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LES VIES MULTIPLES D’UNE MONTRE Sous la direction de Kalust Zorik François H. Courvoisier

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Page 1: LES VIES MULTIPLES D’UNE MONTRE Files/Vies...LES VIES MULTIPLES D’UNE MONTRE LEP LES VIES MULTIPLES D’UNE MONTRE Cet ouvrage réunit les communications présentées en 2015 à

LES VIES MULTIPLES D’UNE MONTRE

—Sous la direction de Kalust Zorik François H. Courvoisier

editionslep.ch

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LES VIES MULTIPLES D’UNE MONTRECet ouvrage réunit les communications présentées en 2015 à Neuchâtel lors de la 10e Journée de recherche en marketing horloger. Il présente également les exposés et tables rondes qui ont eu lieu à la 19e Journée internationale du marketing horloger tenue à La Chaux-de-Fonds. Il fait suite aux autres ouvrages de la même collection qui ont pour but de faire rayonner le savoir-faire des entreprises horlogères et de leurs partenaires.

Le présent volume aborde un thème rarement traité dans la littérature : les vies multiples d’une montre – montres d’occasion, de seconde main – qu’elles aient été portées ou non. Les Anglo-Saxons les appellent pre-owned watches, littéralement « montres pré-possédées ». Ce thème est parfois « chaud » pour les professionnels de l’horlogerie quand il s’agit d’écouler des stocks invendus dans des circuits pas toujours officiels ; il est plus transparent quand il s’agit de ventes aux enchères, physiques tout au moins, opérées par des maisons sérieuses.

Différents enseignants-chercheurs et spécialistes de l’horlogerie ont contribué au contenu de cet ouvrage : Elisabeth Robinot, Leo Trespeuch, Kim Claes, Ryan Raffaelli, Pierre Balloffet, Carole Maury, Jérôme Jauslin, Catherine Bourdin Mougel, Karine Brisset, Laurent Sage, Lisa von Beust, Frédéric Watelet, Thibaut de Norre, Stéphane Devaux, Christian Odin, Walter von Känel, Antoine Simonin, Régis Huguenin-Dumittan, Valéry Bezençon, Geoffroy Ader, Raynald G. Friedli, Nicolas Galley, Grégory Pons, Jean-Marie Schaller, Osvaldo Patrizzi, Manuel Yazijian, Jose Luis Alvira, François H. Courvoisier et Kalust Zorik.

Cet ouvrage est publié sous la direction de :Kalust ZorikPrésident et fondateur des Journées internationales du marketing horlogerFrançois H. CourvoisierDr ès sciences économiques, professeurDoyen de l’Institut du marketing horloger, Haute école de gestion ArcCoordinateur des Journées de Recherche en Marketing Horloger

Avec le soutien de :

ISBN 978-2-606-01657-9 | 935555A1

Autres ouvrages parus aux Éditions Loisirs Pédagogie :« La communication horlogère : stratégies et nouvelles technologies » (2009)« L’utilisateur horloger dans un monde en mutation » (2010)« L’horlogerie et des ambassadeurs » (2011)« Asian Dream : le rêve horloger » (2012)« Le marketing expérientiel appliqué à l’horlogerie » (2013)« Services après-vente horlogers : nouvelles exigences » (2014)« Design horloger : crée-moi une icône ! » (2015)À commander en ligne sur le site www.editionslep.ch

Photographie de couverture :Shutterstock, Stocksnapper

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© LEP Éditions Loisirs et Pédagogie, Le Mont-sur-Lausanne, 2016.

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The multiple lives of a watch • 41

I

The multiple lives of a watchSecondary markets, demand revival, and firm performance: exploratory analyses in thevintage timepiece auctions marketKimClaesSungkyunkwanGraduateSchoolofBusinesskim.claes@skku.edu

[email protected]

IntroductionIn marketing research there is a more recentfocus on consumption as consisting not onlyof a single act of purchase, i.e. when a con-sumer buys a good from a producer in ashop,butbeingabroaderprocesswhichalsocomprises the use of the good and its ulti-mate disposal (Denegri-Knott & Molesworth,2009; Gregson, Metcalfe & Crewe, 2007;Parsons,2008).Goodscanbedisposedoforexchangedthroughmultiplechannels.Inpar-ticular,secondarymarkets(e.g.auctions)arean important medium through which theseactivitiesofgoodsdisposalorexchangeoccur(Denegri-Knott&Molesworth,2009).Inluxurywatchmakingforinstance,secondarymarkets

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42 • The multiple lives of a watch

forwatcheshavebeenboomingoverthelast20yearsandrepresentaveryimpor-tant and lucrative business, with some timepieces reaching record-breakingamounts.Onecanthinkofthe$11+millionhammervalueforthe“PatekPhilippeHenriGravesSuperComplications”in1999,ortherecentrecordbreakingPatekPhilippeminuterepeaterwristwatchthatlistedwithanaskingpriceof$700,000-$900,000andsoldfor$7.3millioninNovember2015.Therefore,understandingthewholeprocessofgoodsexchangeordisposalaftertheirinitialpurchasefromtheproducerisnotonlyoftheoreticalrelevancebutalsoofeconomicimportancefortheoriginalproducersalsoeventhoughtheydonotdirectlycaptureeconomicvalueinthesecondarymarketsale(Claes,2014;Raffaelli,2015).

Whereasseveralquestionscanbeaskedaroundthisprocessofgoodsdisposalorexchangeaftertheirinitialpurchase,suchasthepersonalmotivationstodisposeofgoods(McCracken,1990),ortheidiosyncraticvaluethatownersassigntotheirpossessionsdependingonwhatthesepossessionsmeantothem(Belk,1988;Price,Arnould,&Curasi,2000),thispapermoreratherlooksatthe(unexpected)roleofsecondarymarketsinsustainingandevenrevivingarecedingindustry,theparam-etersaffectingconsumers’valuationofsecondarymarketgoods,andtheeffectofpastsecondarymarketpricesonproducers’subsequentvaluecaptureabilities.

