BRAND FOCUS 8.0: Rolex Brand Audit
For over a century, Rolex has remained one of the most recognized and sought-after luxury brands in the world. In 2009, Businessweek/Interbrand ranked Rolex as the 71st most valuable global brand, with an estimated brand value of $5 billion. 27 A thorough audit can help pinpoint opportunities and challenges for Rolex, whose brand equity has been historically strong, as much is at stake.
· “The name of Rolex is synonymous with quality. Rolex—with its rigorous series of tests that intervene at every stage—has redefined the meaning of quality.”
· — www.rolex.com
Rolex was founded in 1905 by a German named Hans Wilsdorf and his brother-in-law, William Davis, as a watch-making company, Wilsdorf & Davis, with headquarters in London, England. Wilsdorf, a self-proclaimed perfectionist, set out to improve the mainstream pocket watch right from the start. By 1908, he had created a timepiece that kept accurate time but was small enough to be worn on the wrist. That same year, Wilsdorf trademarked the name “Rolex” because he thought it sounded like the noise a watch made when it was wound. Rolex was also easy to pronounce in many different languages.
In 1912, Rolex moved its headquarters to Geneva, Switzerland, and started working on improving the reliability of its watches. Back then, dust and moisture could enter the watch case and cause damage to the movement or internal mechanism of the watch. As a result, Wilsdorf invented a screw crown and waterproof casebook mechanism that revolutionized the watch industry. In 1914, the Rolex wristwatch obtained the first Kew “A” certificate after passing the world’s toughest timing test, which included testing the watch at extreme temperature levels.
Twelve years later, Wilsdorf developed and patented the now famous Oyster waterproof case and screw crown. This mechanism became the first true protection against water, dust, and dirt. To generate publicity for the watch, jewelry stores displayed fish tanks in their windows with the Oyster watch completely submerged in it. The Oyster was put to the test on October 7, 1927, when Mercedes Gleitze swam the English Channel wearing one. She emerged 15 hours later with the watch functioning perfectly, much to the amazement of the media and public. Gleitze became the first of a long list of “ambassadors” that Rolex has used to promote its wristwatches.
Over the years, Rolex has pushed innovation in watches to new levels. In 1931, the firm introduced the Perpetual self-winding rotor mechanism, eliminating the need to wind a watch. In 1945, the company invented the first watch to display a number date at the 3 o’clock position and named it the Datejust. In 1953, Rolex launched the Submariner—the first diving watch that was water-resistant and pressure-resistant to 100 meters. The sporty watch appeared in various James Bond movies in the 1950s and became an instant symbol of prestige and durability.
For decades, Swiss-made watches owned the middle and high-end markets, remaining virtually unrivaled until the invention of the quartz watch in 1969. Quartz watches kept more accurate time, were less expensive to make, and quickly dominated the middle market. Within 10 years, quartz watches made up approximately half of all watch sales worldwide. 28 Joe Thompson, editor of Modern Jeweler, a U.S. trade publication, explained, “By 1980, people thought the mechanical watch was dead.” 29
Rolex proved the experts wrong. The company would not give in to the quartz watch rage. In order to survive, however, Rolex was forced to move into the high-end market exclusively—leaving the middle to the quartz people—and create a strategy to defend and build its position there.
Rolex is a privately owned company and has been controlled by only three people in its 100-year history. Before Wilsdorf died, he set up the Hans Wilsdorf Foundation, ensuring that some of the company’s income would go to charity and that control of the company lay with the foundation. 30 This move was a critical step toward the long-term success of Rolex as a high-end brand. Over the years, many luxury brands have been forced to affiliate with conglomerates in order to compete, but by staying an independent entity, Rolex has remained focused on its core business. André Heiniger, managing chairman of Rolex through the 1980s, explained, “Rolex’s strategy is oriented to marketing, maintaining quality, and staying out of fields where we are not prepared to compete effectively.”
FIGURE 8-7 Rolex Product Portfolio
Rolex includes three family brands of wristwatches, called “collections”; each has a subset of brands (see Figure 8-7 ).
