According To Ariel: Luxury Watch Brands Strive To Make Desirable Objects, But Consumers Want Competitive Products

More so than for standard consumer goods, at the heart of luxury product sales is a tense tug of war between buyer expectations and brand hopes. Some professionals in the space often confuse this struggle as being a positive synergy whereby consumers naturally want to desire something fancy, and high-end brands come to the rescue to satisfy this need with an accordingly priced experience. However, these professionals often merely conflate popularity with demand. I have observed that there isn’t actually much synergy, and the relationship between luxury brand and buyer is much more oppositional than it is cooperative. Understanding this crucial dynamic can help explain what brands are offering and what consumers are seeking, especially in the crowded luxury timepiece market of today.

Brands that sell luxury goods (like watches) are in it to charge consumers as much as they can get away with to ensure high profit margins. Brands accomplish this by striving to create what they refer to as “desirable” goods. On their end of the rope, luxury brands “pull” consumers with the allure of a popular product that appears to be in demand. Consumers, on the other side of the rope, are pulling in a different direction and hope for products that are better than the alternatives and that provide a good deal of value for the money. Sometimes high-demand products are popular because they offer a lot of product for the money, but often, demand is manufactured and promoted through marketing activities. Marketing itself is a good idea, especially when it exists to promote to a larger audience the authentic reasons a consumer might be happy with a product. Marketing starts to get dangerous when it is used to suggest popularity or demand, when in fact, actual market popularity for a product or service is tepid. Marketing is just communication, which is inherently valuable. Whether a marketing message is authentic or fantastical is, of course, another determination.

In many instances, consumers have little interest in products merely because they are popular, but rather draw inferences about those products from their supposed popularity. For example, take the age-old concept of the celebrity endorser or ambassador. What is the real message that brands are suggesting to consumers when they promote media that depicts famous people with their products? Celebrities do attract initial attention, but they also come with a tacit endorsement of quality and competitiveness. Consumers presume that wealthy or famous people have many more buying or selection choices than the average consumer. That tends to be true. What isn’t often true is that celebrities and famous people (simply people with money) are category or product experts. Just because you can afford a lot, doesn’t mean you automatically know a lot. Wealthy or celebrity consumers are often no better educated in a product like watches than are lay collectors or consumers. That said, the presumption that a celebrity or famous person “knows better” is strong and has a great suggestive force with consumers. Consumers thus see celebrity endorsements as signals (either wisely or not) that a product is competitive. meaning that the product (a wristwatch in this case) somehow beats the competition on the merits, and was chosen by someone with a lot of choice power.

The funny thing is that brands that place watches and other high-end goods on celebrities rarely think in these terms. Rather than product competitiveness, they think in terms of popularity, which in their eyes, leads to buyer demand. There is a strong notion that consumers will eventually want something simply because they see it around them a lot. Especially if they see those things associated with famous people. Brands think in black and white terms of items either being “in demand” or “unwanted.” The reality is much more complicated than that, and consumers create mental lists and hierarchies of things they are interested in and how much effort they are willing to put into acquiring those objects or services. Consumers may be curious about popular things, but not demand them because they perceive those things to poorly compete in the market. This happens all the time.

What consumers do desire is positive experiences, so much so that consumers can be poor evaluators of whether someone sharing a positive experience is telling the truth or not. Unless consumers are highly sophisticated about a product category, they are not often in a good position to decide, a priori, if using or owning a product will yield a product experience. Thus, whether tacitly or explicitly, many consumers are seeking to learn if using or wearing a product made someone else feel good (or however they want to feel) prior to investing in that items themselves. Marketers have been keen to this tendency for generations, but the way they make use of this tendency has evolved over time. Many of today’s product endorsements are related to a spokesperson or influencer sharing an emotional reaction to a product, rather than offering a good argument as to its merits. For example, “I feel so good wearing this item” is a much more popular paid testimonial than explaining what about the item is so great to begin with. In essence, relying on other people’s emotional cues in relation with an experience is a mental shortcut that allows us to get an idea of whether or not we might like to sample that experience. That’s why we are often interested in why certain objects are in high demand, but are not entirely convinced to desire something by observing popularity alone, though you might exhibit otherwise when it comes to a lot of trendy behavior out there.

I mention all of this because I think there is an important fine line to distinguish between products that are simply perceived as popular and those that are popularly perceived as being competitive. Consumers fully realize that they have only limited buying power and opportunities to make purchases. One definition of luxury goods that I like to use is that the luxury side of a purchase is any factor not related to helping the buyer subsist. Take food, for example. We all need food to subsist, but we don’t need great taste, visual excellence, or wide variety to do so. So, anything we spend on food above and beyond the need to subsist is a luxury purchase (whether minor or major). Consumers expect the luxury side of a purchase (and some purchases such as jewelry are entirely luxury in their purpose) to feel good. They use perceived market desirability (such as how popular Rolex watches are) to help narrow down choices, but they are ultimately looking for the most competitive way of feeling good. Most consumers would gladly choose lower-cost (i.e., more competitive) ways of getting the same good feelings, if they are aware of those options. The reason so many people choose Rolex over other watches is not because they want the most-demanded product. Rather, they observe Rolex to be the most popular product that appears to deliver the emotional outcome they want (often, a conservative-looking jewelry timepiece that says, “I made it.”), and choose it because they are chasing an outcome, not simply popularity. Many times, the most popular products are the least competitive.