There are two main motivations for this. First, although scholars are spendingincreasingeffortsinunderstandinghowfirms,markets,practicecommunities,orevenwholeindustriesemerge(Navis&Glynn,2010;Raffaelli&Glynn,2014;San-tos & Eisenhardt, 2005), they have devoted less effort analyzing the processesthroughwhichtheseindustriesdeclineandpossiblygetreborndespitecallsfromscholarstotakeacloserlookattheseissues(e.g.Raffaelli,2013b;Scott,2008).Thisisespeciallysurprisingsincewehaveobservedthisprocesshappeningintherealworldforseverallegacytechnologies,includingvinylrecords,fountainpens,andindependentbookstores(Raffaelli,2015).Inparticular,theSwisswatchindus-trywasonthevergeofextinctionintheearly1980saftertheintroductionofthequartzwatch,butyetre-emergedfromitsownashestothrive(Glasmeier,2000).

Second,understandingthefactorsthatinfluenceanewbuyer’smonetaryvaluationofusedgoodsinsecondarymarketsisofcriticalimportanceforfirms.Indeedinart,forinstance,itiswelldocumentedhowauctionpricesofartworkarecorrelatedtothefuturevalueofnewartworkoftheartistswhoproducedtheformer(Khaire&Wadhwani,2010;Velthuis,2003).Inthewatchmakingindustry,thissuggeststhatunderstandingwhatdrivesbuyers’willingnesstopayforsecondhandwatchesinauctionsshouldbeofinterestforunderstandingfuturevalueappropriationcapabil-itiesofwatchmakingfirms.Thatis,itislikelythatpastauctionpricesshouldenable

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The multiple lives of a watch • 43

highersubsequentpricinginprimarymarkets,which,ceteris paribus,contributestomorevaluecreationandappropriationforthefirm.Higherprimarymarketpricesareinturncorrelatedtohigherresalepricesinauctionsmakingthisaparticularlyinterestingvirtuouscycle.

Inthispaperweaddressthesegapsbysheddingmorelightontheprocessthroughwhichsecondarymarketsformechanicalwatcheshelpedrevivea“dyingindustry”.Wefirstprovidequalitativeevidencethatthisiswhathappenedandthenwebuildanempiricalmodelthattestswhetherpastauctionspricesindeeddoaffectfuturevalue capture potential by firms and that then isolates some of the parametersimpactingtheseauctionpricesinthefirstplace.Thisisthefirstresearch(tothebestofourknowledge)thatendeavorstodosoonamacroscale.Luxurywatchmakingoffersoneofthebestcontextsforapplyingthismodelsincewatchesareobjectsthatcanhave“multiplelives”andwhosevaluecansignificantlychangeaftertheinitialprimarymarketsale.

Concretely,wegathereddatafromaseriesofqualitativeinterviewswithkeyindus-tryfiguresexplaininghowwatchauctionsplayedacriticalbutunexpectedroleinenablingamechanicalwatchesindustryre-emergence.Then,inordertoconstructourempiricalmodel,weusedasubsetofcollecteddataonwatchauctionresultsfromJanuary1988toDecember2012thatweaugmentedwithseveralotherprintedand online sources in order to obtain organizational level data for the producersinoursample.Insectiontwo,weexplainhowthesecondarymarketsforwatches

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44 • The multiple lives of a watch

helpedthere-emergenceofthewatchindustryinSwitzerland.Insectionthree,usinginsightsfromourqualitativestudy,wederivehypothesesconcerningtheimpactofsecondarymarketpricesonthesubsequentvaluecapturecapabilitiesofproducers.Insectionfour,wedescribethedata,themethodsweused,andexplainourresults.Weendwithconcludingcommentsinabriefdiscussionsection.

Industry re-emergence enabled by secondary markets: the case of the luxury watchmaking industryLeading up to the 1970s, Swiss watchmaking had been considered the premiersymboloftechnologicalsupremacyandinnovationfornearlytwocenturies(Glas-meier, 2000). Swiss watchmakers dominated the industry and the mechanicalmovement(Donzé,2011)beginninginmid-18thcenturyinGeneva.TheSwissriseon theworldstagecanalsobeattributed to theemergenceofwatchmaking intheJuramountainregion.Thissnow-cappedmountainousterritoryofSwitzerlandsitsalongatraderoutebetweenGermany,FranceandItaly,andwaspopulatedbypeasantcowfarmerswhowereconvincedtousetheir idletimeduringthelongandcoldwinterstobuildwatches.

TownsintheJura,suchasLaChaux-de-Fonds,werealsohometoironandbrasstradesmenwhowerewellpositionedtodiversify into thecraftofwatchmaking.Theregionfocusedonprecisiontimepiecesatreasonableprices.Landes(1983,pp.261-263)notes,“Thefirst [Jura]watcheswerenotelegant–thatwaslefttoGeneva...ThestrategyoftheSwiss[Jura]mountainwasbasedontheproductionofcheapermodelsdesignedtoselltoawidermarket.”Thestrategypaidoff.Bythe lateearly 19thcentury,Swisswatchmakershadbecomeaserious threat totheirFrenchandBritishrivals.By1910,the“Swissmechanicalwatchdominatedtheworldwatchindustry”(Knickerbocker,1974inGlasmeier,2000,p.105).

However,theirreignabruptlyendedinthemid-1970s,withtheonsetofthe“QuartzRevolution”(or“QuartzCrisis”),whenthequartzmovementseeminglydisplacedthemechanicalmovement.

AlthoughtheSwissinventedmanyofthefirstquartzwatchprototypes,theyhadlittle interest in re-tooling their production system to accommodate their massproduction (Perret, 2008). Additionally, the community of Swiss mechanicalwatchmakersdidnotseethequartzwatchasanextensionoftheircraft,“remain-inglargelyskeptical...oftechnologydesignedbyspecialistsinelectronicsratherthanhorologists”1(Perret,2008:324).TheSwisswentfromholding55%percent

1 A“horologist”isamemberoftheprofessionofhorology,thescienceoftimekeeping.

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The multiple lives of a watch • 45

oftheworld’sexportmarket(inmonetaryvalue)toroughly30%adecadelater;inexportvolume,thedeclinewascorrespondinglystaggering,decreasingfrom45%to10%ofwatchesproducedglobally(Glasmeier,1991,p.477).

