Question

For half a century, Seiko has been one of America's best-known watch brands. In good years and bad, Seiko quartz watches have been a fixture of the mid-range ($100 to $500) of the vast U.S. watch market. Since 1967, when Tokyo's K. Hattori & Co. set up Seiko Time Corp. in New York, Seiko has been the company's hero brand here.

Not anymore.

In a major strategic pivot, Seiko Watch Corp. (SWC) in Tokyo, successor to K. Hattori & Co., is shifting the focus of its U.S. operations away from affordable Seiko-brand quartz watches to Grand Seiko, the company's leading luxury watch brand. Grand Seiko, launched in Japan in 1960, and internationally in 2010, consists primarily of men's mechanical watches in the U.S., priced mostly from $2,200 to $10,000.

This fall, SWC reorganized its U.S. company, creating a new subsidiary called Grand Seiko Corp. of America (GSA). "By establishing this new company, we are committed to changing our business model in this market," Akio Naito, GSA's chairman and CEO, told HODINKEE. "This move expresses our focus on the high end of the market, on Grand Seiko as opposed to core Seiko. The high end is the future of the brand in this market."

The changes in the U.S. are part of a long-term, Seiko Group plan to become a power player in the lucrative luxury watch market.

The company will continue to compete in the mid-range of the market with its traditional Seiko-branded quartz products ("core Seiko") priced from $150 to $550. That business will be handled by a separate company, Seiko Watch of America.

However, the company's main focus going forward will be on Grand Seiko. Shinji Hattori, Chairman and CEO of Seiko Watch Corp., and the architect of the new strategy, wants Grand Seiko to be the new face of Seiko in America, Seiko executives say. (Hattori is also chairman and CEO of Seiko Holdings Ltd., the parent company of SWC. Seiko Holdings reported net sales of the yen equivalent of $2.53 billion in the fiscal year ended in March. Watch sales amounted to $1.32 billion.)

The changes in the U.S. are part of a long-term, Seiko Group plan to become a power player in the lucrative luxury watch market. Hattori wants the company to compete aggressively for market share with Swiss brands in global markets, as it does in Japan. There, Grand Seiko is among the top five best-selling luxury watch brands.

The changes are also a response to a rapidly changing global watch marketplace which, Seiko executives acknowledge, presents SWC with both opportunities and challenges.  The challenges are primarily in the mid-priced market, Seiko's traditional stronghold. Seiko sales in the U.S. have suffered in recent years due to market turmoil caused by e-commerce, smartwatches and wearables, and the woes of brick-and-mortar retailers, particularly department stores.The opportunity is in the luxury segment, where Seiko executives see Swiss brands as vulnerable for a variety of reasons. Seiko's long history as a vertically integrated manufacture, and its experience making luxury watches like Grand Seiko and Credor for the Japanese market, give it a fighting chance internationally.

The creation of the Grand Seiko of America company means "we are enlarging our footprint," says GSA President Brice Le Troadec.

GSA plans to open more authorized luxury watch dealers, introduce more new products in a wider range of prices, and put more marketing dollars behind the brand. GSA is also likely to open a boutique in New York City; its only boutique now is on Rodeo Drive in Beverly Hills.

In terms of product, there will be more variety in Grand Seiko's current price range. (Its average unit price is $6,300.)

Grand Seiko's goal is to become one of the top five luxury brands in the U.S. in the $5,000 to $10,000 price segment.

But Grand Seiko will also move further upmarket, Le Troadec says. "The new product and new technology that is coming at the next Baselworld will strengthen our brand in a higher price point: $7,000 and above is our target."

Grand Seiko's goal is to become one of the top five luxury brands in the U.S. in the $5,000 to $10,000 men's watch segment.

That is doable. In the first six months of this year, Grand Seiko shot to ninth in sales in that category, Le Troadec says, citing data from the NPD Group, which tracks U.S. retail watch sales. That's up from number 23 in the same period in 2017.

In addition to Grand Seiko, GSA will also distribute small upmarket collections of Seiko Presage mechanical watches and Seiko Prospex sports watches. These so-called "Seiko Prestige" lines will be priced in the affordable luxury range, below Grand Seiko but above core Seiko. They are part of Tokyo's "global brand" strategy for moving into the luxury range internationally. The global brands are Grand Seiko, Prospex, Presage and Astron. (Astron is not distributed in the U.S.)

