The value of brand... AKA, why Rolex should continue to dominate the watch market centuries from now, but they won't because they're completely EFF'ing up their long-term competitive advantage in fixed cost economies of scale
All proceeds go to givedirectly.org and winning bid gets matched!
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Check out the Pagani Design PD-1733!!! $88.35 on Amazon!
If you haven’t been living under a rock, you will note a striking resemblance to the Rolex Milgauss Z-Blue.
What’s the difference between the $9,150 Milgauss and the Pagani Design? It’s kind of like that saying, “What’s the difference between a billionaire and a millionaire?”
Now, what could possibly account for that vast gulf in price between the two? Why is it that Rolex can charge $9,150 for the Milgauss, while Pagani Design can only charge $88.35?
“Well, @Mr.Dee.Bater, one is a Chinese homage, while the other is a Rolex with a co-axial Calibre 9906, with real heritage, and did you know that it’s been on the Moon, and, also, it can cure cancer, as well as grant the wearer 3 wishes, like a genie!"
I am going to make the heretical assertion that brand cache and brand cache alone accounts for the entirety of the $9,061.65 difference in price between the 2 watches.
How to value brand
So, how much is brand worth? Like, brand is such a nebulous concept, right? That’s like saying, “How much is a rainbow worth?”
[Rainbows are worth every penny on earth... at least, that's how it felt to me, given how much money I dropped on Rainbow Dash and other My Little Pony related merch for my daughters over the years!]
But, it turns out that there’s a pretty tried and true method for doing brand valuation. So, let’s say you’re in private equity and you’re looking to buy an aluminum tube manufacturing company. Here’s how you might go about valuing the acquisition target’s brand…
ACME Tube Company sells their tubes for $100 each
Meanwhile, World’s Most Awesome Tubular Tubes sells theirs for $200 each
Now, World’s Most Awesome Tubular Tubes will tell you as you’re doing your due diligence that their aluminum tubes command a premium over competitors’ tubes because of heritage, and their tubes have been on the moon, and their tubes boast the co-axial calibre 9906, but you and I have been in the private equity game too long to fall for that BS - an aluminum tube is an aluminum tube is an aluminum tube
No, the reason that World’s Most Awesome Tubular Tubes sell theirs for $200 each is because of how their tubes make their buyers feel - their buyers covet the tubes due to all the compelling marketing the company does, with their mascot Ashton Kutcher…
Wherein the brand conjures in buyers’ minds the following...
Now, ACME and World’s Greatest each sell 1M tubes per year, so they generate $100M and $200M in annual revenue respectively
Since they both operate in the same country and they have the same manufacturing setups, and they sell identical products, they both have the same costs - $50M per year
Notice that ACME has an annual profit of $50M, while World’s Greatest has profit of $150M
World’s Greatest’s brand generates $100M in earnings per year above and beyond ACME’s brand!
Now, you can apply a discount rate to that $100M / year to get a net present value, or you can look at comps, or you can blah, blah, blah - regardless there are ways to translate a stream of free cash flows into a net present value to determine the value of World’s Greatest’s brand
For our simplified model, let’s just give our earnings a 5x multiplier
As such, ACME has a market cap of $250M, World’s Greatest has a market cap of $750M, where the only difference between the 2 companies is World’s Greatest’s brand
Thus, in this example, World’s Greatest’s brand is worth $500M!
“That, @Mr.Dee.Bater, is a ridiculously simple example. That’s not how the real world works, and the real world is complex.” Yes, well, the reason we use simple models is because they clarify our thinking and force us to lay out assumptions, along with an analytical framework. In physics, for example, when modeling motion, we would start out with what we call a simple F = MA model, assume no friction, that all motion takes place in a vacuum, all collisions are perfectly elastic, etc., etc. It’s not realistic at all, but it was good enough for Newton to describe the motion of celestial bodies to a frightening level of accuracy. And, only later do we layer in complexity like wind resistance or friction or non-elastic collisions, at which point we would have to turn to Hamiltonian or Lagrangian Mechanics. But, you get the point.
So, let’s look at a more complex example: How much is the Coca Cola brand worth?
Coca Cola
Well, let’s first start out with the ACME brand in the world of colas.
Does anybody actively choose RC Cola??? From my cursory knowledge, you can buy a 2L bottle of RC Cola for like $0.25 from Safeway, if they even carry it, cause they’re always on "buy 1 get 4 free" clearance. Meanwhile, a 2L bottle of Coke will cost ya $2.50.
Why can Coke charge such a premium? Well, if you ask soft drink enthusiasts, they’ll tell you that Coke uses a proprietary formula, that Coke has the co-axial Calibre 9906, with real heritage, and did you know that it’s been on the Moon? And, also, it can cure cancer, as well as grant the drinker 3 wishes, like a genie. But you and I have been in the private equity game for too long to believe that pfaff. No, Coke and RC Cola…
… they’re both utterly foul brownish syrups, made of sugary liquified fecal matter, that is then mixed with carbonated water.
Royal Crown sold to Cadbury Schweppes in 2000 for $94M. What’s it worth today? I have no idea. Let’s just assume the value went up 5% per year for 23 years compounded, and we end up at $250M. Coca Cola, meanwhile, has a market cap of $270B - so roughly 1,000x that of RC Cola.
Sure, sure, Coke has got a bunch of brands under it, it’s got a diverse portfolio of drinks and snacks, blah, blah, blah. And we can strip all those out, and do all the financial analysis to isolate the value of the Coke brand as it pertains solely to foul brownish syrups, made of sugary liquified fecal matter, that is then mixed with carbonated water, but you get the larger point: Brand matters, and we humans are weirdly willing to pay massive premiums for products that have desirable brand connotations.
So, how the heck does one build a brand?