By1983,halfof thewatch industry jobs inSwitzerlandweregone(Landes,1983,p.356).Quartztechnologyhadreplaceditsmechanicalpredecessor,representingaradicalshiftintechnologicaldesignthatcaused“theSwissto[pay]dearlyfortheirslownesstoadoptthenewtechnology”(Landes,1983,p.353).In1983,scholarsandindustryanalystspredictedthatmechanicalwatches,alongwiththeSwisscommu-nitiesofwatchmakerswhobuiltthem,woulddisappear(Donzé,2011;Landes1983).Forthisreason,todaymanagementscholarsoftencitetheSwisswatchindustryasacautionaryexampleoftechnologicaldisplacementandcitetheimpactthatacompe-tencydestroyinginnovationcanhaveonindustrysurvival(Glasmeier,1991;Lecoq,Maillat,Nemeti&Pfister,1995;Tushman&Anderson,1997).

Unexpectedly,however,by2008theSwisswatchmakingindustry,ledbythepro-ductionofmechanicalwatches,hadexperiencedaresurgence,re-emergingastheworld’sleadingexporterofwatchesandreclaiming55%ofthetotalexportvalueintheglobalwatchindustry.

While scholars have examined the macroeconomic, manufacturing, and identityrelated factors associated the reemergence of the Swiss watch industry (Donzé,2001;Raffaelli,2013a)littleattentionhasbeengiventotheroleofsecondarymar-kets.Below,weexplorehowwatchcollectorsandwatchauctionhousesinfluencedthereemergenceofSwissmechanicalwatchmaking.

The Role of Collectors and Vintage Watch AuctionsTheroleofcollectorsandauctionhousescanbetrackedbacktothe1970s.Accord-ingtointerviewswithmultipleauctionhouseexecutives,watchcollectinginthe1970sprimarilyconsistedofthoseinterestedincollectingvintagepocketwatches.Asoneexecutivestated,“therewasjustafewpeopleonthefringe.”

However,startinginthe1980s,agrowingcommunityofItaliancollectorssparkedinitial interest in the secondary market. As another auction house executiveexplained,“TheItalianshadawatchcultureforgenerationsandtheywerebuyingthesepiecesespecially in theearly ’80s. Itwasverymucha fad–noteventherichestItalians.MyunderstandingisevenmiddleclassItalianswerebuyingthesewatchesandpassingthemonfromonegenerationtothenext.”

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46 • The multiple lives of a watch

Led by individuals such as Osvaldo Patrizzi, a new and growing market for vin-tagewatchesbegantoemergeacrossEurope,theUnitedStates,andwithinAsia.Patrizzi’sauctionhouse,Antiquorum,publishedcatalogueswithtechnicaldescrip-tionsandhistoricalbackgrounds.Theycateredtowatchcollectorsasthoughtheywerebuyingpiecesoffineart.OneformercolleagueofPatrizzicommented:“In the 1980s, Patrizzi needed to convince pocket watch collectors that the same mech-anisms and aesthetics were are also in a wristwatch. In addition, he needed to convince [people] that the wristwatch was collectable. And he convinced them. He was very good at convincing.”

Asconsumerinterestsinvintagewatchedcontinuedtomount,auctionhammerpricesalsosetnewrecords.BothcombinedtosendastrongsignaltoSwisswatchproducers that there may still be value associated with the “dying technology”(Raffaelli, 2013a). One auction house executive noted: “Then you had all these collectors jump in and the auction houses noticed. That’s when you started seeing [vintage] wristwatch sales occurring. The auction houses all of a sudden became enablers of watch collecting. And the more the auction houses pushed and helped drive up prices and educate clients, the more brands noticed. All of a sudden you had companies like Patek say, ’There’s something special going on here’.”

Noting that vintage timepieces were achieving record setting prices at auction,severalbrandsbeganreconsiderthelatentvalueofthemechanicalwatch.Somebeganre-issuingversionsoftheirvintagepieces,apracticestillcommontoday.Inturn,manyofthedefeatedSwissmechanicalmanufacturersbegantoreconsiderhowtheycouldrevivewhattheyhadassumedwasa“deadtechnology”.Severalindustryexpertshypothesizedthatthevintagemechanicalwatchsecondarymar-ketmayhavebeenaninitialsignalthatthemarketformechanicalwatcheswasstillviable.

Empirical model: from secondary market prices to value cap-ture by producersFromthisqualitativeanalysisofinterviewsofkeyfiguresofthewatchmakingindus-try, itappearsclearly thatwatchcollectorsandwatchauctionsunexpectedlysig-naledtowatchmakersthattherewassomeresidualinterestandvalueinmechanicalwatches. Unfortunately, producers do not benefit from transactions in secondarymarketsbuttherearereasonstosuspectthatthevalueofobjectsinsecondarymar-ketsshouldspillovertotheoriginalproducerintermsofstatusandlegitimacyasitisinthecaseofartandartistsforinstance(Khaire&Wadhwani,2010;Velthuis,2003).Thismeansthatexternalaudiences(e.g.consumers)valuingtheproducer’s

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The multiple lives of a watch • 47

futuregoodsshouldhaveanincreasedappreciationandwillingnesstopayforthesegoods,ceteris paribus.Ultimatelythismeansthatproducersshouldbeabletopricetheirfutureproductshigherwhilemaintainingdemandatleastconstant.Valuecap-turethenhappenswhenproducers,whoareawareofthemarket,doincreasetheirfuturespricesaccordingly.

Retailpricesreflectthepotentialforvaluecaptureofaproducerbecauseofthefollowingeconomicreasoningappliedtothewatchmakingcontext.Incertainmar-kets likecommoditymarkets(i.e.steel,energy,flour...)pricesaretheresultofthedemandandsupplymechanismsandgoodsaresubstitutablemeaningthatanincreaseinpricebyafirmmakesconsumersoptforalternatesourcesofsupplysincefirmsareequivalent. Inthosemarkets, there is littlestrategicslack inthepricing decisions and prices do not reveal value capture potential, margins arestandardacrosscompetitors.