· • The Oyster Perpetual Collection includes the “traditional” Rolex wristwatch, and has eight sub-brands that are differentiated by features and design. The Perpetual Collection targets affluent men and women.
· • The Professional Collection targets specific athletic and adventurer user groups through its features and imagery. The Oyster Professional Collection includes seven sub-brands.
· • The Cellini Collection focuses on formal occasions through its elegant designs, and encompasses seven sub-brands. These watches incorporate fashion and style features like colored leather bands and an extensive use of diamonds.
In addition to the three collections, Rolex owns a separate “fighter” brand called Tudor, developed in 1946 to stave off competition from mid-range watches such as Tag Heuer, Citizen, and Rado. Tudor has its own range of family brands, or collections, namely Prince, Princess, Monarch, and Sport, each of which encompasses a number of sub-brands. Tudor watches are sold at own-brand specialty stores and through the network of exclusive Rolex dealers. Although they are no longer for sale in the United States, there are many outlets in Europe and Asia. Tudor targets younger consumers and offers watches at a lower price range. The brand is distinctly separate, and the Rolex name does not appear on Tudor watches.
Rolex’s success as the largest single luxury watch brand can be credited to several factors. The company not only produces extremely high-quality timepieces, but also tightly controls how its watches are sold, ensuring high demand and premium prices. In addition, Rolex’s sophisticated marketing strategy has created an exclusive and premium brand that many aspire to own. The brand inventory will describe each of these factors in more depth.
Rolex’s most distinguishable brand element is its Crown logo. Trademarked in 1925, the Crown made its appearance on the watches in 1939. The logo has undergone few revisions, keeping its signature five-point crown intact over the years. Rolex watches feature the name “Rolex” on the dial, a tradition dating to 1926. This development initially helped increase brand recognition. Many Rolex watches also have a distinct look, including a big round face and wide wrist band.
Rolex watches have a classic design and look.
Source: Lee Hacker/Alamy
Throughout the years, Rolex timepieces have maintained the high quality, durability, and prestige on which the company built its name. In particular, the firm has maintained a keen focus on delivering a highly accurate watch of superior craftsmanship, using only the finest premium materials such as gold, platinum, and jewels. It continually works on improving the functionality of its watches with better movements and new, sophisticated features. As a result, Rolex watches are complex mechanisms compared to most mass-produced watches. A quartz watch, for example, has between 50 and 100 parts; a Rolex Oyster chronometer has 220. 31
Each Rolex watch consists of 10 unique features identified as the company’s “10 Golden Rules:”
· 1. A waterproof case
· 2. The Perpetual rotor
· 3. The case back
· 4. The Oyster case
· 5. The winding crown
· 6. The finest and purest materials
· 7. Quality control
· 8. Rolex self-winding movement
· 9. Testing from the independent Controle Official Suisse des Chronometres
· 10. Rolex testing
The company does not license its brand or produce any other product besides watches. Its product portfolio is clear, concise, and focused.
Rolex spends more time and money than any other watch company fighting counterfeiters. Today, it is often hard to spot the differences between a $25 counterfeit and a $10,000 authentic Rolex watch. Counterfeiting Rolex watches has become a sophisticated industry, with sales exceeding $1.8 billion per year.
By limiting production to approximately 2,000 watches a day, Rolex keeps consumer demand high and prices at a premium. Prices start around $2,500 for the basic Oyster Perpetual and can reach $200,000, depending on the specific materials used such as steel, yellow gold, or platinum. Scarcity also helps positively influence the resale value of Rolex watches. One report indicated that “almost all older Rolex models are valued above their initial selling price.” 32
Rolex carefully monitors how its timepieces are sold, distributing them only through its approximately 60,000 “Official Rolex Dealers” worldwide. Official dealers must meet several criteria, including a high-end image, adequate space, attractive location, and outstanding service. In addition, a large secondary market exists for Rolex, both through online auction sites such as eBay and at live auctions run by Christies and Sotheby’s.
