Rolex "BRAND" Strategy one of the reasons for Continuously Raising Prices??

[Grissom]

In many of the prior threads discussing Rolex price increases, a number of comments have been periodically made, putting forth the idea that one of the reasons Rolex continues to sell, even as prices seem to skyrocket, is the perception that the HIGHER the price for the "brand" goes, the MORE people want to own one. Is that, in fact, one part of their pricing strategy, or are they unintentionally going to reap this benefit, from price increases dictated by declining global currency markets, and/or increased demand by emerging markets?

I just came across an article noting that the APPLE brand has now passed GOOGLE as the most valued brand, evidently using this pricing concept. Excerpt taken from the Yahoo Finance article referenced below:

"Apple is breaking the rules in terms of its pricing model," he told Reuters by telephone. "It's doing what luxury brands do, where the higher price the brand is, the more it seems to underpin and reinforce the desire."

Here is a link to the whole article, and below that, a link to the 2011 list of the top 100 brands (by valuation).

http://finance.yahoo.com/news/Apple-...547584535.html

See Millward Brown's Current (2011) List of the TOP 100 BRANDS (Apple has now eclipsed GOOGLE using, evidently, this strategy):

http://tinyurl.com/6hm9qy9

Here is a link to Milward Brown's 2010 List of the TOP 100 BRANDS:

http://tinyurl.com/2ec6loh

Finally, here is a 2010 article entitled "What’s the Most Valuable Watch Brand? And Just How Valuable Is It?", noting:

"Each year the Millward Brown Optimor consulting firm issues a ranking of the world’s top brands. MBO uses a complex formula to estimate a brand’s worth. Only one brand whose primary product is watches made the list: Rolex. MBO estimates that Geneva-based Rolex is the world’s sixth most valuable luxury brand with a value of $4.74 billion." (Note: Millward Brown still maintains Rolex at #6, for 2011, but now notes valuation at $5.269 billion as seen in the screenshot shown below)

http://tinyurl.com/3hgqd2d

- Will Rolex ever make it into the Millward Brown TOP 100 Brands?

- Selling only watches, can they seriously compete for the TOP spot against Louis Vuitton?

Your thoughts?

[Speed]

Grissom,

As a former brand / product marketer, my opinion is that rankings like these are good fun, good for bragging rights, Corporate background / press releases and morale boosters ( used to be good for recruiting tools when companies were hiring ) for employees.

I don't think Rolex will make it in to the top 10 simply because of the methodology. However, it may certainly rise up the rankings of the luxury segment you identified.

Fun read!

[mtrunner]

Is there a cliff note version of your paragraph. I voted that it must make Rolex more desirable when the price goes up. I just think Rolex knows that their is enough demand even at these prices that they will continue to sell. Even if the sales drop of in the US there is such a demand elsewhere they will make up for any lost revenue from sales in the states. I personally think their pricing is crazy but what do I know.

[snowbird]

Interesting question. Clearly this seems to be part of the logic for Omega's large price increases and maybe so for Rolex.

In the US at least, exchange rates are part of the equation too i.e. how much value the USD has lost against the Swiss franc recently.

The recent 8% price increase only makes up for about half of the value the USD has lost against the franc since the last price increase in Sept. 2010 (around a 15% drop).

So Rolex is actually worse off in the US, even after the price increases, since their production costs are largely in francs.

[Roja]

Sadly, supply and demand is the key to it all and for whatever reason, like the expected reaction from one of Pavlov's dogs, I too am suddenly interested in buying a Luis Vuitton whatever and an Hermes something else.

I'm so easy! I guess knowing my hard-wired instincts at least allows me a chance to not always get caught in it all.

As far as 'branding' is concerned or, more appropriately, marketing strategy, I would have to sadly say that Rolex is on the right track.

Let's be honest, there used to be a time when Mercedes Benz was beyond the reach of most, as was Rolex. Now, a much larger market segment can delve into these luxury goods and this has devalued them in a certain way.

[dsio]

Everything will be going up due to the currency changes. Just so you know, here in Australia, where our dollar is worth $1.075 of yours:

Milgauss GV = $9k+
Sub-C = 10K+
Yacht-Master II 18k YG = $60,000

Cars:

Porsche Boxster: $106,000 (in USA $48,000)
Porsche 911 (base model) $223,000 (in USA $77,800)
Porsche 911 Turbo S $423,000 (in USA 160,700)

and yes, here Rolex has dropped prices, not raised them, in line with our appreciation to the Swiss franc.

