• Give your opinion and give me proper explanation with good format.

After reading the attached interactive case, please write a paragraph as case summary and then respond to the following questions:

1. How is the potential growth vision for marketing luxury watches in China?
2. What are the main challenges that Song has faced in such a competitive market?
3. Should Song push for the new ad campaignusing celebrities? Why?
4. As a marketing manager, what do you suggest to the company to succeed in maintaining its brand image and improve its market position?

CASE STUDY COMPETING AGAINST BLING HOW CAN AN UNDERSTATED WATCH BRAND STAND OUT IN CHINA? BY STEPHEN NASON, JOSEPH SALVACRUZ, AND J.P. STEVENSON Wei Song noticed the fashion models first, preening in their chiffon- and-lace gowns. They flanked the entrance to Shanguang Jewelers' flagship store on STEPHEN NASON and Nanjing Road. A vintage Eagle roadster was parked nearby; a dozen well JOSEPH SALVACRUZ are professors of business heeled men and women clustered around it. Song could see more people practice at HKUST Business inside the store, sipping champagne. Many were trying on watches. School. J.P. STEVENSON is a "It's quite an event," Song said to his colleague, Pearl Zhang, who was manager of competitive standing next to him, across the street. intelligence at the Fung "Yes," she replied. "If only it were ours." Group. This fictionalized case study is inspired by Song was a director at Rochat & Schmid, a 100-year-old Swiss "Battling Giants for China's maker of luxury timepieces, overseeing Greater China from his base Luxury Consumer" from the CASE STUDY in Shanghai. Pearl, his VP of marketing, had learned that their rival HKUST Thompson Center CLASSROOM NOTES Berlinger was launching a line of gem-accented watches, which would for Business Case Studies. Nason and Salvacruz be sold through Shanguang, China's biggest jewelry retailer. She'd teach the original case in persuaded him to do a bit of intelligence gathering with her. leadership, negotiation, "I told you they'd make a splash," Pearl said. "Couture clothes, a classic and marketing courses to highlight the cultural car, and watches with your choice of diamonds, emeralds, or rubies differences between around the face. Look at the customers-they're loving it. You asked what Europe and China and we could do to boost sales? The answer is something like this." the ferocity with which "Well, unlike Berlinger, we're not owned by a conglomerate that has luxury brands compete a fashion line, a winemaker, and a car company," Song replied. "Besides, for Chinese consumers, Groups such as LVMH, who, according to a 2016 we don't do diamond-encrusted anything. Berlinger's brand is splashy, Kering, and Richemont- Bain study, account for so they do splashy promotions. R&S stands for subtle elegance." which have portfolios of about 30% of worldwide "And so we're stuck with subtle marketing? In this city? This country?" 30 to 50 brands across spending in the category. Pearl gestured toward the neon-lit road, then up at a billboard featuring categories-have come to dominate the luxury a Hollywood actress. "There has to be some license to adapt to local industry. tastes. Geneva needs to understand that, especially given how much they depend on us to make their yearly numbers." MAY-JUNE 2017 HARVARD BUSINESS REVIEW 155CASE STUDY COMPEI'ING AGAINST BLING Some high-end watchmakers, such as Titoni, have created designs exclusively forthe Chinese market. ls such customization wise? Thanks in part to an anticorruption drive that is deterring the \"gifting\" of watches to officials, high- end watch sales in China grew by just 3% from 2012 to 2015, Bain reports. Data from UnionPay shows that at home and abroad, Chinese consumers spent $97 billion during the Chinese New Year celebration in 2017. Luxury sales in China's second-, third-, and fourth-tier cities are rising and have, in some categories and places, even surpassed sales in rst-tier cities. \"You know I've passed on your thoughts ab out adding new designs and rethinking how we market here. Every time I've had to address the same-store sales declines, I mention it. But you also know how Simon feels about blin g.\" He was referring to R&S's strong- willed chief creative oicer, Simon Carbonnier. \"So,\" Song continued, l'we'll need to think about more- innovative ways to generate buzz here.\" \"I'm ready to show my ideas to you and Simon tomorrow,\" Pearl said. They were scheduled to present mo ck-ups for the Chinese New Year ad blitz to the CC 0 via teleconference the next day. \"Still,\" she added, staring at the models, the car, and the crowded store. \"I'm not sure I can compete with that.\" #6000 HICHE? The following afternoon, Song was back at the Shanguan g store, meeting with theretailer's CEO, Li Gui Ying. \"I walked by the event here last night, and it looked like a great success,\" Song said. \"You should have come in!\" Gui Ying admonished. \"That was the rst, but we're doing them across the countryn ext in Hon g Kong and Beijing, of course, but then Shenzhen, Guangzhou, Tianjin, Hangzhou, and C hengdu. Given the new government initiatives, we can't rely on the 'gifting' market anymore. The only way to drive sales is to persuade customers, especially the middle class, ' that they deserve to splurge, even if the h economy is slowing down.