Rolex’s marketing and communications strategy strives to create a high-quality, exclusive brand image. The company associates itself with “ambassadors”—established artists, top athletes, rugged adventurers, and daring explorers—to help create this imagery. Rolex also sponsors various sports and cultural events as well as philanthropy programs to help align with targeted demographics as well as create positive associations in consumers’ minds.
Advertising. Rolex is the number-one watch advertiser in the world. In 2008, the firm spent over $49 million on advertising, $20 million more than the number-two contender, Breitling. 33 One of the company’s largest expenditures is for magazine advertising. Rolex’s print ads are often simple and austere, usually featuring one of its many brand ambassadors or a close-up photo of one of its watches with the tagline “Rolex. A Crown for Every Achievement.” Rolex does not advertise extensively on television, but does sponsor some events that are televised.
Rolex sponsors a number of different sporting events, including sailing races.
Source: AP Photo/J Pat Carter
Ambassadors. Rolex’s celebrity endorsers are continuously added and dropped depending on their performance. These ambassadors fall into four categories: athletes, artists, explorers, and yachtsmen (see Figure 8-8 ). Aligning with acclaimed artists symbolizes the pursuit of perfection. Association with elite sports figures is meant to signify the company’s quest for excellence. Its support of sailing events, for example, highlights the company’s core values: excellence, precision, and team spirit. 34 Explorers also test the excellence and innovation of Rolex’s watches at extreme conditions. Rolex ambassadors have scaled Mt. Everest, broken the speed of sound, reached the depths of the ocean, and traveled in space. A print ad will usually feature one ambassador and one specific watch, with the goal of targeting a very specific demographic or consumer group.
FIGURE 8-8 2011 Rolex Ambassadors
In 2011, much to the surprise of industry experts, Rolex signed golfer Tiger Woods as a Rolex ambassador. Woods has had a long and complicated history as a celebrity endorser of watches. In 1997, just after he turned pro, Rolex’s Tudor watch signed him to a partnership that lasted almost five years. Woods backed out of the contract in 2002 to sign with rival Tag Heuer, which paid him approximately $2 million annually. Woods rationalized his decision to end ties with Tudor by explaining, “My tastes have changed,” and that he didn’t “feel a connection with that company.” 35 In 2009, the tables turned when Tag Heuer announced it had ended the relationship following Woods’s involvement in a sex scandal.
Rolex’s sponsorship marked the golfer’s first celebrity endorsement since 2009. The company said it was “convinced that Tiger Woods still has a long career ahead of him and that he has all the qualities required to continue to mark the history of golf. The brand is committed to accompanying him in his new challenges … This association pays tribute to the exceptional stature of Tiger Woods and the leading role he plays in forging the sport’s global appeal. It also constitutes a joint commitment to the future.” 36
Sports and Culture. Rolex sponsors a variety of elite athletic and cultural events to reinforce the same messages, values, and associations as it does through its ambassador endorsements. These include a quest for excellence, pursuit of perfection, teamwork, and ruggedness. Rolex sponsors sporting events in golf (U.S. Open Championship, the Open Championship, and the Ryder Cup), tennis (Wimbledon and the Australian Open), skiing (the Hahnenkamm Races), racing (Rolex 24 at Daytona), and equestrian events.
Rolex also sponsors several sailing races, including the Rolex Sydney, Rolex Fastnet Race, and Maxi Yacht Rolex Cup. The company has partnered with extreme exploration expeditions, including The Deepest Dive and Deepsea Under the Pole. It is a major contributor to establishments such as the Royal Opera House in London and the Teatro alla Scala in Milan to align with a more cultural audience.
