HBR Case Study: Competing Against Ostentation

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0:56Pearl Zhang:Times are tough for Roshad and Schmidt, a 100-year-old Swiss maker of luxury timepieces. In the increasingly important but fiercely competitive Chinese market, sales are flat. Wei Song is a director at R &S, overseeing Greater China from his base in Shanghai. It's up to him and his VP of Marketing, Pearl Zhang, to figure out how to boost sales, especially during the upcoming Chinese New Year ad blitz. They have a big meeting tomorrow with Simon, RNS's strong-willed chief creative officer, who's generally resistant to new ideas. But Song and Pearl know they need to breathe some new life into RNS's marketing and decide to check out an event by their chief competitor, Berlinger, whose splashy new campaign stands in stark contrast to RNS's traditionally more restrained approach.

1:46Pearl Zhang:Song, you asked what we could do to boost sales. The answer is something like this.

1:52Wei Song:Yes, Berlinger is great at splashy promotions, but R &S doesn't do diamond-encrusted anything. R &S stands for subtle elegance, and you know how Simon feels about bling.

2:03Pearl Zhang:Simon has to understand that subtle marketing in this city, this country, just can't compete with that. If Geneva depends on us to make their yearly numbers, they need to understand what we're up against.

2:15Wei Song:I agree we need to generate more buzz. We'll need to present some innovative ideas to Simon tomorrow. Are you ready?

2:23Pearl Zhang:I sure hope so. The next day, Pearl makes her pitch to Simon for a calculated departure in R &S's Chinese marketing. She pitches an endorsement deal with Changcheng Gao, a Chinese singer and actress with 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. Pearl is friendly with Changcheng's agent and could guarantee a reasonable rate if If R &S can commit to a three-year contract, Chang Chang would be the face of a new slogan. You deserve it.

2:57Wei Song:Pearl, 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, this Chang Chang gal seems too young and flashy for Roshart and Schmid.

3:11Pearl Zhang:But Simon, Chinese consumers are young. They make up a big part of the luxury sales market, and they like flash. If we aren't going to offer watches with added bling like Berlinger's, our only other option is to kick up our marketing in ways that appeal to their tastes.

3:27Wei Song:Elegance always trumps excess with luxury buyers, Pearl. The trend is toward inconspicuous consumption, even in China. That may be true, Simon, but will trends change fast enough to deliver growth to our shareholders this year? As you know, if we lose ground in China, it affects the whole company. So maybe Pearl is right and we need to shake things up. We are not changing our product designs now and we shouldn't change our marketing either. Let's not lose track of what value Roshart and Schmid offers the market.

3:58Pearl Zhang:Simon, I understand we need to honor our heritage and maintain a consistent image worldwide. But as you've said yourself, China is a unique market. Our existing campaigns are beautiful and on-brand. But in a crowded and stagnating market, they're simply not working as well as we'd like.

4:17Wei Song:And how do you know that this endorsement will actually work?

4:20Pearl Zhang:How does Song know Changcheng's endorsement would work to boost R &S's sales in China? While Song mulls this question over, he takes a cell phone call from Rolf, R &S's CEO.

4:32Wei Song:Song, my friend, I hear from Simon that you and Pearl want to shake up your marketing. Yes, Rolf, we are indeed considering a new direction. It would be a departure for R &S. Have you seen Pearl's mock-ups? Yes, yes. And Simon told me he thinks it's off-brand. But he doesn't run the company. I do. And I trust your knowledge of the Chinese market, Song. If you can stay within budget, do you want me to overrule Simon on this?

5:00Pearl Zhang:Song knows the status quo is not working. But he wonders, is a celebrity endorsement deal really the right tool to help boost R &S's market share in the Chinese luxury watch market? Should he enlist Rolf to fight Simon on this?

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