Easy! Just spend a lot of money! Here’s a simple example from the world of deodorants…
When my dad was in the desirable 18-35 demographic, this deodorant company spent a ton of money to launch a new brand, and magically, my dad religiously purchased Old Spice all throughout the rest of his life - never ever considered trying anything else, and every time he needed deodorant, he simply reached for the same damn Old Spice
Me, on the other hand, I knew that Old Spice was for old farts and instead chose the much hipper, much more modern Speedstick, because Mennen spent a ton of money marketing to create that Speedstick brand affinity, and now I never ever consider trying anything else, and every time I need deodorant, I simply reach for the same damn Speedstick
Now, to my chagrin, Old Spice recently revived itself by spending a ton of money on very hip and very cool marketing…
… so much so that a friend’s kid recently saw my Speedstick in the medicine cabinet and said “Why do you use old man’s deodorant? Why don’t you use Old Spice?”
Rolex dominance into the future
“Okay, well if all it takes to build brand equity is the spending of marketing dollars, why doesn’t a rival just spend more than Rolex does on marketing in order to supplant it?”
Because of fixed costs and economies of scale. See, Rolex is massive relative to its rivals. On a revenue basis, Rolex alone is nearly equal in size to the next 5 Swiss brands combined!!!
But, here’s a simplified way to really hit this point home. We’re going to show how economies of scale and fixed costs interact to give incumbents an almost insurmountable advantage...
Marketing is a fixed cost
I don’t know how much it costs to have Formula 1 plaster your logo all over their race tracks, but let’s say it’s $60M / year
Rolex sells 1.2M watches a year
So, Rolex can amortize that fixed cost across every unit sold, such that the Formula 1 sponsorship costs Rolex $50 / watch
Omega, meanwhile, only sell something like 600k watches a year
In order for Omega to sponsor Formula 1, it would cost them $100 / watch
Marketing effectively costs Omega twice as much as it does Rolex, due to Rolex’s economies of scale!
[In reality, it’s even worse than that. If you look at the chart, Rolex is roughly 3.75x the size of Omega in revenue terms, and the way we really look at amortization of fixed costs is % of revenue. As such, it would cost Omega 3.75x as much to sponsor Formula 1 as it does Rolex, on a % of revenue basis!]
Could someone just say, “I don’t care! I’ll spend whatever it takes”? Sure, I suppose so, but I don’t know too many people willing to throw away money like that - rich people tend to know how to manage money, which is why they’re rich! But, even if someone had lost their mind, and decided to do something like this, it’s nearly impossible to unseat incumbents in this way.
Let’s go back to Coca Cola. RC Cola could outspend Coke in marketing in any given year. But brand equity builds up and maintains its relevance over long time horizons. RC can’t just outspend Coke over the course of 12 months. RC would have to outspend Coke for years, if not decades! Why? Because Coke’s brand equity comes from OVER A CENTURY of marketing! Coke was founded back in 1892. For example, our modern conception of Santa Claus in red and white pajamas comes from Coke’s marketing...
So it is with Rolex. The allure of the Rolex brand is due to decades upon decades of powerful marketing, and someone like Omega would need to outspend Rolex every year for decades on end, even though on a % of revenue basis it’s currently 3.75x more costly for Omega to do so!
5 more centuries of dominance?
Will Role really dominate for another 500 years? They should dominate, if they were to continue to play their cards right, given their inherent incumbent advantages.
But, then again, the history of business is littered with companies with management teams that didn’t understand the source of their own companies' profitability and ended up destroying their companies’ industry dominance and franchise values, companies like…
Nintendo
Kmart
Coors
Krispy Kreme
… and the sad list goes on and on.
Hopefully Rolex’s management continues to build on their success and doesn’t completely EFF things up.
With that said, though, there was recently this news…
You know, the best explanation for why companies should just focus on what they're already good at I heard from my value investing prof. This was back in the day of Netflix and Blockbuster. Netflix was still sending out DVDs by mail, and were just starting to talk about streaming.
And a classmate said, derisively, "I don't understand why Blockbuster doesn't just shift to mailing DVDs and doing streaming." You know, he said it like...
And the prof was like, "Well, that would be like your mom asking you…"
Companies are good at what they're good at. In the same way you're good at what you're good at, and your brother is good at what he's good at. It's in the DNA. And DNA doesn't change - typically when it does, it ends with the death of the organism, as that's typically called "cancer."
He then went on to talk about why value investors look for management teams who understand deeply what the source of their company's true profitability is, and stick to those core competencies come hell or high water.
This is one of those cases where, I suspect, you have a management team that is losing sight of what makes their company truly profitable. Maybe reaching for a bonus or something? Absolutely nuts.
And, well, never put it past the management team of a company to snatch defeat from the jaws of victory.
And, given all that, my assessment is that Rolex is completely EFF’ing up their long-term scale economies advantages by squeezing every penny possible out in the short-term, growing margins above and beyond what the market segment will bear. In so doing, they are alienating consumers, alienating channel partners (ADs), and through limiting supply to capture higher and higher pricing, they are actively directing consumers to nearly perfect substitutes, and those consumers are developing long-term affinity for these substitute brands.
Here is what I wrote previously, and I stick by these analyses as well.
Installment #1 - How Rolex’s hubris is alienating consumers and AD partners, and how that leaves an opening for Rolex’s competitors to chip away at Rolex’s dominant position
Installment #2 - How Rolex’s acquisition of Bucherer leads to “unbundling” and value destruction for their AD network, incentivizing their AD partners to diversify away from Rolex
So, if they keep doing what they're doing, they could end up like the Nintendo's and Kmart's of the world.
If the allure of Rolex is just marketing, then what about Grand Seiko?
Yup, it’s true…
“So, why the EFF do you, @Mr.Dee.Bater, have a giant collection of GS if they’re nothing more than glorified Seiko’s, and you could instead buy a $100 DressKX?”
Well, because I am just as swayed by branding as any other human being! I attended business school a couple of decades ago, where I learned all this stuff about brand valuation, etc., etc. And I remember sitting in class, looking over at a couple of very well-dressed, very attractive female classmates of mine. And, specifically, what went through my head was NSFW. But, more pertinent to this post, I thought, “Why are you wearing those incredibly expensive designer clothes??? I mean, we KNOW that the only reason that blouse and those jeans you have on cost $500 is because of marketing. There’s effectively no difference between what you’re wearing and the $50 alternative other than branding!”
And, yet, here we are today, and this is my watch collection!
