Winding Up Value: How Media Shapes the Luxury Watch Market

Have you ever wondered why some luxury watch brands sell for such high prices at auctions? While paid advertising helps make these brands more desirable, new research from the SC Johnson College of Business shows that nonpaid media coverage— such as news articles and reviews—also play a significant role. Specifically, the way media promotes luxury watch brands—whether it groups them together or treats them as completely separate—can actually affect how they perform in the market and what prices they sell for at auction.

Kim Claes, visiting assistant professor at the Samuel Curtis Johnson Graduate School of Management, and Frédéric Godart, associate professor at INSEAD, study the issue in their paper “What Keeps the Market Ticking? The Role of Third-Party Audiences and Cognitive Embeddedness in Shaping Competitive Dynamics in Luxury Watchmaking,” published in the Strategic Management Journal.

The researchers found that brands perform better when they’re mentioned alongside other brands that are frequently grouped with many others—regardless of how prestigious those brands are. This may seem surprising since in crowded markets, brands usually try to stand out. But Claes and Godart argue that there’s value in being seen as part of a well-connected group of brands.

The researchers’ primary finding is that a firm’s “coreness”— how central a firm’s name is in relation to others mentioned in media reports—positively affects the auction prices of its products. The more frequently a firm is mentioned alongside other prominent brands, the more it is perceived as representative of the industry. This perception can lead to higher prices at auctions for their watches. This positive effect is amplified when a firm receives frequent and favorable media coverage.

“Market interactions are cognitively embedded,” said Claes. “Market participants’ perceptions and actions are shaped and constrained by structured regularities of mental processes that are partially influenced by the media. We argue that firms are perceived and evaluated not only in isolation, but also by their relationships with other firms as found in media narratives.” While previous studies only focused on individual firms’ characteristics, this research emphasizes the importance of network-level properties—how firms are connected through media coverage.

Claes and Godart analyzed a comprehensive dataset from the luxury watchmaking sector, covering media reports from January 2001 to December 2009 and auction data from January 2002 to December 2010. They constructed networks based on comentions of firm names in the media, allowing them to assess these relationships against auction prices. Some of the brands they studied include Cartier, Omega, Patek Philippe, Rolex, and Tag Heuer.

Their findings highlight the importance of understanding how brands are positioned within media narratives. Being frequently mentioned with other core players not only enhances a brand’s own visibility; it also improves its value among consumers, as higher coreness increases a brand’s conspicuous and investment value. This understanding can potentially help luxury watchmakers strategize their marketing efforts and manage their public relations more effectively.

“This research provides valuable insights into how third-party audiences—like the media—shape competitive dynamics in the luxury watchmaking industry,” Claes said. “By focusing on cognitive embeddedness and the concept of coreness within networks of brand names in media stories, we illustrate how media representations influence buyer perceptions and market outcomes.”

For luxury watchmakers, understanding these brand value-enhancing dynamics can lead to better performance not only in secondary markets, but in primary markets, as these can spill over onto firm sales. This study not only enriches an understanding of market interactions but also offers practical implications for managers seeking to navigate the nuances of brand perception in a competitive landscape.