Lessons From Swiss Watch-Makers
Today, nonprofit higher education is under threat like never before. Costs for higher education are rising at a rate that simply may not be sustainable over the long term. For-profit universities have provided platforms that enable individuals, especially those in the work force, to obtain degrees with an ease and convenience formerly not possible. Silicon Valley entrepreneurs are looking for ways to provide quality online education at a fraction of the current cost. Some of them even question the value of a college education: One entrepreneur (Peter Thiel) is actually paying students not to go to college and to start businesses instead.
As costs to colleges and universities rise, state legislatures have been cutting allocations in the public sector in a way never seen before, while at the same time constraining the rate at which tuition may rise; low interest rates reduce returns on endowments; newly limited funding of grant proposals reduces income through indirect costs; and philanthropy is constrained in many cases by flat or even falling personal incomes. What’s to be done?
We in the higher-education sector can learn a lot from the Swiss watch-making industry. In the 1980s, the Swiss watch industry was in serious trouble. The Swiss watch-makers — who had dominated the industry for decades and, in some cases, for centuries — were being routed by Japanese watch-makers who were producing watches that could do much more than the Swiss ones, and at a fraction of the cost. Why pay hundreds or even thousands of dollars for a Swiss watch that told the time and possibly the date when you could get the time, day, and date from a Japanese product, not to mention additional features such as stopwatch, alarm, and multiple-time-zone features, and sometimes more? Even worse, the Japanese quartz (battery-operated) watches often were more accurate in telling the time than were the Swiss hand-wound or self-winding models.
The Swiss watch-making industry might have gone bust — in much the way some of us fear for the newspaper or magazine industries today — except for their creative redefinition of what it means to own a Swiss watch. Recognizing that the Japanese were out to capture their market, the Swiss watch-makers set out to redefine what it meant to own a Swiss watch. The Swiss watch was to become what a classical stringed instrument had become — the symbol of quality. Research suggests that it is difficult if not impossible to distinguish the sound of a Stradivarius from that of a well-made modern instrument, but musicians are willing to pay a huge premium for the perception of quality in the classical instrument. Swiss watch-makers similarly capitalized on their brand equity, knowing that they had only a limited amount of time effectively to do so before becoming irrelevant. They needed users of their products personally to identify with their products — to see their Swiss watches as extensions of themselves.
Different watch-makers emphasized different images. For example, Rolex Oyster watches present a bold image of luxury and privilege. Patek Philippe watches, generally even more expensive than Rolexes, tend to present an image of the highest quality accompanied by understated elegance and durability of a single watch over generations. Blancpain watches typically are even more understated, with an emphasis on each being handmade by a single maker. Tag Heuer has become a symbol of the young achiever on the way up. Longines offers quality at a more modest price, while Swatch watches are funky and relatively inexpensive.
What are the lessons in brand equity to be learned for higher education?
1. Waiting to see what happens does not work. The Swiss watch-makers could not tarry or their market would have been gone for good. Neither can higher education today wait around and hope for the best. Some newspaper and magazine publishers waited; you can see how well it worked out for them! There are too many threats to nonprofit higher education to adopt a stance of wait and see. You can’t wait to change while your market share steadily evaporates.
2. Quality institutions will survive only if they effectively market their brand. The Swiss watch brands had (and still have) a worldwide reputation for superiority. The watch-makers, however, needed to persuade their customers that quality matters. This was no easy task. Many products today, such as personal computers, have become largely mass-marketed products of generic quality. Some manufacturers, such as IBM, left the business, recognizing that relatively few PC customers would pay a premium for quality. With a cheap watch, you can buy hundreds of them before you reach the cost of a good Swiss watch. Moreover, all the watches tell time. The Swiss watch-makers, therefore, needed to persuade customers that their product was a statement about the wearer — much like a piece of jewelry. (Indeed, some non-Swiss brands, such as Cartier and Bulgari, are known primarily for their association with jewelry.)
You may be thinking that you would never seek to purchase a premium watch. But how about some other product that is more luxurious than you really need — a premium car, bicycle, house, home appliance, television, cell phone, garment, or even branded rather than generic food or drugs? Most of us seek a premium product for something because for, whatever that thing is, we want better quality, or at least, our perception of it. With higher education, students often feel their choices are limited, relative to their resources, when it comes to price.