I like to pretend, as per F. Scott Fitzgerald, that, "The test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function.” But, really, I suspect it’s just that I’m a hypocrite and a lemming.
What about you?
Are you immune to brand? Does marketing roll off you like water off a duck’s butt? Are you superhuman and able to resist all influence?
Dammit! I forgot to stretch before I clicked on this! Might not make it all the way through on the first go…
This is a dadaist test. Each post moving forward will be longer and longer and longer. The absurdist humor is in seeing how long a post can be before it gets blacklisted by @WatchCrunch!
Very well thought out and thought provoking post. Can one be susceptible to marketing and at the same time try to rebel against it. I try to collect a little from all over the place, including Rolex. What does that say about the grip of marketing on me?
Very well thought out and thought provoking post. Can one be susceptible to marketing and at the same time try to rebel against it. I try to collect a little from all over the place, including Rolex. What does that say about the grip of marketing on me?
Hmmm... Here is my tongue-in-cheek answer...
Human beings always, consciously or unconsciously, want to signal status to other human beings
We turn to things like watches and jewelry to do so
But, of course, to lie to ourselves, we imbue these objects with all sorts of emotions and strong values - heritage, history, craftsmanship, etc. - when in reality, they just show off our status
Now, we would want to signal to both ordinary passersby and the initiated - we want EVERYONE to know how elite we are
So, we would want to have recognizable stuff in our collections, like Rolex, in order to let the average Joe know that we're better than them
AND we would want stuff that only the enthusiast would recognize (Glashuette Original, JLC, etc.), in order to signal to other "elites" that we are also one of the truly select few
So, yes, you have reached a level of truly elite signaling by your rebelling against marketing! 😜😜😜😜😜😜😜😜
As someone who works in marketing, I think I should show up with that Homer Simpson meme where he withdraws into the bush. But I won't! My role in this World is apparently to make people buy / spend too much on stuff they don't need. And to make a mean Bolognese.
I don't think anyone is immune to marketing or 'brand'. Even those who think/say they are. Some just more than others. Every day we're influenced by what we see and hear. And sometimes it's an ad. Sometimes it's something that doesn't look like an ad but ultimately is. Sometimes it's the words of others - which may have been influenced by ad dollars, whether indirectly or not. Etc. There's a reason why some brands are more successful than others, even when they might not have the 'best' product (cough, Rolex).
Won't mention the watch brands / parent organisation my company works for but what I can say is I own one of them. However, that purchase was absolutely not influenced by that factor (they don’t give us discount for a start!). But I was influenced by their marketing. I'd be kidding myself if I said I wasn’t.
Human beings always, consciously or unconsciously, want to signal status to other human beings
We turn to things like watches and jewelry to do so
But, of course, to lie to ourselves, we imbue these objects with all sorts of emotions and strong values - heritage, history, craftsmanship, etc. - when in reality, they just show off our status
Now, we would want to signal to both ordinary passersby and the initiated - we want EVERYONE to know how elite we are
So, we would want to have recognizable stuff in our collections, like Rolex, in order to let the average Joe know that we're better than them
AND we would want stuff that only the enthusiast would recognize (Glashuette Original, JLC, etc.), in order to signal to other "elites" that we are also one of the truly select few
So, yes, you have reached a level of truly elite signaling by your rebelling against marketing! 😜😜😜😜😜😜😜😜
I think that is probably, and sadly, hitting the nail on the head.
As someone who works in marketing, I think I should show up with that Homer Simpson meme where he withdraws into the bush. But I won't! My role in this World is apparently to make people buy / spend too much on stuff they don't need. And to make a mean Bolognese.
I don't think anyone is immune to marketing or 'brand'. Even those who think/say they are. Some just more than others. Every day we're influenced by what we see and hear. And sometimes it's an ad. Sometimes it's something that doesn't look like an ad but ultimately is. Sometimes it's the words of others - which may have been influenced by ad dollars, whether indirectly or not. Etc. There's a reason why some brands are more successful than others, even when they might not have the 'best' product (cough, Rolex).
Won't mention the watch brands / parent organisation my company works for but what I can say is I own one of them. However, that purchase was absolutely not influenced by that factor (they don’t give us discount for a start!). But I was influenced by their marketing. I'd be kidding myself if I said I wasn’t.
Amazing!!! I truly admire your line of work. I mean, it takes real skill and witchcraft, and I know I suck at it - which would help to explain why it took me 16 years to convince my wife to marry me.
It's so funny how there are so many tropes in modern society that seem to immediately appeal. And, yet, upon any further reflection, those tropes are nonsensical. Here are a few from the watch community...
"I'm not influenced by marketing." Signaling translation: I'm so high status that I can claim to be above anything that influences the thinking of lesser mortals
"Flippers are evil." Signaling translation: I'm so high status that I don't need the money that comes from flipping watches, so I look down on the poors who would make money doing so
"Grand Seiko is the best." Signaling translation: I aspire to be this gentleman...
But, again, I do truly admire your line of work. One of the reasons that we have such high standards of living in the Western World is because of the compelling and powerful marketing that professionals like you are able to come up with!
I think that is probably, and sadly, hitting the nail on the head.
Hey man, you're talking to a galaxy-brain (me) who sold off all his Swiss watches, to go full Grand Seiko, because...
But, I have to admit that the real reason I did so, is because unconsciously my brain had tricked me into believing all this mystical stuff about GS, because it felt like GS would do a better job of signaling than the Swiss stuff! Ha!
Amazing!!! I truly admire your line of work. I mean, it takes real skill and witchcraft, and I know I suck at it - which would help to explain why it took me 16 years to convince my wife to marry me.
It's so funny how there are so many tropes in modern society that seem to immediately appeal. And, yet, upon any further reflection, those tropes are nonsensical. Here are a few from the watch community...
"I'm not influenced by marketing." Signaling translation: I'm so high status that I can claim to be above anything that influences the thinking of lesser mortals
"Flippers are evil." Signaling translation: I'm so high status that I don't need the money that comes from flipping watches, so I look down on the poors who would make money doing so
"Grand Seiko is the best." Signaling translation: I aspire to be this gentleman...