However, the creative and luxury industries (Caves, 2000) are imperfect marketsmeaningthatfirmsareperceivedtobedifferent,asdisplayingdifferentidentitiesandproductsarenotsubstitutable.Therefore,pricesareaffectedbyotherfactorsthandemandandsupply.Theyresultfromabargainingprocessofvaluecreationand capture throughout a value chain of suppliers, producers, and customers(Brandenburger&Stuart,1996;Makowski&Ostroy,2001).Inthosemarkets,pricesmainlyresultofstrategicdecisionsmadebyproducersandrespondonlypartiallytothesupplyanddemandmechanism.Thisisforexamplethecaseintheluxuryindus-trieswhere inadditiondemand isusually inelastic topricechangesandmarginsareveryhigh,meaningthatpricesarenotmainlydeterminedbycosts.Inparticular(especiallythroughoutthelastdecade)contrarytowhattraditionaleconomictheorywouldpredict,pricesfor luxurywatches(andluxurygoodsingeneral)haverisenmuch faster than inflationbutsohasdemand.Thismeans thatmostof thenewandmoreexpensiveproductionhasbeensystematicallyabsorbedby themarketmakingretailpricesagoodindicatorofvaluecapturepotential.Thisphenomenonofincreasingpricesandincreasingdemandhasbeenconfirmedbyseveralproducersandisquitecommoninluxuryindustries(Velthuis,2005;White,2002).

Wehavereasonstobelievethatvaluecaptureoccursbecauseweweretoldinourinterviewsthatindustryinsidersoftenuseauctionpricesasagoodindicatorofawatchmaker’ssocialstatuswithin the industry.Thismeans thatproducersdopayattentiontoauctionpricesandsomeofthisinformationshouldbereflectedinsubsequentretailprices.Researchhasalsoshownthatsocialstatusisadriverofafirm’sfinancialperformance(Podolny,1993;Shipilov&Li,2008).Thatis,itislikelythatpastauctionpricesshouldenablehighersubsequentpricesinprimary

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48 • The multiple lives of a watch

markets in future time periods which ceteris paribus contributes to more valuecreationandappropriationforthefirm.Howevernoresearchtodatedidformallytestthisideaonamacroscalehenceourfollowingquestion:

Question 1: Do past auction prices enable higher subsequent value capture for watch producers?

Ifthisturnsouttobetrue,itwouldalsobeinterestingtoisolatewhichparametersbothatthewatchandwatchmakerlevelaffectthewillingnesstopayofconsum-ersinthoseauctions.ThisisourQuestion 2.Thisisimportantsinceproducersdohave an influence upon those parameters in their subsequent productions andorganizationalactions.

Methods and resultsOurmethodsfollowedanapproachbasedonwhatCreswell(2003)termsacon-currenttriangulationstrategy,wherebymultiplemethods,datasources,andunitsofanalysisareused toevaluateasetof theorized relationshipswithinasinglestudy.Asaresult,ourpaperincludesbothqualitativeandquantitativedataandanalyses.Qualitativeanalysesofinterviewandarchivaldatawereusedtoinduc-tivelyexposethefactorsmostsalienttochangesinvintagewatchbuyingpatterns.Quantitative analyses were then used to illustrate how these changes evolvedovertime.

Torevealhowandwhythepriceofvintagewatchpricesoccurred,weemployeda mixed methods approach. Content analysis of archival data and semi-struc-turedinterviewswasusedtoidentifysalientfactorsandunderlyingmechanisms.Thepurposeoftheinterviewswastogatherinformationfromactorsindifferentpositionsinthefieldaboutourphenomenon.OurinterviewprotocolfocusedonchangesinthefieldofSwisswatchmakingfromeachindividual’svantagepoint.

Bothauthorsreliedonthequalitativedatatoexamine,morespecifically,howindustryactors interpretedshifts invintagewatchprices.Usingacontentanalysissoftwarepackage (NVivo10) to organize and examine the archival data and field interviewtranscripts,weanalyzeddatainaniterativeprocessofgoingbackandforthbetweenconductinginterviewsinthefield,analyzingdata,andsearchingforemergingthemes(Locke,2001;Miles&Huberman,1994;Strauss&Corbin,1998).Thegoalofthedataanalysisprocesswas tocreatea“chainofevidence” that linkeddescriptivecodesfoundwithinthedatawithmoreabstractandtheoreticalconstructsthathelpedusidentitykeyconstructsthatcouldbeanalyzedusingourquantitativedata.

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The multiple lives of a watch • 49

Data

Todevelopourpaper’smainquestionsandinitialintuitions,wecollectedqualitativeandquantitativedatafromseveralsources.

Qualitative data.Weusedavarietyofqualitativedatasources,including122semi-struc-turedinterviewswithseniorexecutives,watchmakers,distributors,retailers,industryanalysts,collectors,companyhistorians,auctionhouserepresentatives,andmuseumcuratorsassociatedwiththewatchindustry.ThesedatawerecollectedaspartofabroaderresearchprojectconductedbythesecondauthorthataimedtounderstandthereemergenceoftheSwisswatchindustry(Raffaelli,2015;Raffaelli,2013b).Theaverageinterviewlasted91minutes.

Thesampleofintervieweeswasdevelopedbyrelyingona“theoreticalsampling”technique, whereby researchers narrow the sample of various actors in the fieldbasedontheoreticaltrendsthatemergefromdata.Ingeneral,privacyandsecrecyshroudstheSwisswatchindustry.Asoneseniorexecutivecommented:“Itisasmallandveryprivatecommunity.”(Raffaelli,2015).Toovercomesuchaccesschallenges,a snowball approach was used, asking respondents to suggest other individualsorcompanyrepresentativesweshouldspeaktowhomtheybelievedwereinfluen-tial.Individualsweremorewillingtoparticipateiniftheyknewthatothershadalsoagreedtodoso,therebymakingthesnowballapproachthemostappropriatewaytogainaccesstothisclosedcommunity.Thefinalsampleincludedinterviewswithrepresentativesofcompaniesrepresentingapproximatelythree-fourthsofallSwisswatchexportsalesfrom1970to2014.

Thesecondauthoralsoranfourfocusgroupswith42watchmakersandwatchcollec-torsinbothSwitzerlandandtheUnitedStates.Inaddition,heattendedBaselworld,theindustry’slargestannualfield-configuringeventforthesector(Lampel&Meyer,2008), which attracts 104000 participants, 1815 exhibitors from 45 countries, and3300journalists.Toconversefluentlywithexecutivesandwatchmakers,heattendedawatchmakingcoursetaughtbyseveralprominenthorologistsattheNationalAssoci-ationofWatchandClockCollectors’SchoolofHorology.