Philanthropy. Rolex gives back through three established philanthropic programs:
· 1. The Awards for Enterprise program supports individuals whose work focuses on benefiting their communities and the world. These projects are focused on science and health, applied technology, exploration and discovery, the environment, and cultural heritage. 37
· 2. The Young Laureates Programme is part of the Awards for Enterprise program, providing support for outstanding innovators between the ages of 18 and 30. 38
· 3. The Rolex Mentor and Protégé Arts Initiative seeks out extraordinarily gifted young artists around the world and pairs them with established masters. Young artists have been paired with accomplished filmmakers, dancers, artists, composers, and actors. 39
FIGURE 8-9 Rolex Mental Map
Rolex has successfully leveraged its history and tradition of excellence along with innovation to become the most powerful and recognized watchmaker in the world. Some positive consumer brand associations for Rolex might be “sophisticated,” “prestigious,” “exclusive,” “powerful,” “elegant,” “high quality.” Some negative brand associations that some consumers may link to the brand, however, could include “flashy” or “snobby.” Figure 8-9 displays a hypothetical Rolex mental map.
In one report by the Luxury Institute research group in New York, consumers had positive attitudes in terms of purchase intent toward Rolex. Wealthy people said they were more likely to buy a Rolex than any other brand for their next watch. The Rolex brand was far more recognizable (84 percent knew it) than Bulgari (39 percent) and even Cartier (63 percent), although several rivals outranked Rolex for perceived quality and exclusivity. 40
A 2008 Mintel survey on the watch industry revealed that “women are still likely to view watches as an accessory, with many buyers choosing their watch based on looks alone. However, at the top end of the luxury market there is a growing number of women who are interested in mechanical watches. The study also found that women are increasingly choosing androgynous or unisex watches.” 41
Many older, affluent people place a high value on owning a Rolex, whether new or collectible. In 2011, a Rolex sold for $1 million for the first time. The watch—an oversized stainless-steel split-second chronograph wristwatch manufactured in 1942—was purchased at Christie’s Geneva auction for $1,163,340, an all-time high price paid for any Rolex. 42
While the brand and product line seem to resonant well with older, wealthy individuals, Rolex struggles somewhat to connect with younger consumers. In a NPD Group poll, 36 percent of people under the age of 25 didn’t wear a watch. 43 Another study by Piper Jaffray revealed that 59 percent of teenagers said they never wear a watch and 82 percent said they didn’t plan to buy one in the next six months.
Brand Resonance Pyramid
The Rolex brand resonance model pyramid (see Chapter 3 ) is equally strong on the left-hand and right-hand sides. There is great synergy between the two sides of the pyramid; the functional and emotional benefits Rolex strives to deliver are in harmony with consumers’ imagery and feelings about the brand. The pyramid is also strong from bottom to top, enjoying the highest brand awareness of any luxury brand as well as high repeat purchase rates and high customer loyalty. Rolex has successfully focused on both the superior product attributes and the imagery associated with owning and wearing a Rolex. Figure 8-10 highlights some key aspects of the Rolex brand resonance pyramid.
Rolex has many competitors in the $26.5 billion watch industry; however, only a few brands compete in the very high-end market. 44 Through its pricing and distribution strategies, Rolex has positioned itself as a high-end luxury watch brand. On the lower end of the spectrum it competes with companies such as TAG Heuer and OMEGA, and on the high end with brands such as Patek Philippe, maker of the world’s most expensive wristwatch.
TAG Heuer. A leader in the luxury watch industry, the Swiss firm TAG Heuer distinguishes itself by focusing on extreme chronograph precision in its watches, and on sports and auto-racing sponsorship in its advertising. Founded by Edouard Heuer in 1876, TAG Heuer has been a mainstay in the luxury watch business. In 1887, the firm created the first oscillating pinion, a technology that significantly improved the chronograph industry and is still used in many of its watches today. In 1895, it developed and patented the first water-resistant case for pocket watches. TAG Heuer expanded into the United States in 1910, introduced a chronograph wristwatch in 1914, and has continued to focus on chronograph innovation ever since.
TAG’s image and positioning is inextricably connected to chronograph precision. Its timepieces were the official stopwatches of the Olympic Games in 1920, 1924, and 1928. The firm was a Ferrari team sponsor of Formula 1 from 1971 to 1979 and was part of the TAG-McLaren racing team from 1985 to 2002. It was also the official timekeeper of the F-1 race series for much of the 1990s and early 2000s. 45 TAG Heuer has sponsored numerous Americas Cup teams and other yacht racing teams over the years.