Rolex watches happen to be very well made, but we all know that mass market popularity with consumers is rarely related to competitiveness when it comes to luxury goods. This is often due to the fact that, for most timepiece companies (though not all), money spent on marketing is taken away from manufacturing or research and development, meaning that money spent to popularize a product often necessitates a quality or refinement sacrifice elsewhere. This is often most pronounced at brands that openly engage in very elaborate marketing campaigns or expensive celebrity or entertainment media placements. While managers believe they are injecting value in the brand by increasing popularity and perceived desire through paid endorsements, they are actually forcing consumers to call into question the value proposition and thus the competitiveness of the products they sell. This is a common situation today, and it becomes a challenging balancing act for many luxury watch brands. On the one hand, they must invest in marketing activities to spread awareness of their authentic stories. On the other hand, they must be careful not to outwardly splurge so that consumers do not believe they are paying high prices to subsidize marketing obligations, as opposed to high costs for materials and artisanal labor. The push to make a brand look desirable can have a negative reciprocal effect on the perceived competitiveness of a product.

This conversation is the most salient at large and established luxury watch brands (often, those that are corporate-owned). I say this because smaller, artist- or entrepreneur-run luxury watch brands tend to be close enough to the market to more authentically engage with consumers. These companies are most interested in actually selling watches as opposed to being focused on more abstract notions of “brand equity value.” They tend to directly engage in marketing and communication practices that lead to consumers buying a watch. Corporate marketing managers and similar professionals are less directly incentivized by product sales. Rather, their performance is judged on more abstract factors such as “brand desirability” and regular measures of “earned media value.” For these professionals, being able to demonstrate to stakeholders that a brand is in demand and sexy to consumers is how they justify their work efforts. The problem is that measures of brand desirability are vague and open to interpretation, especially when compared to more precise measures such a sales over time. My concern is that too many watch industry professionals are incentivized by increasing a brand’s “desirability” over something more specific, like actual revenue numbers.

This is a very real problem because efforts to make a brand more desirable (which is an outcome of measured data more so than anything related to actual human sentiment) may not actually lead to that many more sales and probably don’t lead to better products. Brands have associated easy-to-misunderstand concepts like high resale prices, celebrity endorsements, auction popularity, earned media value, and similar measures as being used to demonstrate how desirable a brand is (and thus, how good business will be). These factors rarely lead to better timepieces and often just end up increasing prices without increasing the inherent value of a product. Thus, by focusing on increasing demand/desire across those metrics, brands are not led to improve their underlying products or making them more competitive.

When a luxury firm discusses wanting to make its products more desirable, it sounds good at first thought. In the best instances, such a desire pushes companies to make more original, risk-taking products that excite consumers while moving product categories to new levels. Brands that want consumers to desire their products often understand how to flirt with buyer expectations and relish in “wowing” them when possible. All too often, however, brands that focus on increasing their overall desirability do so using shortcuts like celebrity endorsements and market manipulation to achieve their goals. One of the best examples of this has been over the last few years when many high-end timepiece brands pretended they didn’t have popular watch models in stock, and who then strung along interested buyers on waiting lists and offered to sell them what they wanted only after they first purchased a few products they did not want. At the brands, this was all just a way of making their company more desirable, even if it meant sharply cutting how competitive they are in the long run. It isn’t actually noble to merely work on your brand’s desirability if you do so using techniques that harm the brand’s long-term competitiveness. Thus, increased desirability should be an unintended outcome of a marketing effort designed to increase a brand’s market competitiveness.

If only selling watches were as easy as making a popular brand. Luxury companies have been putting timepieces on celebrity wrists and rigging auction results for many decades. It doesn’t always lead to massive demand, and it rarely results in brands that actually appear to be more competitive upon close scrutiny. The biggest challenge for the watch industry to overcome is ego. Many timepiece companies, especially those from Europe, approach marketing as though they are in a battle with the consumer. They fantasize about winning over consumer hearts, despite a buyer’s better judgment and objections. Buyers don’t want this. They want to purchase from accessible companies that spare no expense and appear to be making watches that meet the high standards of the people manufacturing them. Those are the types of companies they associate with making the most competitive watches. In this instance, desirability is an intellectual outcome of perceived quality and appeal. Desirability (for the purposes of valuing a brand) is not really a measurable metric unto itself.

What do you think? Do you agree or disagree that watch brand desirability and competitiveness are two different sentiments, and that the latter is what most timepiece collectors are interested in. What are some of the most popular but still competitive watchmakers? How many of the most desirable watchmakers are also among the most competitive?