The intangible aspect of branding

Impeccably accurate timepieces are among the essential trademarks of Switzerland. A Swiss-made watch evokes a sense of quality, a reputation that has taken nearly 500 years to build.

Not surprisingly, it’s one that the Federation of the Swiss Watch Industry is determined to keep. The federation recently quit one of the country’s top business organisations, Economiesuisse, accusing it of not wanting sufficiently to protect the Swiss brand.

The two organisations have been in disagreement over how much of a product must originate in Switzerland for it to be labelled “Swiss Made”.

Current legislation says that only 50 per cent of the value of the precision-tooled inner workings of a watch, known as the watch movement, has to be manufactured in Switzerland. There is no such law for other industrial products.

The Swiss government has proposed legislation ensuring that 60 per cent of the source or manufacturing of any item with the “Swiss Made” tag be done in Switzerland. The 60-per cent threshold, supported by the watch-making federation, has been rejected by Economiesuisse – which represents more than 2 million businesses – as restrictive and impractical.

Culture tag

This brings into question how much culture and other intangibles are worth. To what extent can they be reflected in the price tag, and how can companies or industries convince consumers that these values are inherent in the price they pay?

Recent studies by St Gallen and Zurich Universities suggest that the Swiss brand generates as much as 20 per cent more profit on luxury products. In the case of watches made in Switzerland, compared to watches made in countries such as China but using a Swiss-designed movement, the Swiss brand almost doubles the high-end price to $100,000 or more.

The use of cultural and geographical references to add value to luxury products has always been a critical aspect of their marketing, says Frederic Godart, an assistant professor of organisational behavior at the international business school Insead.

“By indicating a special cultural or geographical reference,” he says, “luxury producers make replication harder and increase customers’ willingness to pay.”

Authentic purchases

Whether it’s a Swiss watch, an organic cheese or an old mining town looking to repackage itself as a tourist destination, the social and cultural value of a product is increasing as consumers become more vigilant about the authenticity of their purchases.

“Today’s innovation in highly developed countries largely consists of transforming cultural values and ways of life into sellable products and services,” says Olivier Crevoisier, a professor at the University of Neuchatel.

Consumers are educating themselves, Crevoisier says, and are increasingly making choices based on a product’s provenance, sustainability or history.

“But traditional activities like the watch industry, as well as new ones, have to find some legitimacy in public debate in order to create economic value,” he says. “The watch today is a cultural good, it’s a useless good really, everybody has a mobile phone, so why do people pay so much for a Swiss watch?”

“It’s precisely because it’s embodying what we call authenticity,” Crevosier says. “It’s not something you can claim for yourself. You can’t advertise with great credibility and say, ‘We’re authentic.’ Other people have to say it about you.”

Generating interest

Public discussion generates interest around a product, which creates value as well as testifying to the authentic nature of the brand, he adds, noting that this desire to be seen as authentic has forced marketers to introduce some innovative techniques.

Many Swiss watch manufacturers, for example, are turning their plants into tourist destinations. Often they are set on a farm or in an old village with a museum next door. Workers are taught to speak English and encouraged to interact with customers or journalists who are brought in to tour the facilities.

LVMH has taken a similar route, opening its major fashion houses, boutiques, vineyards and family homes to guests in an event called ‘Les Journees Particulieres’, giving customers a glimpse of the craftsmanship behind its products.

Cultural value is also providing opportunities for ailing regions, allowing them to transform their heritage into a sellable product.

Take the Ruhr Valley of Germany, the old mining and steel district which fell into crisis as collieries and pits shut down in the late 20th century. By leveraging its Industrial Revolution roots, the area has reinvented itself, promoting industrial heritage by turning old mines, blast furnaces and factories into galleries, monuments and landmarks.

Nor is it only old culture that’s being used, Crevoisier adds. Ystad, a small town on the south coast of Sweden that is the backdrop for Henning Mankell’s popular series of Inspector Wallander mysteries and for numerous television adaptations, has created a thriving tourist industry off the fictional tales, using the series as an advertising tool to promote the region.

Companies commonly use media events and celebrities to promote their products. However, Crevoisier argues that real value is driven by open debate between experts, connoisseurs, NGOs and customers.

Swiss watchmakers, like many high-end manufacturers, are investing in glossy magazines with articles which encourage journalists and experts to discuss not only the crucial competences of a product but its symbolic knowledge. By stirring up discussion, sharing experiences and swapping ideas across sectors and countries, consumers are becoming expert in a product or sector and, as a result, more willing to spend money on it.

Anything that creates discussion will add to consumers’ interest and ultimately to the value of the product, Crevoisier says, which brings us back to the watchmakers and their public outrage over Economiesuisse’s refusal to support the government’s “Swiss” bill.

“The watch industry has acquired a lot of experience with this ‘authenticity’ and marketing during the past 10 years,” Crevoisier says. “I think the watchmakers will get the regulation they want, probably a different standard than for other products. (In the meantime) they are very good at using this kind of episode to appear in the media as the true defenders of authenticity. They would never miss this kind of opportunity.”

(Jane Williams is editor of Knowledge Arabia.)

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