\" ' \"Are you hoping for events from us, too?\" \"We had impressive sales last night, and the publicity was amazing. But events from Rochat 8: Schmid? No, nothing alongthe lines of what we did with Berlinger. You're in a good niche. When people come in loo king for something less glitzy, we send them right to your watches.\" \"But our sales with Shanguang are ateven with your new locations and our same- store gures in the big cities are all slightly down,\" Song said. \"1 kn ow from your recent earnings report that most of your points of sale seem to b e doing OK despite the dip in luxury spending. I'm not sure you're sending enough people our way. I'm wondering ifyou would consider giving us more count er space, showing a wider variety of our watc hes esp ecially in the fast ergrowing cities.\" Gui Ying sat stone-faced fora minute. Song waited politely. l'I think we have just the rig ht amount of Rochat 8: Schmid now,\" she said. \"Yes, sales are off, but the corruption crackdown and the sluggish economy are causing tastes to shift. People are trying to be less obvious ab out their wealth, so I can see your watch es drawing many more customers going forward maybe in a year or two? Of cours e, if you want to give me something new towork with a new slogan, new designs, even a celebrity endors erI'm always willing to listen.\" CELEBRITY FLiiSH 1-?\" Song had to hustle backto theR&S '\\ 43 China headquarters to make Pearl's I i 4 PM presentation. When he walked into the teleconferenceroom, Simon was already up on thevideo screen. l'Song, good to see you, my friend.\" \"And you, Simon. How are you?\" \"Verywell, thank you. I'm unfortunately press ed for time today. The design team has a workshop starting at 10 our time. And then I'm meeting with Rolf.\" Song and Pearl exchanged glances. They oft en made bets about how long it would take Simon tomention his contact with R0 ch at 8: Schmid's CEO, Rolf 0d ermatt. \"But you have my undivided attention for the next 30 minutes. Pearl, please go ahead.\" \"Than ks, Simon. So I've worked with our team and our ad agency on two distinct directions.\" She clicked on her laptop, and a slide appeared on a second screen in the room. \"The rst will feel very familiar,\" she said, calling up a set ofads. \"We run with our traditional 'Mark every occasion' tagline but give it a feminine spin to highlight our new range of women's watches. Instead of a father giving his son a watch at graduation, we see amother giving one to her daughter. Instead of a wife giving a husband a watch for his birthday, we see sisters surprising each other with matching watches. We update to a In China, foreign watches are principally distributed through specialty stores and partnerships with local com panies that market products in high-end department stores and malls. Though a watchmaker may be represented by several retailers within a region, retailers may carry the products ofm ore than so watchmakers. How should that inform the way Song negotiates with Gui Ying? '. .1, How does Song's geographic locationso far from head quartersaffect his ability to inuence Cssuite executives at Rochat& Schmid? 156 HARVARD BUSINESS REVIEW' MAY-JUNE 2017 By 2014 women accounted for more than half of Chinese luxury spending, up from 10% in 1995, according to Bain. However, in China men still dominate the luxury watch market by a ratio of 3:1, reports HKTDC Research. when Deloitte asked 19- to 29year-olds which marketing channel most inuenced their decision to buy a watch, the top answer among Chinese consumers was brand ambassadors. Most luxury goods companies pay celebrity endorsers to wear their products and appear in their ads. What are the costs and benets of such an approach? slightly more modern font, but the photography is still black- an d-white.\" Pearl waited for a response from Simon. When she didn't get one, she pressed on. \"The second would be a departure but a calculated one, also designed to appeal to women. Song, I know you're familiar with Changchan g Gao. Simon, she's a Chinese singer and actress who recently switch ed from TV to lms. She has 30 million followers on Weibo, many of them Millennials. When she releases a song, they download it. When she wears a dress, they buy it. I happen to be friendly with her agent, so Iknow she's open to one ortwo endorsement deals. I think she could be locked down at a reasonable rate if we gave hera three-year contract. I'd like to make her the face of a new slogan: 'You deserve it.'\" Pearl clicked and an image of Changchang appeared onscreen. She was walking down abusy street in a short red dress, ashing an irreverent smile and wearing three R815 watch es on her right arm. Everyone else in the picture was loo king at her. Song smiled. He liked it. Simon clearly did not. He was frowning. \"Simon, I'd love your feedback,\" Pearl said careilly. " - There was a long pause. \"I admire your creativity, but I've always found endorsement deals a bit lazy. And even if we did do celebrities, which we don't,\" Simon said, \"she doesn't seem right for us. Too young, too flashy.