The strategy is for these collections to change the image of Seiko here as a discounted, mass market brand. "We want to shift this image that consumers and retailers have to reflect what we are really," Le Troadec says. Namely, a full-fledged watch manufacture that makes all of its watches, watch movements, and watch parts, mechanical and quartz, in house, including hairsprings. Seiko began manufacturing timepieces in 1895. It produced its (and Japan's) first wristwatch in 1913.

Seiko is well known as a producer of quartz watches. But the extent of Seiko's watch production prowess is still little known in America, Seiko executives say. The company proudly claims to be the only watch company in the world to master every type of horological technology: mechanical, standard quartz, Kinetic (motion-powered) quartz, Kinetic Direct Drive, solar-powered quartz, GPS solar quartz (based on signals from satellites in space), radio-controlled quartz (based on signals from atomic clocks on earth) and Spring Drive.

The mandate for GSA to elevate the image of Seiko in America comes straight from the top in Tokyo. "One important thing I would like U.S. consumers to be aware of is the depth and breadth of our watchmaking history," Shinji Hattori told HODINKEE at a meeting in New York in November. "Over the past 130 years, Seiko has developed several epoch-making products, spanning the range from easily affordable to extremely high end. We are particularly proud of the craftsmanship that goes into Grand Seiko. Once customers understand our history, I believe they will have a different view of Seiko as a brand."

There are several reasons why Hattori and his team in Tokyo think the time is right to reposition the company in the U.S. One is that repositioning Grand Seiko in Japan has done wonders for it there. Since 2011, Seiko execs say, Grand Seiko sales have quadrupled in Japan. (The company does not disclose figures.)

The key, Hattori says, was to focus on a new audience for Grand Seiko: young people. At the start of this decade, Grand Seiko was considered an old man's brand. "Younger people were not so interested in Grand Seiko," he said. It was viewed as a retirement gift watch. Younger people were more interested in Swiss luxury watches than "Dad's watch," Seiko executives say.

Seiko addressed the generational problem. One key move was to increase its offer of entry-priced Grand Seikos, so that younger consumers could afford them. Another was signing Japanese baseball sensation Yu Darvish as a Grand Seiko spokesperson. (Darvish now plays in America, pitching for the Chicago Cubs.) Ads showing Darvish in a suit wearing a Grand Seiko with the tag line "The Pride of Japan," referring to both Darvish and his Grand Seiko 9S Mechanical watch, boosted sales, Hattori says.

Grand Seiko is also benefitting from a new global appreciation for Japanese products, Hattori says. "People all over the world are interested in Japanese culture," he says. Not long ago, many Japanese products were too exotic, too "foreign" for outsiders. That has changed. Japanese products and design are in vogue, Hattori says.

One of the hallmarks of Grand Seiko is that it embodies "the Japanese sense of aesthetics, the philosophy of Japanese beauty," Hattori says. "The fact that our brand was born and developed in Japan influences our products in many ways. This is a matter of history, heritage, and culture that produce what we recognize as Japanese craftsmanship, Japanese design, and so on. There is something special about a Grand Seiko. It is something visible, but it is also something, for want of a better word, emotional. Today, when it is so important to promote the uniqueness of a brand, we want to emphasize this ineffable quality of 'Japanese-ness' that makes our watches stand out from the Swiss counterparts."

Hattori believes Americans are open to Grand Seiko's "Japanese-ness." "In the last few years, I have been pleased to see the progress that Grand Seiko has made in the U.S. market," he says, "especially among serious watch buyers who understand and appreciate the heritage behind the brand."

Another factor in the move upmarket is that Seiko's top brass see the Swiss as vulnerable. Seiko executives note that many luxury retailers are unhappy with how Swiss brands are treating them, noting that Swiss brands continue to close authorized dealers and open their own boutiques, and continue to over-produce luxury watches, which hurts jewelers by boosting gray-market sales. They say jewelers are becoming more receptive to alternatives to Swiss luxury brands.   

"So now is the best time," Hattori says about the Grand Seiko push in America.

The time may be right for Grand Seiko in the U.S., but it appears to be up for the Seiko brand. That, essentially, was the assessment of a well-known American consulting company. (SCA declined to name the firm.) SCA turned to the company in 2015 after years of eroding market share in the U.S. The study concluded that Seiko would not recover its once dominant position in the mid-market and recommended Seiko move upmarket.

In recent years, Seiko has been weakened by tough competition from the Citizen Group's mid-range brands Citizen and Bulova, and some fashion brands. Sources say a management decision to cut back on advertising also damaged the brand. The turmoil in the mid-market caused by the arrival of the Apple Watch and other wearables and the rise of e-commerce have aggravated Seiko problems. When traffic declined in mass merchants and department stores, and stores were shuttered, Seiko got hurt.