But, again, I do truly admire your line of work. One of the reasons that we have such high standards of living in the Western World is because of the compelling and powerful marketing that professionals like you are able to come up with!
It’s not just marketing though. We are influenced by the opinions of others as you say. Whether that’s what they say or what we want them to think about us.
I’m yet to be swayed by Grand Seiko. But you and a bunch of others are gradually chipping away at me.
It’s not just marketing though. We are influenced by the opinions of others as you say. Whether that’s what they say or what we want them to think about us.
I’m yet to be swayed by Grand Seiko. But you and a bunch of others are gradually chipping away at me.
Don't do it! Don't do Grand Seiko! I mean, in the end, ALL of it is ridiculous. If I weren't so broken inside, and I didn't have such a weird relationship to money, such that I had to trick myself into knowing that I'm not a poor kid living off government cheese anymore, I would never have bought ANY luxury watches.
If I could start all over, I would only own micro brands!
Hey man, you're talking to a galaxy-brain (me) who sold off all his Swiss watches, to go full Grand Seiko, because...
But, I have to admit that the real reason I did so, is because unconsciously my brain had tricked me into believing all this mystical stuff about GS, because it felt like GS would do a better job of signaling than the Swiss stuff! Ha!
I may also be a bit of a “nationalist” watch collector as many of my watches are either micro brands or large brands that have some sort of tie to America, with some Swiss and English thrown in to be balanced. I am also eyeing a GS and you know those German watches are looking nice. 😊
I am here to say I do prefer Royal Crown (RC) cola. 😜 Grew up in a rural region of "flyover country" where every rural country store had a RC machine, as it owned Sun Drop (it's like Mt. Dew) which in said region out sold Coca-Cola and Pepsi, often combined.
I am here to say I do prefer Royal Crown (RC) cola. 😜 Grew up in a rural region of "flyover country" where every rural country store had a RC machine, as it owned Sun Drop (it's like Mt. Dew) which in said region out sold Coca-Cola and Pepsi, often combined.
OMG!
I’ve heard of some crazy sub cultures out there, like what you just described. For example, I’ve heard that Juggalos and Juggalettes religiously drink Faygo!
Louis, to their credit, stopped. There is the famous quote, “When every secretary has one, it is no longer a luxury bag.” They did not like being associated with that. We can talk about how problematic that is, or how smart/bad that is from a business perspective, but clearly they pivoted away because it was not just China as outlined, but the rest of the world started to feel that way.
Coach on the otherhand? lf you are at the right TJMaxx on the right day, you can get one. Not knocking them, but like most brands, once they start being made for the outlets, the brand becomes tarnished for those that care about that.
My cousin-in-law works in purchasing, planning, and allocation for Coach. I should ask her about the brand and her take on it all. Super interested to hear about it from an insider perspective now!
My cousin-in-law works in purchasing, planning, and allocation for Coach. I should ask her about the brand and her take on it all. Super interested to hear about it from an insider perspective now!
Oh that would be fascinating. Obviously, making bags for outlets (most goods at outlets are usually downmarket versions of the boutique models) has to have paid off? Any outlet mall I have been at has one. Perhaps, to your point about tubes, they decided “why compete just in the high end space, and let’s move volume.” Clearly there is a tipping point fiscally. As far as when discount stores get them, I am not sure they have any control over surplus/wholesale, kind of like how Omega has no power in stopping their watches from being sold for a little more than cost to grey dealers.
I’ve heard of some crazy sub cultures out there, like what you just described. For example, I’ve heard that Juggalos and Juggalettes religiously drink Faygo!
Is it like that?
I personally don't drink a lot of soda, but will always pick up an RC or Sun Drop if I run it across it in a road trip. But to your question, yes in the region I grew up in and a few others (mainly Upper South region) Sun Drop used to be, and probably still is, a cultural norm that allowed it to sell abnormally well and perform as a regional peer to Coke and Pepsi. These are very small and unique geographical regions - almost pockets unto themselves in terms of regional culture.
Faygo is another good example - there are parts of metro Detroit and the Great Lakes where Faygo is a regional player due to it being a historic brand to the region - and being absurdly affordable. Oh, and yes, due to the clowns (ICP), which are their own distinct subculture.
I worked in grocery industry while in university and for a soft drink distributor straight out of undergrad - so very familiar with industry. Did a lot of my grad work research around supermarket industry - in particular Kroger and Aldi. 😁 I feel you will appreciate this niche data and this part of my background.
One of the best watch related posts I have seen in the last decade, @Mr.Dee.Bater
As a child of the 70s-80s, Swatch didn't bite me but Rolex marketing did. Graduated high school in '86 and Rolex was THE signal that I had made it. Bought my first Rolex DJ at 21. And the desire to own a Day-Date has yet to be realized but will be as I save over the next three years. Hell, binging "The Sopranos" over the holidays reignited that desire like never before. It is 100% for the status symbol that I will pickup a vintage 18k champagne dial 18038 in 36mm. The sin of pride, I claim it.
But some things, the prestige and marketing don't matter. Clothing brands used to mean the world to me. Couldn't care less about a brand name now. And yet Ralph Lauren continues to market and make great clothing BUT the law of diminishing returns seems to not matter to me with clothing.
One of the best watch related posts I have seen in the last decade, @Mr.Dee.Bater
As a child of the 70s-80s, Swatch didn't bite me but Rolex marketing did. Graduated high school in '86 and Rolex was THE signal that I had made it. Bought my first Rolex DJ at 21. And the desire to own a Day-Date has yet to be realized but will be as I save over the next three years. Hell, binging "The Sopranos" over the holidays reignited that desire like never before. It is 100% for the status symbol that I will pickup a vintage 18k champagne dial 18038 in 36mm. The sin of pride, I claim it.
But some things, the prestige and marketing don't matter. Clothing brands used to mean the world to me. Couldn't care less about a brand name now. And yet Ralph Lauren continues to market and make great clothing BUT the law of diminishing returns seems to not matter to me with clothing.
What changed that?
Thank you so much, sir!