Quantitative data.Inordertobuildourempiricalmodel,weusedasubsetofcollecteddataonluxurywatchesfromAntiquorumauctionsrangingbetweenJanuary1988andDecember2012.ThesedatawerecollectedaspartofalargerstudyconductedbythefirstauthorforastudyonSwisswatchmaking(Claes,2015).WechoseAntiquorumfortwomainreasons:first,becauseofitscriticalroleinthere-emergenceofthemechan-ical watch industry by being the first auction house to start selling second hand

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50 • The multiple lives of a watch

watchesintheearly1970s.Second,becauseitiscurrentlystilloneofthemainauctionhousesintheworldforsecondhandluxurywatches.Itroughlysells4000timepiecesperyearthroughouttenauctionsacrossthreecontinentswithvenuesinNewYorkCity,Geneva,andHongKong.Withanaveragepriceof16,000CHF/watch(in2012)thisrepresentsamarketof64,000,000CHF(1CHF~1USD)2peryearwithseveralmuchmoreexpensivelotsbeingexchangedoverthecounterbetweenprivatecollectorsinbetweenauctions.

Finally,weaugmentedourinterviewsandquantitativeauctiondatawithorganiza-tionalleveldatacomingfromprofessionalassociations’websitesliketheFédéra-tion de l’industrie horlogère suisse,brand’swebsites,andtheWristwatchAnnualmagazineinordertocontrolforaseriesofdifferentparametersintheanalyses.

Research Setting

Luxury watchmaking offers one of the best empirical contexts for testing thismodelsincewatchesareamongthefewobjectsthatcanhavemultiplelivesandwhose value can significantly change after the initial primary market sale.Thisisbecausewatches’valuesgoesfarbeyondthe“objective”materialandtechni-calaspectsandisheavilysociallyconstructed.Thismeansthatawatch’svalueisdeeplyrelatedtoculturalfactors(Beckert,2011;Beckert&Aspers,2011)–e.g.inluxuryandwatchmakingforinstancesomeofthesefactorsaretradition,history,ortechnicality(Kapferer&Bastien,2009;Zorik&Courvoisier,2007)–andthesefactors are valued quite differently across individuals, times, and geographies.Giventhatsomeofthesewatchescanbeseveralcenturiesoldandthatbrandsevolvethroughtime,therecanbeabigdisconnectbetweenoriginallistpriceandsubsequentauctionprice(orevenbetweensuccessiveauctionspricesofthesamepiece or same model). Investigating whether some of the auction value can beinturnrecapturedbythebrandandlookingatwhatfactorsinitially impactthatfutureauctionvalueisthereforeparticularlysuitedtoourempiricalcontext.

Variables

Dependent Variables.Therearetwomaindependentvariables.ThefirstoneisPortfo-lio PriceusedtoaddressQuestion1.ItisconstructedfromdataavailableintheWrist-watchAnnualmagazineandisthemeanoftheportfoliopricesofbrands.Forinstance,agivenbrandwillexhibititscollectioninthemagazineanddisplaytherecommendedretailprice.Ourvariableisconstructedasthemeanofthesepricesinagivenyearanditisthusavariableatthefirmlevel.

2 1CHF=0.99USD(mid-marketpriceson16November2015).

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The multiple lives of a watch • 51

ToaddressQuestion2,ourseconddependentvariableistheAuction Price ofwatchesthroughouttheauctionsweconsidered.ThesepricesarethefinalpricescontainingtheAntiquorummargin(buyer’spremium),whichisapercentageofthehammerprice.Forinstanceawatchhammeredat12,000HKDwillbepaid15,000HKDbythebuyer(25%buyer’spremium).FromhavingattendedoneoftheseauctionsandfromwhatintervieweeshavetoldusweknowthattheseareEnglishstyleauctions,meaningthatthehighestbidgetsthewatch.Thereareroughly100orsoattendees intheroomversus700-1000whoarenotintheroomandareeitheronline,onthephone,orhavealreadygivenpre-auctionbidorders.Theseparticipantsarethenmoreinternationalandnotvenueconstrainedwhereastheattendeesintheroomaremorerepresenta-tiveofthelocalcrowdofthevenue.Therearethreevenues,Geneva,NewYork,andHongKong.Roughly300to500piecesgetsoldduringtheone-dayauctionandthereare8to10auctionsperyear.

Theauctiondatawashighlyunstructured(fromanITcodingperspective)anditwasPythonparsedfromtheonlinesourceandcleanedusingvarioustechniquesofmainlyuserfedstringmatchingasinClaes(2014) inordertoextractthepricesaswellasalltherelevantinformationaboutthebrand,thefunctions,materials,dateofmake,expertestimationsofthelotsunderconsideration.Therestofthisinformationisusedascontrolsforourmodels.ThereadercangetanideaofthedatadisplayinTable1.Thisdataisavailabletoallparticipantspriortoandduringtheauctioninamagazineoronlinecatalog.

Lot 198

ROLEX REF. 116619 SUBMARINER WHITE GOLD Rolex, “Oyster Perpetual Submariner, 1000ft / 300m, Superlative Chronometer Officially Certified,” case No. V762996, Ref. 116619. Made in 2010. Very fine, center seconds, self-winding, water-resistant, 18K white gold wristwatch with date, blue ceramic bezel and an 18K liplock bracelet with Glidelock clasp. Accompanied by the original fitted box, guarantee (now void), booklets and hang tag. Limited to 500 exemplars.

Grade: AAA Case: 2 Movement: 1* Dial: 1-01

Estimate: 20,000-30,000 USD 155,000-230,000 HKD 18,000-26,000 CHF

Sold: 27,500 USD

Remark: the price at which the watch was sold is only available after the auction of course.