The fact is its still cheaper by far to buy from the USA than it is to buy here in Australia even with the absolute best discount possible from a repeat customer.

[snowbird]

Originally Posted by dsio

Porsche Boxster: $106,000 (in USA $48,000)
Porsche 911 (base model) $223,000 (in USA $77,800)
Porsche 911 Turbo S $423,000 (in USA 160,700)

Interesting - why are Porsche's so expensive? Is there a steep luxury tax on high end cars?

[Numismatist]

Continually rising higher prices beyond what seems normal? Sounds familiar...didn't we just go through that with housing?

If there is a Rolex bubble...what happens to the brand when it pops?

[dsio]

Originally Posted by snowbird

Interesting - why are Porsche's so expensive? Is there a steep luxury tax on high end cars?

The luxury car tax isn't quite as bad as you would expect, its 33% above $57K.

Then there's the fact that we're right hand drive... so we pay more for that... then there's the fact that we're on an island in the middle of nowhere... so there's that...

Then there's the fact that only 10 years ago, the AUD was worth less than HALF of one US dollar. As it got better, rather than pass on the benefits to consumers, retailers held on to them, and continued indexing their prices upward with time, especially with cars.

My brother's first Daytona was about $14k, back 7 years ago, then 5 years ago his second was $17k, now today the MSRP is $13.5k. Make sense much?

[steubi1]

As I already mentioned in another thread: I guess the price increases are a pure necessity because of the extremely weak $ versus the Swiss Franc.

Rolex has most of their cost in Swiss Franc.

Tom

[Dweller of the Sea]

Rolex has always been valuable, and one of the most soughtafter watch brands.
Unfortunatly for Rolex, the last 10 years they have been sleeping, and all of the competion (IWC, Breitling, Omega etc) have made modern looking watches, increased their quality of their products and used this "luxury strategy".
Now Rolex is suddenly behind. They are still up front, but the gap to the others are very small. It used to be big. Young men often wants a Breitling or IWC, rather than a Rolex, because they don´t look smart enough/ big enough.
In my view, Rolex is doing the right thing now, as a brand. As a wis, I think they are overpricing them to much now. At these prices, I´m probably going to buy JLC, AP insted. The smart, new-rich chinese probably don´t care: Its a Rolex, its bling and its show off.
It not something new in the watch world, all other companies have done this for years.

[Casey VP-26]

As I have mentioned before after watching a TV segment on Bloomburg Channel recently. Switzerland is having a hard time keeping up with the demand for watches do to the lack of watchmakers. Part of these price increases could be a product of supply and demand.

[snowbird]

Originally Posted by dsio

The luxury car tax isn't quite as bad as you would expect, its 33% above $57K.

Then there's the fact that we're right hand drive... so we pay more for that... then there's the fact that we're on an island in the middle of nowhere... so there's that...

Then there's the fact that only 10 years ago, the AUD was worth less than HALF of one US dollar. As it got better, rather than pass on the benefits to consumers, retailers held on to them, and continued indexing their prices upward with time, especially with cars.

My brother's first Daytona was about $14k, back 7 years ago, then 5 years ago his second was $17k, now today the MSRP is $13.5k. Make sense much?

Interesting, it sounds like a number of factors are at work - in any event, that's too bad for Porsche lovers.

[TheWatchFiend]

I'm all for Rolex raising their prices AFTER and only after I have purchased their product, hopefully raising the value of my purchase.

[frank gama]

=the Veblen effect is still very powerful with Rolex.

[dddrees]

They are going to be selling more product in China as time goes on as it appears anyway. I think the US will get less product as China gets more.

However this price increase might have more to dowith the US Dollar going down as stated above.

[STP]

Originally Posted by dsio

The fact is its still cheaper by far to buy from the USA than it is to buy here in Australia even with the absolute best discount possible from a repeat customer.

Thats right - not even a repeat customer would get decent discounts to match the price in the US in Australia. Its crazy, especially as our dollar has surpassed the US dollar.
We get ripped off blind over here.

[boogiebot]

Originally Posted by STP

Thats right - not even a repeat customer would get decent discounts to match the price in the US in Australia. Its crazy, especially as our dollar has surpassed the US dollar.
We get ripped off blind over here.

canada to mate. we get taxed out the yang on everything. with provincial and federal tax we pay 12% on our items. but hey we have medical right?