In 2016, Tokyo sent Naito, a top SCA executive with experience in finance and legal matters (he is a lawyer), to the U.S. to head U.S. operations. His mandate was to cut Seiko's losses and begin the shift upmarket.

He brought in Le Troadec, who was head of Omega in the U.S. and knew the luxury watch business here.    

Now comes the hard part. "In Japan," Naito says, "everybody – consumers and trade – seems to be aware of Seiko's brand values from the low price point to the high price point. The market outside of Japan is different."

When Seiko launched Grand Seiko internationally for the first time in 2010, reactions across the watch community were sharp. Watch collectors, some of whom considered it a cult object, cheered.

But, in the watch trade, there were many skeptics. Seiko is trying to defy the laws of marketing, some said. You can always take an upmarket brand down, they argued, but you can never take a down-market brand up.

One prominent Swiss watch executive made the point another way. He told me, off the record, "Seiko makes the best mechanical watch in the world. I hate to say it but it's true. There is only one thing wrong with the watch," he said with a huge smile. "The name!"

Shinji Hattori has always been proud of Seiko's history in the high end of the market, which has not been truly communicated outside of Japan.

– Grand Seiko of America Chairman and CEO Akio Naito

In the U.S., Seiko got blowback from some important customers. "I don't need Seiko in the luxury range," the CEO of a large jewelry chain told me. "I have plenty of brands there. I need them to be strong where they are, in the middle."

Shinji Hattori was aware of the risks. With the revival of the luxury mechanical watch in the 1990s, some of his predecessors had considered taking Grand Seiko global, but decided against it. Opposition from retailers and the peril of fighting the Swiss on their turf were factors. For a while, Hattori hesitated as well. (He became CEO of SWC in 2003.)

Then he did it. Why? Hattori is the great-grandson of Kintaro Hattori, who founded the Seiko dynasty in Tokyo in 1881. "As a member of the founding family," Naito explains, "Shinji Hattori has always been proud of Seiko's history in the high end of the market, which has not been truly communicated outside of Japan. He was thinking there is this huge potential [internationally] which has never been exploited. He thought we should do something about this."

Now Seiko has. Hattori understands the selling of Grand Seiko globally will take time. "In Japan, Grand Seiko achieved its status as a top luxury watch brand only after years of effort," he says. "Outside of Japan, Grand Seiko is still only beginning to be seen as a luxury brand, so we have a lot of work to do."

Creating a separate company in the U.S. with its own team devoted only to Grand Seiko is an important step, he says. "If we continue striving to improve the areas that made us successful in Japan, if we work with the right partners and leverage digital communications effectively, I believe it will not take such a long time for us to achieve our goal."

As for defying the laws of marketing with Grand Seiko, the company doesn't see it that way. "In truth, we are not changing [our market position]," Naito says. "We were always there [in the luxury market] in Japan."

Question

Market segmentation and positioning are critical to companies in their efforts to penetrate different markets. Based on information from the article you are asked to (a) identify the variables Seiko is using in segmenting consumer markets and (b) discuss Seiko’s positioning strategy and its evolution over time

Answer 1

A.)the variables seiko used in marketing are: behavioural segmentation:behavioural segmentation segments the market by behaviours and decision patterns of consumers like lifestyle, usage, purchase , consumption etc.we can say that seiko used thus because:apart from grand seiko another product line has called seiko prestige has been added especially for the young customers because the grand seiko has been considered as old man's brand and retirement gifts for the old generation.so the young customers preferred swiss brands for their lifestyle.so seiko introduced seiko prestige product line to attract the younger generation .so they segmented the market as grand seiko for old generation and seiko prestige for lifestyle and purchase pattern of new generation thus having unique products for both generations. Geographical segmentation:geographical segmentation is creating different target customer groups based on geographical boundaries. We can say seiko used this because first seiko created quartz watches with prices ranging $100 to $500 to cater needs if American middle class and then it expanded its market to the luxury class of Japanese market by introducing seiko grand and seiko prestige watches. Coming to our next subpart b: the positioning strategies seiko used: positioning strategy based on product process.:here the company claims it's the process or the complexity in manufacturing its product unique from others.seiko claims itself to be master of every horological technology. The cultural symbol appeoach:it is using deeply entrenched cultural symbols to differentiate from competitors .the grand seiko watche embodies the Japanese sense of aesthetics , the philosophy of Japanese beauty etc .they choose this positioning strategy because grand seiko was first introduced in Japan.