It's funny and almost random which marketing gets a hold of us, when we're young and impressionable, isn't it? For you, the Rolex marketing took hold when you were young. But, for me, weirdly, it was Omega. When I was 22, I remember flying to Manhattan to see my now-wife, who was doing an internship out there. And in the middle of Times Square was a giant billboard of Pierce Brosnan wearing a Seamaster, and it said, "James Bond's choice." And, ever since then, I'd always thought that Omega must be the most prestigious watch brand... after all, James Bond wears one!
As for clothing... I have a totally "straight out of my butt" guess as to why clothing brands no longer matters to you. Like me, you're old! Clothing is a young man's game. I mean, nobody in the world can make clothes that will flatter my pudgy, pear-shaped body. So, why even try, right? Only young, virile guys, who don't require blue pills to perform these days, can really rock nice, form-fitting designer clothes, right? 😂
It's funny and almost random which marketing gets a hold of us, when we're young and impressionable, isn't it? For you, the Rolex marketing took hold when you were young. But, for me, weirdly, it was Omega. When I was 22, I remember flying to Manhattan to see my now-wife, who was doing an internship out there. And in the middle of Times Square was a giant billboard of Pierce Brosnan wearing a Seamaster, and it said, "James Bond's choice." And, ever since then, I'd always thought that Omega must be the most prestigious watch brand... after all, James Bond wears one!
As for clothing... I have a totally "straight out of my butt" guess as to why clothing brands no longer matters to you. Like me, you're old! Clothing is a young man's game. I mean, nobody in the world can make clothes that will flatter my pudgy, pear-shaped body. So, why even try, right? Only young, virile guys, who don't require blue pills to perform these days, can really rock nice, form-fitting designer clothes, right? 😂
Think you nailed it. As a young man, I dressed not only for myself but to impress the ladies. Now, o wear what I like because it is comfortable, I like the fit and my style is all about casual. I have traded alligator belts for elastic Arcade belts, $80 Polo tees for super cozy tall size, heavy Chinese tees.l that sell for $18.
People are weird creatures. I imagine that our social interactions would be seen as amusing, fascinating or even troublesome to a more advanced race.
I am definitely doing something wrong. Clearly people have enough time on their hands to consume marketing and adverts, yet I barely have enough to watch the stuff I want to, let alone some BS that is being forced down my throat. I just tried to come up with a single product I own or use where I remember an advert, past or present. Can't think of a single thing aside from head and shoulders shampoo but I bought that because it comes in a huge container with a handy dispenser...
I am definitely doing something wrong. Clearly people have enough time on their hands to consume marketing and adverts, yet I barely have enough to watch the stuff I want to, let alone some BS that is being forced down my throat. I just tried to come up with a single product I own or use where I remember an advert, past or present. Can't think of a single thing aside from head and shoulders shampoo but I bought that because it comes in a huge container with a handy dispenser...
because it comes in a huge container with a handy dispenser...
I don't know why, but that comment immediately made me think of this...
Well, probably I thought of it because they too come in huge containers with handy dispenser!
When paying for assets you tend to use depreciation as a guide. The complication comes if one assets doesn't depreciate. Over a 5 year period the Pagani actually costs more than the Rolex. 🤔
Straight line projections, be they economic, or demographic, or whatever, never work out. Just look at the history of the Fortune 500: mining companies are replaced by car companies are replaced by computer companies are replaced by insurance companies are replaced by... It is guessing the next part is where fortunes are made. But it is not static.
Rolex is one of the few brands that has never failed in a corporate-wide sense. Omega failed. Your could have bought them for a song forty years ago. Seiko's interest in Omega made the Swiss industry circle the wagons. Sure, Citizen can have Alpina, but Omega is sacred. The Rolex name, especially in the second half of the 20th Century, gave them an advantage over other brands. There was also probably some luck there too. It could have been Longines. It just wasn't.
The name is everything. We can see it in modern companies as well. Name a German brand founded before unification that has not failed. You can't. Every one went dark for a time. The biggest and oldest, Kienzle, is still dark. But Laco, or at least the name, can't be killed. Laco's real heritage is a recent minting. However, the name lets it reach back to a time between the wars. The Laco name is nearly 100% of the value of the company that bears it.
Brand loyalty allows consumers to limit their own choices. Once you have determined that a product is of a quality and price to your liking you no longer have to analyze information with every purchase. Speedstick works better than Dry Idea. I will buy it every time so that I don't have to consider the purchase. I will buy this Dole bagged salad because it is easy, even if I pay slightly more. Choice is a burden. Brand loyalty isn't what it used to be: there are very few "Ford only" car buyers, but they still exist.
Lastly, men stop dressing for potential mates in their forties, 47 I seem to remember. For women, the age is about fifteen years later. So, given that women care for more than a decade longer, and there are more of them, woman's fashion will always be a bigger industry than men's.
Another dissertation for the ages my friend and we are all the wiser for it. To say we’re not susceptible to brand bias and marketing is absurd and it DOES matter. Hard to put a price on rainbows and how the brand makes you feel.
To answer your question, I am absolutely a brand guy and there are large chunks of your post I agree with but there are also some parts Im not sold on.
I dont see my watches as mere consumer items like Coke or tubing. I have no illusions that my 'original' watch is any better than a copy in any way. However, for me the original and the copy are actually completely different things, different product classes. The original is art, the copy is decoration. When I want art I buy art and pay art prices, when I want decoration I buy decoration and pay decoration prices.
I know this can fire up a whole debate over what is art, how can 1 million rolexes be art but the one off mod you bought from ebay not be..... but thats a different debate.
2. However, I fear the biggest gap in your discussion is missing that the only reason you want the $200 pagani is because the $10000 rolex exists and has been sold to you already at the cost of billions of dollars. This isnt tubing that you need because without it all that oil ends up on the floor and not in the place its meant to be. You want that design because someone spent billions of dollars convincing you.
Heres's the weird paradox - people wont pay rolex money because they object to money being spent to paint F1 barriers green but only want copies of the rolex because rolex spent money to paint F1 barriers green.
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Dammit! I forgot to stretch before I clicked on this! Might not make it all the way through on the first go…
Dammit! I forgot to stretch before I clicked on this! Might not make it all the way through on the first go…
This is a dadaist test. Each post moving forward will be longer and longer and longer. The absurdist humor is in seeing how long a post can be before it gets blacklisted by @WatchCrunch!