\" \"But, Simon, Chinese consumers are young, and they like ash,\" Pearl replied. \"We'd love to offer them products that capture that, but without new watches, all we have is marketing.\" \"Elegance always trumps excess with luxury buyers. We've talked about it before. These days the trend is toward inconspicuous consumption. It's starting to happen in China, too. That's why we're not changing our product designs now. We shouldn't change our marketing, either.\" Song decided to speak up. \"I understand what you're saying, Simon. Certainly t he antic orrupti on movement seems to be hurting the flashier brands. And maybe aesthetic preferences will change in a way that favors us. But will they change fast enough to deliver China, it affects the whole company. So maybe we need to shake things up.\" \"I'm against it,\" Simon said. \"Let's not lose track of what value Rochat 81 Schmid offers the market.\" Pearl chimed in. \"Simon, [understand the importance of honoring our heritage and maintaining a consistent image worldwide, but as you've said yours elf, China is a unique market. Our existing campaigns are beautiil and on bran d, but in a crowd ed and stagnating market they're simply not working as well as we'd like.\" \"And how do you know that this endorsement will work?\" Simon asked. When Pearl didn't reply, Song spoke up again. \"Simon, perhaps you and] can take some time to review these.\" \"I don't thinkI need time on both,\" Simon replied, \"but I'll send my notes on the rst set in a few days.\" UP FORI-I FIGHI? The next day Song had his weekly call with Rolf. They exchanged the usual pleasantries, then talked through the regional sales numbers. \"What's this I hear ab out you and Pearl wantingto shake up your marketing?\" Rolf asked. Song was taken aback,- he didn't think Simon would have spoken to Rolfalready. \"Yes, we're considering a slightly new direction.\" \"Simon thinks it's offvbrand and could hurt our image,\" Rolfsaid. \"Of course, he doesn't run the rm. I do.\" \"Have you loo ked at Pearl's mock- ups? They're a departure, yes, but not too ashy.' ' \"Simon show ed me. To b e hon est, the pretty girl, the red dress, the three watch es fit does seem ashy to me. But you know China better than I do. Do you have the budget to do it?\" \"We wouldn't be asking for more than we're already allocated. Pearl says we'd get a better deal by signing a longer contract.\" \"Unless it doesn't work. Then it's not a deal,\" Rolf replied. \"Ye s,\" S ong admitted. \"So do you want to f] ght Sim on on this?\" Song had been asking himself t hat same question since the previous day. \"Value proposition" is a key concept in strategic marketing. Did Song's proposals adequately convey the unique benets of Fl&5 watches? Among Chinese executives, silence is often a sign of disagreement, but a Swiss executive might be more likely to interpret it as acceptance. He hadn't realized he would need to answer it so soon. growth to our shareholders this year? . _ SEE COMMENTARIES on THE As you know, if we lose ground in NEXT PAGEO MAY-JUNE 2017 HARVARD BUSINESS REVIEW 15? CASE STUDY COMPETING AGAINST BLING SHOULD SONG SONG AND PEARL know the Chinese some at the superluxury end-priced at consumer better than Simon does. They $100,000 and above-are now embracing PUSH FOR THE NEW should trust their instincts, engage online and social marketing. Of course Changchang Gao as an endorser, and pursue any new campaign must fit with the AD CAMPAIGN? the new marketing strategy. brand's DNA. But the one Pearl suggests I suggest this course of action for a seems to walk that line well THE EXPERTS few reasons. First, despite the current slowdown in high-end watch sales in China, RESPOND it's still the world's most important luxury ANY NEW CAMPAIGN market, with the potential to grow further MUST OF COURSE FIT in the future. Companies must continue to WITH THE BRAND'S DNA. invest in brand building here if they want to keep succeeding. Second, we've seen many BUT THE ONE PEARL companies, including Longines, Omega, and SUGGESTS SEEMS TO Baume et Mercier, benefit from advertising WALK THAT LINE WELL. campaigns featuring Chinese celebrities. Critically, Changchang appears to be not just a famous singer and actress but one with a Simon mentions the rising preference significant social media following, through for inconspicuous consumption in China. which she can promote Rochat & Schmid. I would characterize changing customer Her digital influence will be a huge tastes in a different way. In my view, asset in attracting buyers-both young luxury buyers are now gravitating toward and old-to the brand's watches, as more items that reflect independent thinking people investigate products and make rather than following the crowd. I believe purchases on mobile phones. But it will manufacturers and retailers should particularly help R&S appeal to Millennials, respond by, as Pearl suggests, offering more an increasingly important market. (In China varied, perhaps even localized, designs and the average age of luxury