TAG Heuer uses officially licensed retailers to sell its watches both in stores and online. These licensed retailers range from exclusive jewelers to department stores such as Nordstrom and Macy’s. The watchmaker generates brand awareness through brand ambassadors and sponsoring sporting events and advertises extensively in magazines. In 1999, TAG Heuer was purchased by luxury goods conglomerate LVHM.
FIGURE 8-10 Rolex Brand Resonance Pyramid
OMEGA. Founded in 1848 by Louis Brandt, OMEGA has long prided itself on the precision of its watches and timing devices. It built what was Amelia Earhart’s watch of choice during one of her transatlantic flights and has been involved in aviation and athletic timing ever since. OMEGA was the time equipment selected for the 1936 Winter Olympics, which saw the first use of synchronized chronographs. By 1937, the company had launched its first waterproof wristwatch, and in 1967 it invented the first underwater touchpad timing equipment, which was used in Olympic swimming competitions. OMEGA watches accompanied the expedition to locate the exact position of the North Pole, and boarded the Apollo 11 mission to become the first and only watch ever to land on the moon. OMEGA is now owned by watch conglomerate, Swatch Group.
Like Rolex and TAG Heuer, OMEGA employs ambassadors to generate brand awareness, including athletes Michael Phelps, Alexander Popov, Ernie Els, and race car driver Michael Schumacher as well as Hollywood stars Nicole Kidman and Cindy Crawford. In 1995, OMEGA became the official watch of the James Bond film franchise.
OMEGA watches are offered in both women’s and men’s styles in four different collections: Constellation, Seamaster, Speedmaster, and De Ville. Prices vary greatly even within individual collections. Watches in the De Ville collection range from $1,650 to over $100,000.
Patek Philippe. In 1839, Antoine Norbert de Patek and François Czapek started a Swiss-based watch company built upon 10 values: independence, innovation, tradition, quality and workmanship, rarity, value, aesthetics, service, emotion, and heritage. After several name changes during its formative years, the company was finally named Patek Philippe. The innovator of many technologies found in today’s high-end watch, it represents the absolute pinnacle of luxury timepieces. In particular, the firm prides itself on creating many of the world’s most complicated watches through innovations with split-second chronograph and perpetual date technology.
Unlike other leading luxury watchmakers, Patek Philippe does not rely on event sponsorship or brand ambassadors to generate name recognition. However, since 1851, the firm has made watches for royalty throughout Europe. Its watches are only sold through authorized retailers, of which there are 600 worldwide. In 1996, the brand started its “Generations” campaign, building on its values of heritage and tradition and featuring the tag line, “You Never Actually Own a Patek Philippe, You Merely Look After It for the Next Generation.”
Patek Philippe evaluates every authorized dealer’s storefront to ensure that it meets the watchmaker’s quality standards. It also separates itself from other watchmakers on price, with its least expensive noncustomized watch retailing at $11,500 and its most expensive at over $600,000.
Figure 8-11 summarizes some positioning analysis and possible points-of-parity and points-of-difference, as described below.
FIGURE 8-11 Possible Rolex Brand Positioning
Points-of-Parity. Rolex is similar to other watchmakers in the high-end luxury watch market on several levels. They all make their watches in Switzerland, which is renowned for superior craftsmanship in watch making, and they all deliver high quality. All pride themselves on their attention to detail and ongoing innovation in the watch industry.
Points-of-Difference. Rolex separates itself from the competition in several ways. One, Rolex watches have a distinct look with their Crown logo, big face, and wide band. Two, Rolex has kept a strategically tight control on its distribution channel and production levels, creating a sense of prestige, importance, and exclusivity in the minds of consumers. Three, it has kept the brand pure, remaining focused only on watches and never licensing its name. Through careful selection of event sponsorships and brand ambassadors, Rolex has cut through the clutter, resonated with consumers around the world, and maintained an air of prestige.