Handshakes times a million god I love a good analysis that discussions finance strategy and watches. Why haven’t I been following you my entire life?!
Handshakes times a million god I love a good analysis that discussions finance strategy and watches. Why haven’t I been following you my entire life?!
I feel this way...
... about you too!
Very well thought out and thought provoking post. Can one be susceptible to marketing and at the same time try to rebel against it. I try to collect a little from all over the place, including Rolex. What does that say about the grip of marketing on me?
Dammit, why did you have to post this now. I'm supposed to be working!
Very well thought out and thought provoking post. Can one be susceptible to marketing and at the same time try to rebel against it. I try to collect a little from all over the place, including Rolex. What does that say about the grip of marketing on me?
Hmmm... Here is my tongue-in-cheek answer...
Human beings always, consciously or unconsciously, want to signal status to other human beings
We turn to things like watches and jewelry to do so
But, of course, to lie to ourselves, we imbue these objects with all sorts of emotions and strong values - heritage, history, craftsmanship, etc. - when in reality, they just show off our status
Now, we would want to signal to both ordinary passersby and the initiated - we want EVERYONE to know how elite we are
So, we would want to have recognizable stuff in our collections, like Rolex, in order to let the average Joe know that we're better than them
AND we would want stuff that only the enthusiast would recognize (Glashuette Original, JLC, etc.), in order to signal to other "elites" that we are also one of the truly select few
So, yes, you have reached a level of truly elite signaling by your rebelling against marketing! 😜😜😜😜😜😜😜😜
As someone who works in marketing, I think I should show up with that Homer Simpson meme where he withdraws into the bush. But I won't! My role in this World is apparently to make people buy / spend too much on stuff they don't need. And to make a mean Bolognese.
I don't think anyone is immune to marketing or 'brand'. Even those who think/say they are. Some just more than others. Every day we're influenced by what we see and hear. And sometimes it's an ad. Sometimes it's something that doesn't look like an ad but ultimately is. Sometimes it's the words of others - which may have been influenced by ad dollars, whether indirectly or not. Etc. There's a reason why some brands are more successful than others, even when they might not have the 'best' product (cough, Rolex).
Won't mention the watch brands / parent organisation my company works for but what I can say is I own one of them. However, that purchase was absolutely not influenced by that factor (they don’t give us discount for a start!). But I was influenced by their marketing. I'd be kidding myself if I said I wasn’t.
Hmmm... Here is my tongue-in-cheek answer...
Human beings always, consciously or unconsciously, want to signal status to other human beings
We turn to things like watches and jewelry to do so
But, of course, to lie to ourselves, we imbue these objects with all sorts of emotions and strong values - heritage, history, craftsmanship, etc. - when in reality, they just show off our status
Now, we would want to signal to both ordinary passersby and the initiated - we want EVERYONE to know how elite we are
So, we would want to have recognizable stuff in our collections, like Rolex, in order to let the average Joe know that we're better than them
AND we would want stuff that only the enthusiast would recognize (Glashuette Original, JLC, etc.), in order to signal to other "elites" that we are also one of the truly select few
So, yes, you have reached a level of truly elite signaling by your rebelling against marketing! 😜😜😜😜😜😜😜😜
I think that is probably, and sadly, hitting the nail on the head.
Dammit, why did you have to post this now. I'm supposed to be working!
I know... jobs suck, right?
As someone who works in marketing, I think I should show up with that Homer Simpson meme where he withdraws into the bush. But I won't! My role in this World is apparently to make people buy / spend too much on stuff they don't need. And to make a mean Bolognese.
I don't think anyone is immune to marketing or 'brand'. Even those who think/say they are. Some just more than others. Every day we're influenced by what we see and hear. And sometimes it's an ad. Sometimes it's something that doesn't look like an ad but ultimately is. Sometimes it's the words of others - which may have been influenced by ad dollars, whether indirectly or not. Etc. There's a reason why some brands are more successful than others, even when they might not have the 'best' product (cough, Rolex).
Won't mention the watch brands / parent organisation my company works for but what I can say is I own one of them. However, that purchase was absolutely not influenced by that factor (they don’t give us discount for a start!). But I was influenced by their marketing. I'd be kidding myself if I said I wasn’t.
Amazing!!! I truly admire your line of work. I mean, it takes real skill and witchcraft, and I know I suck at it - which would help to explain why it took me 16 years to convince my wife to marry me.
It's so funny how there are so many tropes in modern society that seem to immediately appeal. And, yet, upon any further reflection, those tropes are nonsensical. Here are a few from the watch community...
"I'm not influenced by marketing." Signaling translation: I'm so high status that I can claim to be above anything that influences the thinking of lesser mortals
"Flippers are evil." Signaling translation: I'm so high status that I don't need the money that comes from flipping watches, so I look down on the poors who would make money doing so
"Grand Seiko is the best." Signaling translation: I aspire to be this gentleman...
But, again, I do truly admire your line of work. One of the reasons that we have such high standards of living in the Western World is because of the compelling and powerful marketing that professionals like you are able to come up with!
I think that is probably, and sadly, hitting the nail on the head.
Hey man, you're talking to a galaxy-brain (me) who sold off all his Swiss watches, to go full Grand Seiko, because...
But, I have to admit that the real reason I did so, is because unconsciously my brain had tricked me into believing all this mystical stuff about GS, because it felt like GS would do a better job of signaling than the Swiss stuff! Ha!
Amazing!!! I truly admire your line of work. I mean, it takes real skill and witchcraft, and I know I suck at it - which would help to explain why it took me 16 years to convince my wife to marry me.
It's so funny how there are so many tropes in modern society that seem to immediately appeal. And, yet, upon any further reflection, those tropes are nonsensical. Here are a few from the watch community...
"I'm not influenced by marketing." Signaling translation: I'm so high status that I can claim to be above anything that influences the thinking of lesser mortals
"Flippers are evil." Signaling translation: I'm so high status that I don't need the money that comes from flipping watches, so I look down on the poors who would make money doing so
"Grand Seiko is the best." Signaling translation: I aspire to be this gentleman...