When students pay the high and, in some institutions, astronomical costs of a college education today, they understandably feel like they are paying a premium price, whether they want to or not, and they expect to get their money’s worth. You might think that the premium branding strategy applies only to elite institutions. But today, because students perceive almost all of higher education as commanding premium prices, they want a product that delivers. Having a strong value proposition applies to all institutions, not just elite ones. Thus, institutions of higher education need to market their brand to bring pride of ownership and belonging to their students. They need to develop personal identification with the brand. Generic institutions without a clear and differentiated value proposition are the ones most likely to be hurt.
3. Quality is, in part, in the eye of the beholder. How does one actually know that, say, a Rolex or a Patek Philippe is a superior watch? For the large majority of buyers, that knowledge is gotten through the superior functioning and durability of the watch and through the watch-maker’s reputation. It is not enough to be good: The customer must be persuaded, as Detroit automakers are learning today after many lean years in which they saw their brand equity decimated. You not only need to excel, you have to be recognized for your excellence. Good marketing and good public relations are necessary but generally not sufficient to persuade stakeholders of quality. Thus colleges and universities need transparent systems of accountability that will persuade stakeholders of the quality the institutions claim.
4. Institutions will succeed to the extent that they identify, pursue, and market their unique niche. Institutions at the top of the reputational heap — the Yales and the Stanfords, say — have marked out their niche, trying to be the best possible in a wide variety of disciplines. Most institutions of higher learning, however, have neither the financial resources nor even the will to become the best across the board. Instead, they need to do what the Swiss watch-makers did — find a niche in which they excel and then sell themselves as powerfully as they can to those who identify with what they have to offer.
At Oklahoma State University, for example, our brand derives from our land-grant mission — that we seek to educate ethical citizens and leaders who will make a positive, meaningful, and enduring difference to the world. As part of our value proposition, we have a Center for Ethical Leadership, leadership-related courses and student activities in all colleges, a popular leadership minor, and an ethos of developing servant leaders. We are in the early stages of planning to start an "ethical leadership track," to be administered jointly by academic and student affairs, to be readily and freely available to all students — undergraduate and graduate. It will combine the study of ethical leadership in the academic sphere with activities developed by student affairs that immediately apply what one learns in the classroom to one’s activities on campus.
In this way, we hope better to integrate the academic and student-affairs sides of our university, a task that is not always easily accomplished. In particular, certain courses will be identified as participating in the track, and will include within them principles and case studies in ethical leadership as applied to the particular discipline being studied. Thus, students will not have to take additional courses, but rather will elect courses and course sections relevant to the track. They will see directly how ethical leadership cross-cuts academic disciplines. And through their student-affairs activities, such as community service, student government, athletics, journalism, or whatever, they will apply what they learn. They then will be accountable in the academic work for showing how they applied what they learned on the academic side to the student-affairs side.
Other institutions might brand themselves differently. What is important is that the brand identification accurately and excitingly reflects both the mission of the institution and the graduates it produces.
5. You need consistency in quality and in messaging. For the best watch-makers, every watch is of superb quality. There are few or no duds, and if there is a dud, it is quickly replaced, no questions asked. Moreover, the watch-makers deliver on quality: There is an active market for quality Swiss watches dating back to the early 1900s. If the old watches are serviced, they still work and keep accurate time. And they bring high prices, even a century later. Similarly, colleges and universities need to produce graduates who show to employers and other stakeholders in the higher education system that they have the skills and work ethic they need to cope effectively with the work demands of the present and the future.
Similarly, messaging has to be strong and consistent. In earlier times, it was relatively simple to make different pitches to different audiences — to try to be everything to everybody. But with the advent of the Internet, information spreads around the globe literally at the speed of light. As some political candidates have discovered, whatever you say anywhere to anybody is fair game. You can’t afford to be indecisive about what you stand for. Some institutions cannot decide who or what they are: They have too many messages, too many logos, too many moving parts working at cross-purposes to each other. The Swiss watch-makers that have succeeded have been consistent in producing high-quality products and have carried a distinctive and unified brand message, sometimes offering diverse options (models) within the context of that overall message.
To some readers, it may seem offensive to think of a college or university in terms of a construct of brand equity. But in an age of rapid advances and intense competition, institutions of higher learning can no longer afford to be quixotic or otherwise naïve. Enhancement and effective communication of brand equity is what saved Swiss watch companies. It is what will save quality institutions of higher education.
Robert J. Sternberg is provost, senior vice president, Regents Professor of Psychology and Education, and Kaiser Family Foundation Chair in Ethical Leadership at Oklahoma State University. He is on the board of the Association of American Colleges and Universities as treasurer and is president of the Federation of Associations in Behavioral and Brain Sciences as well as past president of the American Psychological Association. The opinions in this article, however, are exclusively his own.
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