buyers is 40, the ability to customize. compared with 50 or 60 in other countries.) Technology now allows us to tailor We've seen some fashion watch brands- products and shopping experiences to those priced at $1,500 or lower-really take customers' preferences. In 2016, our off in recent years because of their savvy group had more than 2,300 Chow Tai Fook use of new digital platforms. And even and Hearts on Fire points of sale in over 500 cities in Greater China, Singapore, Malaysia, Korea, and the United States, but we also sold close to a million pieces of jewelry through our own e-shop and other e-tail accounts on important online shopping platforms, such as Tmall. Now we're experimenting with blending the two experiences: taking orders online, often via our mobile app, which allows for design- your-own products, and delivering them off-line. Customers can go to the nearest store to pick up their purchases or have a sales associate deliver items to their homes. Whether it is in product development, sales, or marketing, R&S needs to be much more responsive to its Chinese customer base. KENT WONG IS THE MANAGING DIRECTOR OF CHOW TAI FOOK JEWELLERY GROUP. 158 HARVARD BUSINESS REVIEW MAY-JUNE 2017MARTIN GANI MANV BRANDS ENLIsT celebrity endorsers or ambassadors, but at Breguet we don't. We prefer to focus on our heritage and the quality of our products. Since our founding, in 1775, our clientele have always included royalty and heads of state, so we like to say that the people who wear our watches are our ambassadors. While I understand that Song feels he needs to do something to boost Rochat 8: Schmid's sales in China, I'm not sure a celeb rity-led ad campaign will solve all his problems. Before pushing for this shift in marketing strategy, heneeds to ask himself whether a singeratumed~actress ts with his brand's mission and priorities in China. Just look at the many types of endorsers that real-world watchmakers have used to highlight their strengths: sports stars, scientists, conductors, artists. Even if Song nds theright ambassador, he must also consider other risks: Do all current and target customers know and like this person? Might he or she be less successful or popular in a few years' time? Orbehave in a way that reects poorly on the brand? Formal endorsements are quite expensive and involve longterm contracts. Perhaps Song should consider a lower'cost, shorter-term experiment instead. For example, if he believes an association with Changchang Gao will help attract younger customers or those that prefer a bit more ash, R815 could simply sponsora party, dinner, or concert or a series of eventsask her to perform or attend, and invitethe media. These events need not be as \"blingy\" as the Berlinger one described at the start of the story. Instead of models and cars, R815 might bring in artisans who demonstrate how its watches are made. As someone who has worked in Hong Kong for more than 30 years and spent the past six building Breguet's mainland China business, I can tell you that luxury brands in Asia benetwhen they offer customers special experiences, particularly when CELEBRITY ENDDRSEMENTS ARE RISHY. THE BRAND AMBASSADOR MIGHT BE lESS PDPUlAR IN A FEW YEARS 0R BEHAIIE IN A WAY THAT REFlECTS PDDRlY [IN THE BRAND. they're able to team up with leading retailers to do so. In Taiwan and the Philip pin es, for ex ample, Breguet has had success with events featuring prominent television anchors. If the response to R815 China's initial experiments with Changchang are positive an d more importantthe initiatives boost sales, Song and Pearl can then present a better case for investing in a partnership that would make her the new face of R&S in China (although I would still recommend limiting the contract to a year or 18 months, with an option to ren ew). To be clear, I'm not suggestingthat Song roll over for Simon. Brand headquarters need to be the driving force of companies, and their brand strategies should be implemented as much as possible, but it's key to take local intelligence into account. The motto should be: Think globallyact locally. Clearly the status quo isn't working, and Song is right to consider a change. However, celebrity endorsements are risky, and I would advise him to proceed very carefully. 6 HBH Reprint RWOBN Reprint easeonly HWOSX Reprint commentary only R1703?! 6' COMMENTS FROM rHE HBR.0RG CDHHUNITY stand Up for Your Ideas Yes, ght for the new ad campaign. Even luxury brands have to adapt to the current trends of the market they're in. Jan Nissan, In t._. .tional Target New Kinds of customers If you want to keep it traditional and conservative, seek a new niche in the gifting space: the wedding market. Market the watches as a long-lasting present from parents to a bride or groom. Run a Trial My advice is to do more market research on existing and target customers as well as competitors, and then design a small pilot to test a new marketing strategy with the help of the retail CEO. Maria Pantsidou, posit-ct B MAY-JUNE 2017 HARVARD BUSINESS REVIEW 159 Copyright 2017 Harvard Business Publishing. All Rights Reserved. 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