But, again, I do truly admire your line of work. One of the reasons that we have such high standards of living in the Western World is because of the compelling and powerful marketing that professionals like you are able to come up with!
It’s not just marketing though. We are influenced by the opinions of others as you say. Whether that’s what they say or what we want them to think about us.
I’m yet to be swayed by Grand Seiko. But you and a bunch of others are gradually chipping away at me.
It’s not just marketing though. We are influenced by the opinions of others as you say. Whether that’s what they say or what we want them to think about us.
I’m yet to be swayed by Grand Seiko. But you and a bunch of others are gradually chipping away at me.
Don't do it! Don't do Grand Seiko! I mean, in the end, ALL of it is ridiculous. If I weren't so broken inside, and I didn't have such a weird relationship to money, such that I had to trick myself into knowing that I'm not a poor kid living off government cheese anymore, I would never have bought ANY luxury watches.
If I could start all over, I would only own micro brands!
Hey man, you're talking to a galaxy-brain (me) who sold off all his Swiss watches, to go full Grand Seiko, because...
But, I have to admit that the real reason I did so, is because unconsciously my brain had tricked me into believing all this mystical stuff about GS, because it felt like GS would do a better job of signaling than the Swiss stuff! Ha!
I may also be a bit of a “nationalist” watch collector as many of my watches are either micro brands or large brands that have some sort of tie to America, with some Swiss and English thrown in to be balanced. I am also eyeing a GS and you know those German watches are looking nice. 😊
I am here to say I do prefer Royal Crown (RC) cola. 😜 Grew up in a rural region of "flyover country" where every rural country store had a RC machine, as it owned Sun Drop (it's like Mt. Dew) which in said region out sold Coca-Cola and Pepsi, often combined.
I am here to say I do prefer Royal Crown (RC) cola. 😜 Grew up in a rural region of "flyover country" where every rural country store had a RC machine, as it owned Sun Drop (it's like Mt. Dew) which in said region out sold Coca-Cola and Pepsi, often combined.
OMG!
I’ve heard of some crazy sub cultures out there, like what you just described. For example, I’ve heard that Juggalos and Juggalettes religiously drink Faygo!
Is it like that?
Louis, to their credit, stopped. There is the famous quote, “When every secretary has one, it is no longer a luxury bag.” They did not like being associated with that. We can talk about how problematic that is, or how smart/bad that is from a business perspective, but clearly they pivoted away because it was not just China as outlined, but the rest of the world started to feel that way.
Coach on the otherhand? lf you are at the right TJMaxx on the right day, you can get one. Not knocking them, but like most brands, once they start being made for the outlets, the brand becomes tarnished for those that care about that.
My cousin-in-law works in purchasing, planning, and allocation for Coach. I should ask her about the brand and her take on it all. Super interested to hear about it from an insider perspective now!
My cousin-in-law works in purchasing, planning, and allocation for Coach. I should ask her about the brand and her take on it all. Super interested to hear about it from an insider perspective now!
Oh that would be fascinating. Obviously, making bags for outlets (most goods at outlets are usually downmarket versions of the boutique models) has to have paid off? Any outlet mall I have been at has one. Perhaps, to your point about tubes, they decided “why compete just in the high end space, and let’s move volume.” Clearly there is a tipping point fiscally. As far as when discount stores get them, I am not sure they have any control over surplus/wholesale, kind of like how Omega has no power in stopping their watches from being sold for a little more than cost to grey dealers.
OMG!
I’ve heard of some crazy sub cultures out there, like what you just described. For example, I’ve heard that Juggalos and Juggalettes religiously drink Faygo!
Is it like that?
I personally don't drink a lot of soda, but will always pick up an RC or Sun Drop if I run it across it in a road trip. But to your question, yes in the region I grew up in and a few others (mainly Upper South region) Sun Drop used to be, and probably still is, a cultural norm that allowed it to sell abnormally well and perform as a regional peer to Coke and Pepsi. These are very small and unique geographical regions - almost pockets unto themselves in terms of regional culture.
Faygo is another good example - there are parts of metro Detroit and the Great Lakes where Faygo is a regional player due to it being a historic brand to the region - and being absurdly affordable. Oh, and yes, due to the clowns (ICP), which are their own distinct subculture.
I worked in grocery industry while in university and for a soft drink distributor straight out of undergrad - so very familiar with industry. Did a lot of my grad work research around supermarket industry - in particular Kroger and Aldi. 😁 I feel you will appreciate this niche data and this part of my background.
One of the best watch related posts I have seen in the last decade, @Mr.Dee.Bater
As a child of the 70s-80s, Swatch didn't bite me but Rolex marketing did. Graduated high school in '86 and Rolex was THE signal that I had made it. Bought my first Rolex DJ at 21. And the desire to own a Day-Date has yet to be realized but will be as I save over the next three years. Hell, binging "The Sopranos" over the holidays reignited that desire like never before. It is 100% for the status symbol that I will pickup a vintage 18k champagne dial 18038 in 36mm. The sin of pride, I claim it.
But some things, the prestige and marketing don't matter. Clothing brands used to mean the world to me. Couldn't care less about a brand name now. And yet Ralph Lauren continues to market and make great clothing BUT the law of diminishing returns seems to not matter to me with clothing.
What changed that?
One of the best watch related posts I have seen in the last decade, @Mr.Dee.Bater
As a child of the 70s-80s, Swatch didn't bite me but Rolex marketing did. Graduated high school in '86 and Rolex was THE signal that I had made it. Bought my first Rolex DJ at 21. And the desire to own a Day-Date has yet to be realized but will be as I save over the next three years. Hell, binging "The Sopranos" over the holidays reignited that desire like never before. It is 100% for the status symbol that I will pickup a vintage 18k champagne dial 18038 in 36mm. The sin of pride, I claim it.
But some things, the prestige and marketing don't matter. Clothing brands used to mean the world to me. Couldn't care less about a brand name now. And yet Ralph Lauren continues to market and make great clothing BUT the law of diminishing returns seems to not matter to me with clothing.
What changed that?
Thank you so much, sir!
