It's been said that sport is the great social equalizer. Billionaire tech tycoons like Steve Ballmer share the same frenzied fandom over teams like the L.A. Clippers that an everyman from Van Nuys also enjoys. And while dropping $10,000+ on a wristwatch is not something the everyman will ever do, companies like Swatch (NASDAQOTH:SWGAY), Louis Vuitton (NASDAQOTH:LVMUY), and Chopard are betting heavily that those who do, like Ballmer and his peers, choose their timepieces because of their ties to sports.
The best, albeit anonymously
To be clear, what we're talking about here are watch brands at the tip-top of the retail market ... brands whose entry-level products come with four-figure price tags and a level of swag that the classic calculator watch simply can't match. Yet, while most folks are at least familiar with Casio (the firm behind the aforementioned wrist-based calculator), a random sampling of the general public turns up a sea of blank faces when asked to identify brands like Hublot, Longines, and Chaumet. To be fair, those who follow the industry and watch connoisseurs are quite familiar with the likes of Hublot and its parent company, Luis Vuitton Moet Hennessy, but that level of brand awareness will only sell so many units.
Turning to the global stage
To combat this relative anonymity these companies are adjusting their advertising strategies and consumer targets by going after sports fans. Hublot scored a major coup by inking a deal to be the official timekeeper for the biggest sporting event in the world, the World Cup soccer tournament. The deal is designed to expand the watchmaker's brand awareness, and with nearly half of the global population (46% according to soccer's governing body FIFA) expected to tune in, it's a safe bet that more people will know the name Hublot after the trophy is hoisted than before.
Similarly Swatch subsidiary Omega has a deal with another high-profile global sporting event. As official time keeper of the Olympics, the Swiss-based company gets its name and logo splashed across countless television screens. The International Olympic Committee (IOC) reports that 3.6 billion people tuned in for the 2012 Summer Games. To put that figure in perspective, the NFL projects that the Super Bowl, often touted as the most-watched television show in the U.S. every year, nets a global audience of just over 1 billion. Clearly these companies are ignoring individual markets in favor of the Bond Villain strategy of striving for world domination.
Not just the events, but the players too
The list of "official timekeepers" of sporting events is as long and diverse as the list of sporting events themselves. The Grand Prix of Monaco has privately owned Chopard, Formula One racing has Luis Vuitton's Tag Heuer, and horse racing's Triple Crown has Swatch subsidiary Longines. But with athletes as opinion-makers, luxury brands are jumping at the chance to be seen on their wrists. Exemplifying its commitment to sport, Swatch has endorsement deals with dozens of athletes across its subsidiary brands. Omega, for example, has a stable of endorsers that includes the likes of golfer Rory McIlroy and swimmer Michael Phelps, while Tissot claims racer Danica Patrick and NBA champion Tony Parker.
Deals like these used to be exclusive to sportswear manufacturers like Nike and Puma. Now high-fashion labels are engaging in an arms race to lock up the most high-profile athletes in exclusive deals. Dwyane Wade, Usain Bolt, Diego Maradona, Kobe Bryant, Cristiano Ronaldo, and Lionel Messi all boast lucrative deals to wear a specific watch brand and the result is unprecedented exposure to entire groups of previously ignored people. Suburban teens and inner-city twentysomethings can now tell you that if you want to put your swag on display you should put an Omega on your wrist.
Seeing the returns
While successful in their own right, luxury watchmakers aren't in the same league as firms that traditionally spend big in sports-related marketing. The Coca-Cola Company's iconic cola is often "the official soft drink" of sporting events around the world, and with $46.9 billion in revenue in 2013, it can afford to be. In contrast, Hublot recorded $355 million in revenue in 2012, so its investment in the World Cup is a significant one. With exact amounts kept private, estimates suggest that the watchmaker is spending in the neighborhood of 20% of its marketing budget on the World Cup alone.
Despite the hefty sum Hublot Chief Executive Ricardo Guadalupe recently told the Financial Times that it is money well spent. "[W]e believed it could be a very effective support for our communications because it is the most followed sport in the world," Guadalupe said. "The success we've had since proves it was the right strategy.... During the World Cup in 2010, we had five times more visitors to our website than we would do usually: 1 million in one month. And this year we expect the numbers to be even higher."
Things are heating up
As industry leaders like Guadalupe tout the benefits of investing in sports-related marketing, competition for this type of exposure will get fierce. We can expect full-blown bidding wars every time a deal like the one Hublot has with the World Cup expires. We'll also be treated to countless leagues, teams, and venues bringing in "official timekeepers" and "official watchmakers" ... provided, of course, they pay for the privilege.
On the individual front, the luxury timepiece will begin to rival a signature shoe deal for athletes. As more and more stars ink watch deals, the kids who follow their every move will take notice. At one time kids grew up hoping to one day get their own Air Jordan deal; soon they'll be dreaming of sporting a personalized Tag Heuer ... just like Cristiano Ronaldo.
Surprise, prices will go up
None of this will make these watches any more affordable to the average consumer. The fact is all of these timepieces are expensive because they boast intricate, mechanical movements to go along with precious metals and sometimes gemstones. A watch with a diamond bezel is going to cost a pretty penny regardless of who endorses it. That said, the aforementioned diamond watch can sell for upwards of $1,000 more than the same watch if it comes with Ronaldo's name engraved on the back.
Jason Tomaszewski has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola. The Motley Fool has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.