Brand Mantra. Rolex has been extremely successful in building a global name through clever marketing and communications, without compromising the integrity of the brand. It has nurtured the belief that acquiring a Rolex represents a milestone in one’s life and has built a well-known brand recognized for its elegance and status throughout the entire world. A brand mantra that captures these ideas might be, “Classic Designs, Timeless Status.”
The Rolex brand audit proved that Rolex is a very strong brand with significant brand equity. It also identified a few opportunities and challenges:
Leverage the Company’s Independent, Continuous Heritage and Focus
· • Rolex is the largest and most successful watch company in the world. As a result, many consumers don’t realize it is privately owned and competes against major conglomerates such as TAG Heuer’s parent company, LVMH, and OMEGA’s parent company, Swatch Group. While being privately owned is a good thing for many reasons, it also brings up several challenges. For example, Rolex has to compete against companies that are 10 times its size. Larger companies have lower labor costs, wider distribution, and significant advertising synergies.
· • Rolex may want to leverage and promote the fact that in some ways it has to work harder to succeed. It is doing what it has done for 100 years—making durable, reliable, premium watches on its own. Due to the currently popular anti-Wall Street vibe, this positioning may resonant well with consumers.
Leverage the Company’s Elite Craftsmanship and Innovation
· • Research from the Luxury Institute group suggested that consumers do not consider Rolex the top brand in quality and exclusivity. History has proved that Rolex watches are in fact leaders in both craftsmanship and innovation and Rolex may want to run a campaign focused more on these aspects.
Connect with the Female Consumer
· • Women make up the majority of jewelry and watch purchases. However, as Mintel’s 2008 study revealed, women are more and more interested in purchasing unisex mechanical watches rather than feminine-styled watches. This is a great opportunity for Rolex, whose watches are primarily masculine in design. The firm could move away from its decorative, jeweled watches and introduce more powerful, gender-neutral watches. Its 2009 Oyster Perpetual Datejust Rolesor 36 mm is one example—robust, with large utilitarian numbers, and waterproof to a depth of 100 meters. 46 However, its floral dial design and diamond-set bezel possibly give it an unnecessary feminine angle.
· • Rolex may want to tweak its female ambassador list to coincide with a more unisex product line. Women who have succeeded in a male-dominated environment such as Condoleezza Rice or Katie Couric could be powerful brand endorsers.
Attack the Online Counterfeit Industry
· • Counterfeits damage the company’s brand equity and present a huge risk to the brand. The boom in e-commerce has taken counterfeit Rolexes from the street corner to the Internet, where fakes can reach far more consumers. Consequently, the age-old problem of counterfeiting is a bigger threat than ever before. To maintain its limited distribution, Rolex does not authorize any of its watches to be sold on the Internet. In order to combat the online sale of counterfeits, however, Rolex might consider building an exclusive online store, or an exclusive distribution site to which all official e-retailers must link. In fact, Rolex dedicates extensive resources to fight the illegal use of the brand, including sponsoring the International Anti-Counterfeiting Coalition and suing companies that allow the sale of counterfeit Rolexes.
Use Marketing to Reach Younger Consumers
· • Research has shown that younger consumers do not value watches the same way older generations did. As a result, Rolex should be researching the questions: How will prestige be defined in the twenty-first century? Who or what symbolizes prestige, ruggedness, precision? Will the same formula work for the millennial generation as they age and move into the Rolex target market?
Communicate Long-Term Value
· • Rolex competes for a share of the luxury buyer’s wallet with a host of other types of goods, such as clothes, shoes, and handbags. Many are less durable over time than a Rolex watch and are susceptible to falling out of fashion. Rolex should leverage its superior value retention—both in its resale value and in its “heirloom” quality—in order to better compete for luxury spending with brands outside its category.
· • Swiss luxury watch competitor Patek Philippe used print advertising to communicate the heirloom quality of its watches. Rolex could pursue a similar approach, perhaps using its more visible ambassadors, to communicate its own heirloom quality.