Table 1 – Data available to buyers before and during the auction

Independent variables. ForQuestion1,our independentvariableof interest is theMaximum Pricereachedforawatchofagivenbrandinagivenyear.Weareinterested

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52 • The multiple lives of a watch

inknowingwhetherpastauctionpricesinfluencefuturevaluecapturepotentialforbrandsandwesuspectanon-spuriouscorrelationbetweenthesevariables.Thisisbecauseweknowfromourinterviewsthatauctionpricesreflect/revealastatusrank-ingwithintheindustryandthatwatchmakerspayattentiontotheirauctionspricesaswellasthecompetitors’.Fromsocio-economictheorywealsoknowthatprices,especiallybidprices(thosepaidbytheconsumerwithoutproducerinfluence),revealtheconsumers’assessmentsofproducers’qualityandarehighlycorrelatedtostatusrankings(White,1981,2002).Frommorerecentresearchwealsoknowthatstatusandqualityshouldberelatedtopricingpotentialandperformance(Podolny,1993;Shipilov&Li,2008).Wedescribethecontrolsusedforthismodelbelow.Wefocusonthemaximumpricesinceitisthemostsalientone.

Question 2 is open-ended and exploratory. No specific independent variable wasisolatedsincewearelookinginabroadfashionatthedriversofauctionprices.Weincludedseveralproductlevelandbrandlevelvariablesinthemodelbasedoneco-nomicreasoning.AttheproductlevelwehaveincludedPreciouswhichaccountsforwhetherthewatchcontainsatleastoneofthefollowingpreciousmaterials:gold,plat-inum,ordiamondssincethisobviouslyplaysapartintheoriginallistprice.MoreoverwehaveincludedaLadyvariablethattellsuswhetheritisalady’swatchornotsincethereshouldbelessdemandforladies’watchesgiventhatthisismainlyamen’smar-ket.Wealsoaccountfortechnicalfeaturesofthewatches.ThevariableQuartzis1ifthemovementisquartzand0ifautomaticormanual;thismakessensesincequartzwatchestendtobecheaper.FurthermoreweaddedaWater Resistant variablebasedontheintuitionthatwaterresistantwatchesusuallyhavesimplermovementsandthusshouldbecheaper.Inadditionwealsochecktheeffectofspecificfunctionsonthefinalprice,suchastheexistenceofaChronograph, Moon Phase, Retrograde Display, Equation of Time, Perpetual Calendar and Tourbillonsincethesefunctionscanheavilyimpact theproductionprice.Moreover,wealso includedvariables thataccount forthestateofthewatchsuchasWatch Age,whichmeasurestheageofthewatchsinceinceptionuntilauctionyear.WealsohaveavariablethatindicateswhetherthewatchisLimitedornot,andwealsoincludeavariableDocumentsthatindicateswhetherthewatchcomeswithoriginalcertificationpaperworkanditsbox.

Additionally,we include theexpertEstimationof thewatch,which is theminimumestimationfromtherangeoffered.Thisisoneofthemostimportantvariablessinceconsumersrelyuponitverystronglyasavaluationanchor.Thisisbecausetheestima-tionisverysalientandalsobecauseitishardtovaluewatches,itnecessitatesalotofindustryknowledgeandadeepunderstandingofthecodesoftheindustry(Carcano&Ceppi,2010;Claes,2014).Intervieweeshavetoldusthatalthoughbuyersareusually

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The multiple lives of a watch • 53

watchsavvythereisstillleewayforimprovementabouttheirhorologicalknowledgeandfirmsspendabigamountoftimeeducatingconsumersthroughoutexhibitions,privateevents,etc.,thereforeexpertshaveacriticalvalueinguidingthenon-perfectlyknowledgeableconsumer.WealsoincludedtheUncertaintyofthatexpertvaluationdefined,inpercentage,astheratiooftheestimationrangeontheminimumestima-tionasinpreviousresearch(Khaire&Wadhwani,2010).Ahighuncertaintytranslatesahigherdoubtoftheexpertconcerningtheexactvalueofthewatch.Sincepeopletendtoberiskaverse(Tversky&Kahneman,1974),ahigherexpertuncertaintycouldleadtoalowervaluationandapreferenceforstayingclosertotheminimumbound.

Ina lastseriesofvariables,wehave includedtheallcontrolsused forQuestion1,which look at the effect of organizational level parameters on the final prices.WeincludedthePortfolio Pricevariableasdescribedabove(butmeasuredoneyearpriortothedependentvariable).WhenusedasacontrolforQuestion1,itisconsideredalaggeddependentvariablecontrol(Wooldridge,2009)whichisoneofthebestvaria-blestoaccountforomittedvariablebias(Godart,ShipilovetClaes,2014).WhenusedasanindependentvariableforQuestion2itcheckswhetherthecurrentoverallaver-agepricepositioningofbrandsaffecttheauctionpricessinceonecouldimaginethat“moreexpensive”brandscouldfetchhigherauctionpricesevenwhencontrollingforallelse.WealsoaddedwhetherthebrandbelongedtoaConglomerate,theAgeofthebrand,thenumberofMedia Mentionsofthebrandinthemedia,andwhetherthebrandwasSwisssincetheseparametersshouldinfluenceconsumers’perceptionsofbrandsandthereforetheirwillingnesstopay.

Finallywelaggedallourindependentvariablesbyoneyearsotoavoidsimultaneitybiases.Thismeansthatindependentvariablesinyeartimpactdependentvariablesinyeart+1.Wealsocleanedthedatasothatonlythewristwatchesremainedsotomakethetestscleaner.Assuchpendulettes,wallclocks,pocketwatches,deskclocks,lighters,etc.weresuppressed.

Statistical analyses and results

WeusedanOrdinaryLeastSquareestimationsincethedependentvariablesarecon-tinuous.Weonlyusedtheyears2008,2009,and2010fortheanalysisandweintro-ducedauctiondummiesandaswellasbranddummies.InTables2and3wecanseethecorrelationbetweenthevariablesusedinthetwomodelsweusedforquestions1and2.Thecorrelationsbetweenindependentvariablesarewellbelowthe70%thresh-oldthatisusuallyacceptedinmarketingandmanagementresearch.Somesummarystatisticsarealsoprovidedinthesetables.

