Beyond Function: An Analysis of Affective Design Factors in Japanese Mechanical Watches with High Auction Prices

Abstract

In research on the brand value of luxury products, product price serves as an indicator for measuring brand value. Watches that command high prices at auctions can be said to possess high value. Therefore, this study clarified the factors behind high auction prices by using brand value factors. This study is part of the research on luxury product pricing. As background, while the theory of price signaling is well known in studies on luxury product pricing, this theory posits that price signals the perceived quality of a product rather than the factors constituting product prices. Since luxury products possess value beyond function, it is natural to consider brand value as a factor influencing their prices. This study analyzes the relationship between price and brand value factors. Based on prior studies, the brand value factors used are “iconic products,” “consistency with brand identity,” and “rarity.” Due to the lack of a theoretical background, this study is primarily exploratory in nature. Japanese mechanical wristwatches were selected as the subjects of this study. Among luxury products from companies listed on the TSE, only Japanese whisky and wristwatches consistently command high prices at global auctions. Furthermore, almost all wristwatches appearing in these auctions are mechanical watches. Auction data from Phillips, one of the world’s leading auction houses, was used. Phillips’ watch-related auction sales in fiscal year 2024 were approximately $210 million in total, accounting for 41% of the watch auction market and making it the world leader in this field. The analysis sample comprised 57 Japanese mechanical wristwatches sold at Phillips since 2018. At Phillips, expert estimates serve as the pricing benchmarks. Results significantly exceeding these estimates are covered by global media and influence brand reputation. The analysis revealed that hammer prices exceeding estimates can be explained by three configurations: (1) iconic products with low production numbers, (2) iconic products featuring cases aligned with the brand’s identity, and (3) watches with low production numbers featuring cases aligned with the brand’s identity. In other words, no single factor alone determines hammer prices. Even when a specific factor is present, some hammer prices exceed the estimate while others do not. In addition, hammer prices exceeding the estimate result from multiple combinations of these factors. The academic contribution of this study is that it uses price as a metric to reveal how brand value factors—being an iconic product, possessing consistency with brand identity, and having rarity—interact to create value. Practically, the identification of price-related factors contributes not only to luxury goods but also to the manufacturing industry overall, enhancing profitability and brand value. While high secondary market prices positively impact brand value, this study found that iconic products are one of the factors that influence high prices on the secondary market, such as auctions. It also clarified the importance of product development aligned with brand identity.

Keywords: Brand Value, Premium Price, Luxury Watch

DOI: 10.54941/ahfe1007327