It's funny and almost random which marketing gets a hold of us, when we're young and impressionable, isn't it? For you, the Rolex marketing took hold when you were young. But, for me, weirdly, it was Omega. When I was 22, I remember flying to Manhattan to see my now-wife, who was doing an internship out there. And in the middle of Times Square was a giant billboard of Pierce Brosnan wearing a Seamaster, and it said, "James Bond's choice." And, ever since then, I'd always thought that Omega must be the most prestigious watch brand... after all, James Bond wears one!
As for clothing... I have a totally "straight out of my butt" guess as to why clothing brands no longer matters to you. Like me, you're old! Clothing is a young man's game. I mean, nobody in the world can make clothes that will flatter my pudgy, pear-shaped body. So, why even try, right? Only young, virile guys, who don't require blue pills to perform these days, can really rock nice, form-fitting designer clothes, right? 😂
Thank you so much, sir!
It's funny and almost random which marketing gets a hold of us, when we're young and impressionable, isn't it? For you, the Rolex marketing took hold when you were young. But, for me, weirdly, it was Omega. When I was 22, I remember flying to Manhattan to see my now-wife, who was doing an internship out there. And in the middle of Times Square was a giant billboard of Pierce Brosnan wearing a Seamaster, and it said, "James Bond's choice." And, ever since then, I'd always thought that Omega must be the most prestigious watch brand... after all, James Bond wears one!
As for clothing... I have a totally "straight out of my butt" guess as to why clothing brands no longer matters to you. Like me, you're old! Clothing is a young man's game. I mean, nobody in the world can make clothes that will flatter my pudgy, pear-shaped body. So, why even try, right? Only young, virile guys, who don't require blue pills to perform these days, can really rock nice, form-fitting designer clothes, right? 😂
Think you nailed it. As a young man, I dressed not only for myself but to impress the ladies. Now, o wear what I like because it is comfortable, I like the fit and my style is all about casual. I have traded alligator belts for elastic Arcade belts, $80 Polo tees for super cozy tall size, heavy Chinese tees.l that sell for $18.
People are weird creatures. I imagine that our social interactions would be seen as amusing, fascinating or even troublesome to a more advanced race.
I am definitely doing something wrong. Clearly people have enough time on their hands to consume marketing and adverts, yet I barely have enough to watch the stuff I want to, let alone some BS that is being forced down my throat. I just tried to come up with a single product I own or use where I remember an advert, past or present. Can't think of a single thing aside from head and shoulders shampoo but I bought that because it comes in a huge container with a handy dispenser...
I am definitely doing something wrong. Clearly people have enough time on their hands to consume marketing and adverts, yet I barely have enough to watch the stuff I want to, let alone some BS that is being forced down my throat. I just tried to come up with a single product I own or use where I remember an advert, past or present. Can't think of a single thing aside from head and shoulders shampoo but I bought that because it comes in a huge container with a handy dispenser...
I don't know why, but that comment immediately made me think of this...
Well, probably I thought of it because they too come in huge containers with handy dispenser!
When paying for assets you tend to use depreciation as a guide. The complication comes if one assets doesn't depreciate. Over a 5 year period the Pagani actually costs more than the Rolex. 🤔
A couple of related thoughts...
Straight line projections, be they economic, or demographic, or whatever, never work out. Just look at the history of the Fortune 500: mining companies are replaced by car companies are replaced by computer companies are replaced by insurance companies are replaced by... It is guessing the next part is where fortunes are made. But it is not static.
Rolex is one of the few brands that has never failed in a corporate-wide sense. Omega failed. Your could have bought them for a song forty years ago. Seiko's interest in Omega made the Swiss industry circle the wagons. Sure, Citizen can have Alpina, but Omega is sacred. The Rolex name, especially in the second half of the 20th Century, gave them an advantage over other brands. There was also probably some luck there too. It could have been Longines. It just wasn't.
The name is everything. We can see it in modern companies as well. Name a German brand founded before unification that has not failed. You can't. Every one went dark for a time. The biggest and oldest, Kienzle, is still dark. But Laco, or at least the name, can't be killed. Laco's real heritage is a recent minting. However, the name lets it reach back to a time between the wars. The Laco name is nearly 100% of the value of the company that bears it.
Brand loyalty allows consumers to limit their own choices. Once you have determined that a product is of a quality and price to your liking you no longer have to analyze information with every purchase. Speedstick works better than Dry Idea. I will buy it every time so that I don't have to consider the purchase. I will buy this Dole bagged salad because it is easy, even if I pay slightly more. Choice is a burden. Brand loyalty isn't what it used to be: there are very few "Ford only" car buyers, but they still exist.
Lastly, men stop dressing for potential mates in their forties, 47 I seem to remember. For women, the age is about fifteen years later. So, given that women care for more than a decade longer, and there are more of them, woman's fashion will always be a bigger industry than men's.
Mongo spend money, Mongo feel good.
Another dissertation for the ages my friend and we are all the wiser for it. To say we’re not susceptible to brand bias and marketing is absurd and it DOES matter. Hard to put a price on rainbows and how the brand makes you feel.
To answer your question, I am absolutely a brand guy and there are large chunks of your post I agree with but there are also some parts Im not sold on.
I dont see my watches as mere consumer items like Coke or tubing. I have no illusions that my 'original' watch is any better than a copy in any way. However, for me the original and the copy are actually completely different things, different product classes. The original is art, the copy is decoration. When I want art I buy art and pay art prices, when I want decoration I buy decoration and pay decoration prices.
I know this can fire up a whole debate over what is art, how can 1 million rolexes be art but the one off mod you bought from ebay not be..... but thats a different debate.
2. However, I fear the biggest gap in your discussion is missing that the only reason you want the $200 pagani is because the $10000 rolex exists and has been sold to you already at the cost of billions of dollars. This isnt tubing that you need because without it all that oil ends up on the floor and not in the place its meant to be. You want that design because someone spent billions of dollars convincing you.
Heres's the weird paradox - people wont pay rolex money because they object to money being spent to paint F1 barriers green but only want copies of the rolex because rolex spent money to paint F1 barriers green.
People are weird.