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54 • The multiple lives of a watch

Mean Min Max 1 2 3 4 5 6 7

1 Portfolio Price 47,977.96 934.17 470,000.00 1

2 Portfolio Price (t-1) 41,686.05 1,345.00 395,140.00 0.55 1

3 Conglomerate 0.38 0 1 0.01 0.05 1

4 Age 140.26 3 314 –0.1 –0.1 0.43 1

5 Media Mentions 887.67 0 3909 –0.3 –0.3 –0.2 –0.2 1

6 Swiss 0.91 0 1 0.03 0.03 –0.3 –0 0.07 1

7 Maximum Price 768,558.32 1,124.77 5,120,000.00 0.07 0.04 –0.3 0.22 –0 0.2 1

Table 2 – Correlation of variables of Question 1

Mean Min Max 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

1 Auction Price 16,758.78 777.69 250,895.95 1

2 Precious 0.6 0 1 0.1 1

3 Lady 0.06 0 1 –0.08 0.17 1

4 Quartz 0.05 0 1 –0.09 0.06 0.23 1

5 Water Resistant 0.65 0 1 –0.01 –0.36 –0.21 –0.04 1

6 Chronograph 0.22 0 1 0.1 –0.2 –0.13 –0.04 0.15 1

7 Moonphase 0.08 0 1 0.25 0.16 –0.07 –0.03 –0.04 0.01 1

8 Retrograde Display 0.02 0 1 0.06 0.06 –0.04 –0.03 0.03 –0.03 0.13 1

9 Equation of Time 0 0 1 0 0.01 –0.01 –0.01 0.03 –0.01 0.1 0.11 1

10 Perpetual Calendar 0.22 0 1 0.18 –0.12 –0.07 –0.11 0.27 –0.19 0.22 0.03 0.05 1

11 Tourbillon 0.02 0 1 0.32 0.09 –0.04 –0.03 –0.04 –0.01 –0.01 0.06 –0.01 –0.04 1

12 Documents 0.31 0 1 0.24 0.15 –0.04 –0.06 –0.02 –0.06 0.14 0.05 0.02 –0.07 0.09 1

13 Limited 0.16 0 1 0.07 0 –0.1 –0.07 0.14 0.02 0.04 0.07 0.04 –0.12 0.16 0.23 1

14 Watch Age 28.29 0 187 –0.08 0.04 0.09 –0.08 –0.36 –0.06 –0.16 –0.13 –0.04 –0.01 –0.11 –0.17 –0.29 1

15 Expert Estimation 12,078.92 250.66 256,587.98 0.94 0.12 –0.08 –0.08 –0.02 0.11 0.26 0.06 0 0.16 0.35 0.23 0.07 –0.08 1

16 Expert Uncertainty 49.38 7.14 400 –0.22 –0.13 0.01 0.04 0.01 0.06 –0.1 –0.01 0 –0.11 –0.04 –0.17 –0.04 0.03 –0.24 1

17 Portfolio Price 43,121.86 934.17 470,000.00 0.09 0.23 0.03 0.01 –0.1 –0.05 0.09 0.15 0.1 –0.18 0.16 0.15 0.06 –0.18 0.11 –0.06 1

18 Conglomerate 0.39 0 1 –0.15 0.01 0.04 0.01 –0.06 0.1 0.02 –0.02 –0.04 –0.32 0.03 –0.08 0.14 –0.03 –0.15 0.06 –0.02 1

19 Age 140.22 3 315 –0.03 0.16 0.06 –0.05 –0.22 0.02 0.03 –0.17 –0.08 –0.23 –0.05 0.08 –0.05 0.16 –0.02 –0.06 –0.08 0.45 1

20 Media Mentions 892.35 0 3909 0.01 –0.16 –0.01 –0.01 0.17 –0.11 –0.11 –0.11 –0.04 0.51 –0.09 –0.16 –0.22 0.2 –0.01 0 –0.32 –0.26 –0.17 1

21 Swiss 0.9 0 1 0.03 0 –0.05 –0.11 –0.01 0.03 0.05 0.04 –0.03 0.16 –0.01 –0.04 –0.17 0.13 0.03 –0.01 0.04 –0.29 –0.02 0.09 1

Table 3 – Correlation of variables of Question 2

As we can see from Table 4 it seems that the answer for Question 1 is positive. Over-all past auction prices do seem to enable higher retail prices in the future as can be seen by the positive and very significant coefficient of Maximum Price in the model.

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The multiple lives of a watch • 55

Thiscoefficientmeansthatforevery1000CHFincreaseinmaximumauctionpriceinagivenyear,theaverageportfoliopricecanbeincreasedby30CHF“forfree”.ItalsoseemsthatSwissbrandsaremaybeunderpricingtheirportfoliosrelativetonon-SwissbrandsgiventhenegativeandsignificantcoefficientoftheSwissvariable.Olderfirmsseemtopricetheirwatcheshigherthanyoungerfirmsonaverage.

PortfolioPrice Coefficients StdErrors

PortfolioPrice(t-1) –0.76*** (0.00)

Conglomerate –9.1e+04*** (7528.18)

Age 205.79*** (10.92)

MediaMentions –1.53*** (0.16)

Swiss –2.8e+04*** (1195.55)

MaximumPrice 0.003*** (0.00)

Auctiondummies yes

Branddummies yes

Constant 1.9e+05*** (7215.89)

SampleSize 6086

AdjustedR2 0.977

Fstat 2972.73***

+ p-value ’ 0.1, * p-value ’ 0.05, ** p-value ’ 0.01, *** p-value ’ 0.001

Table 4 – Regression of Portfolio Price

WeseefromTable5thatseveralfactorsaffecttheauctionpriceofawatch.Intermsofmechanics, it seems thatchronograph functions,moonphases,andperpetualcalendars fetch higher prices in the auction. It is to note that a tourbillon alsoincreasestheprices(butwith1tailedsignificance).Thefactthatthewatchcomeswithallitsdocuments,certifications,box,etc.andthatitislimitedalsoincreasesitsvalue.Unsurprisingly,expertestimationsalsopositivelydriveupthepricesreachedandthelevelofuncertaintyaroundthepriceseemstobenefitthewatchbecauseitalsotendstodriveupthefinalvalue.Thenumberofmediamentionsofthebrandinthemediaalsoseemstopositivelyimpactthewillingnesstopayofconsumersandsodoestheageofthebrand.Finallysurprisinglytheswissnessofabrandseemstonegativelyaffectthefinalprice.CombiningthisobservationwiththeresultofTable4seemstosuggestthatSwissbrandsmighthavebeenoverpricingtheirproductslatelyrelativetothenon-Swissbrandsandarerectifyingthisbias.Let’snotealsothattheexpertestimationisthemostreliableandaccurateindicatorsofthefinalpriceandthatdespitecontrollingforthis,consumersstillvaluetheseparametersoverandabovetheirvaluationbytheexpert.

