The watermark function is in an obscure place because the Design tab seems to be hidden.

The Maddocks option

Maddocks have a specific function to address this issue; It is able to create a custom text watermark or an image watermark.

Open Microsoft Word, go to the Print tab, and find the Add or remove a watermark function.

In the new window that appears, select the Picture watermark option or the Text watermark option.

Picture watermark

If you are creating a Picture watermark, click Select picture... then click on From a file and then navigate to where the picture that you want to insert is.

Text watermark

Ensure the Language on English (Australia), 

In the Text field, change it to whatever the user desires.

Leave the Font on Arial since that is the font we use at Maddocks, leave the size to auto, the Color to the default color, and the layout on Diagonal.

You can edit the watermark at any time by going back into the Insert or remove a watermark button.

The Microsoft way

The built-in watermark feature seems to be hidden.
To get access to the built-in watermark feature you need to right-click on an empty space in the ribbon, 

This next step is a little complicated.
In the new window that opens, Change the Choose commands from: dropdown to Main tabs

We need to find where the watermark function is on the left panel, and then add it to a location on the right panel.

In the left panel, Expand Design, Page Background, and then click on Watermark to highlight it. Then, in the right pane, Expand home, create a New Group, and then click on the newly created group to highlight it.

After all that is done, click on Add, and then OK. 

Here is a screenshot, be sure to pay attention to what the order of the numbers are carefully.

You should now be able to see the watermark feature in the Home tab, unless you selected a different location for the watermark function to go.

From here, you can click on the Watermark function, and then select a watermark to apply it to the page.