Transcript 1

1st man: For three centuries the Swiss were the watch-making experts of the world. In evidence, in 1950 four out of five watches were made in Switzerland. But by 1980 this market share had dropped to one in five and by 1985 the figure was less than 5%. The Swiss watch industry was in big trouble, and they knew it. Only the luxury watch manufacturers were still making money.

Woman: Two things had led to this: technology and price. Although it was the Swiss who had invented electronic quartz watches, they were first manufactured and sold in the USA by Hamilton and Timex - these were digital watches. But by the 1970s thanks to super-efficient mass-production techniques most of these watches were made in Japan by Citizen or Seiko, or thanks to low labour costs in Hong Kong. And not in Switzerland.

2nd man: That's right, but Swiss market research showed that consumers still liked analogue watches. Now, the problem was that good ones were much more expensive than digital ones - and cheap ones were less accurate and needed winding up every day.

1st man: And there had to be a solution. The technology required to make quartz watches with hands that moved around a face was developed in Switzerland by an old watchmaking company, ETA. But to make such watches at a competitive price would require huge investment - investment in a computerized production line and this was at a time when the market was all but saturated with cheap digital watches.

2nd man: So ETA took the risk of developing an unrepairable watch which was welded into a plastic case that would only cost 15 Swiss Francs to manufacture - but which would retail for considerably more. Now their innovative idea was that the new watch would be a fashion item, not an upmarket timepiece like Rolex or Omega that rich people bought to last them a lifetime. The design of the face of the watch and the strap were what would make fashionable, trendy and sporty "young people want to buy what they called a Swatch (or preferably more than one) to wear.

The new Swatches wouldn't compete with cheap digital watches on price. No, they would be more expensive but much more attractive. This was going to be a completely new product.

Woman: It was such a novel product that ETA knew they needed to spend huge amounts on promotion and advertising. In 1985 they spent 30 million Swiss Francs in the USA alone on advertising - to create a fresh, young, sporty image for the product. They spent millions on sponsoring sportspeople and sports events. Even Princess Diana wore Swatches. They constantly produced new designs, including Swatches smelling of mint, strawberry and banana.

2nd man: So, ETA made sure that the watches were not discounted by any distributor, and to maintain a demand for Swatches, they restricted their production so that each design was a 'Special Edition' which might hopefully become a collectible, not just a mass-produced object. The quality was excellent: the watches weren't repairable, but they didn't need to be because they didn't go wrong. Each new design was both original and fashionable.

1st man: And that was how the Swatch earned its place in marketing history. And how the Swiss watch-making industry was rescued by courageous investment, Swiss efficiency and innovation.