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56 • The multiple lives of a watch

AuctionPrice Coefficients StdErrors

Precious –298.55 (284.65)

Lady –4.84 (513.41)

Quartz –636.10 (589.44)

WaterResistant 379.48 (312.71)

Chronograph 904.53** (330.05)

Moonphase 952.87+ (506.02)

RetrogradeDisplay –361.38 (868.21)

EquationofTime 1144.03 (2608.08)

PerpetualCalendar 1678.50*** (440.77)

Tourbillon 1377.87 (933.92)

Documents 1132.58*** (296.54)

Limited 1515.07*** (384.20)

WatchAge 6.94 (6.02)

ExpertEstimation 1.21*** (0.01)

ExpertUncertainty 20.35** (6.42)

PortfolioPrice –0.00 (0.01)

Conglomerate 4713.05 (3602.69)

Age 18.66 (13.48)

MediaMentions 0.39+ (0.23)

Swiss –3356.76* (1487.03)

Auctiondummies yes

Branddummies yes

Constant –5248.34 (3916.05)

Samplesize 6334

AdjustedR2 0.8972

Fstat 496.23***

+ p-value ’ 0.1, * p-value ’ 0.05, ** p-value ’ 0.01, *** p-value ’ 0.001

Table 5 – Regression of Auction Price

Discussion and conclusionThis paper aimed at offering both some theoretical and empirical contributionsbutalsosomedirectlyactionablepractitioner insights into thedriversofwatchvalue and valuation by consumers and experts alike. From an in depth qualita-tiveanalysisofanextensivesetofinterviewsweisolatedthefactthatsecondarymarketsunexpectedlyenablethere-emergenceofthemechanicalwatchindustry.Collectorsandauctionsbothsentsignals tofirmsabout theresidualvalue inamechanical watch even though it was a displaced technology in comparison tothemoreprecisequartzwatch.Thesesignalswerewellreceivedandinterpreted

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The multiple lives of a watch • 57

byfirmswhorepositionedtheindustryasaluxuryindustry.Inasecondpartofthepaperweshowedthatindeedauctionpricesenablefuturevaluecapturebypro-ducersintermsofenablinghigherretailprices.Wecomplementedthisanalysisbyisolatingproductandfirmlevelparametersthataffectauctionprices.

Tothebestofourknowledgethisisthefirstpapertoofferamacrolevelempiri-calevidenceattestingofa relationshipbetweensecondaryandprimarymarketprices.Theanalysesshouldhoweverstillbemorerefinedandmoredatacollec-tioniscurrentlyunderway.Thereareacoupleoftakeawaysfromthisexploratoryresearch.Forinstanceexpertopinionsmatteralotforauctionprices.Watchesarehardtovalueandthereareseveralparametersthatinfluencethevaluationpro-cess.Understandingwhataretheparametersthatexpertsvalueparticularlywouldbequiteinterestingforfirms.FromTable5wealsoisolatedaseriesofvariablesattheproductlevelthatseemtobevaluedbybuyersoverandabovetheirestimationbyexperts.Introducingmoreofthoseorunderstandingwhyconsumerslikethemwouldalsobebeneficialforfirmsanddefinitelycallsformoreresearch.

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58 • The multiple lives of a watch

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LES VIES MULTIPLES D’UNE MONTRE

—Sous la direction de Kalust Zorik François H. Courvoisier

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LES VIES MULTIPLES D’UNE MONTRECet ouvrage réunit les communications présentées en 2015 à Neuchâtel lors de la 10e Journée de recherche en marketing horloger. Il présente également les exposés et tables rondes qui ont eu lieu à la 19e Journée internationale du marketing horloger tenue à La Chaux-de-Fonds. Il fait suite aux autres ouvrages de la même collection qui ont pour but de faire rayonner le savoir-faire des entreprises horlogères et de leurs partenaires.

Le présent volume aborde un thème rarement traité dans la littérature : les vies multiples d’une montre – montres d’occasion, de seconde main – qu’elles aient été portées ou non. Les Anglo-Saxons les appellent pre-owned watches, littéralement « montres pré-possédées ». Ce thème est parfois « chaud » pour les professionnels de l’horlogerie quand il s’agit d’écouler des stocks invendus dans des circuits pas toujours officiels ; il est plus transparent quand il s’agit de ventes aux enchères, physiques tout au moins, opérées par des maisons sérieuses.

Différents enseignants-chercheurs et spécialistes de l’horlogerie ont contribué au contenu de cet ouvrage : Elisabeth Robinot, Leo Trespeuch, Kim Claes, Ryan Raffaelli, Pierre Balloffet, Carole Maury, Jérôme Jauslin, Catherine Bourdin Mougel, Karine Brisset, Laurent Sage, Lisa von Beust, Frédéric Watelet, Thibaut de Norre, Stéphane Devaux, Christian Odin, Walter von Känel, Antoine Simonin, Régis Huguenin-Dumittan, Valéry Bezençon, Geoffroy Ader, Raynald G. Friedli, Nicolas Galley, Grégory Pons, Jean-Marie Schaller, Osvaldo Patrizzi, Manuel Yazijian, Jose Luis Alvira, François H. Courvoisier et Kalust Zorik.

Cet ouvrage est publié sous la direction de :Kalust ZorikPrésident et fondateur des Journées internationales du marketing horlogerFrançois H. CourvoisierDr ès sciences économiques, professeurDoyen de l’Institut du marketing horloger, Haute école de gestion ArcCoordinateur des Journées de Recherche en Marketing Horloger

Avec le soutien de :

ISBN 978-2-606-01657-9 | 935555A1

Autres ouvrages parus aux Éditions Loisirs Pédagogie :« La communication horlogère : stratégies et nouvelles technologies » (2009)« L’utilisateur horloger dans un monde en mutation » (2010)« L’horlogerie et des ambassadeurs » (2011)« Asian Dream : le rêve horloger » (2012)« Le marketing expérientiel appliqué à l’horlogerie » (2013)« Services après-vente horlogers : nouvelles exigences » (2014)« Design horloger : crée-moi une icône ! » (2015)À commander en ligne sur le site www.editionslep.ch

Photographie de couverture :Shutterstock, Stocksnapper

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