Case Study 2 Group 2 : Filipa ALVES - Camille BARBE - Margaux BOMBE - Pei Xin LIN
Content ☓ The problems ☓ Main facts & marketing theories ☓ Alternative ways ☓ Evaluation of each way ☓ Solution chosen
The Problems Competition between Hermès and LVMH : There is no competition between luxury brands, but Hermès has to differentiate itself from its main competitor LVMH.
Decrease of european market : Less and less europeans buy luxury products, 50% of purchases are made by tourists. and the China market is facing the same situation because of the fight against corruption.
Continuous takeover interest from LVMH : LVMH retains stake in Hermès, so there’s risk for being controlled by LVMH group.
Background ● ● ●
Established in 1837 by Thierry Hermés. Headquarters: Paris, France Went public in 1993
Product portfolio: - Leather - Lifestyle accessories - Home furnishings - Perfumery - Jewelry - Watches - Ready-to-wear
Main Facts -
Hermès is one of the most valuable luxury brands in the world, right behind LV in value terms.
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It has a strong reputation of rich heritage, exquisite craftsmanship, eye for detail and high levels of quality and professionalism. The brand control the production and distribution.
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Hermès strives for exclusivity and scarcity, having decreased its number of stores through time.
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The company has extended its reputation by establishing strategic partnerships with specific players (Vaucher, J3L, etc…)
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Philosophy: the customer should feel close to the person that crafted the product. Brand’s strategy is consistent across each of their product categories.
Main Facts -
They have multiples tools in order to preserve exclusivity and scarcity (craftsmanship training focus, etc)
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Hermès is known for its innovative position, having some exclusive products.
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Hermès uses art and artists to design iconic products in the company’s portfolio.
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Hermès marketing communication is considered exclusive, having sponsors and engaging campaigns.
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LVMH is continuously interested in higher stake at Hermès.
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China market is a serious opportunity for Hermès.
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Perfumes and jewelry still need a boost, when comparing to the most successful categories.
Marketing Theories PRESTIGE, HERITAGE AND AUTHENTICITY: ●
Hermès has high inherent prestige.
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Heritage - myths and traditions that distinguish a luxury offering from other offerings that can be also functional and prestigious. Something that Hermès is particular good at. They involve their heritage in everything they do.
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Conspicuous consumption - used by customers to signal that the customer is prestigious. In this case, since Hermès turns down displays of logos (quiet products) and does not use celebrities, their consumers’ do not usually look for conspicuous consumption, because they tend to be highly sophisticated and to recognize subtle cues.
Marketing Theories EXPERIENTIAL LUXURY: For luxury products consumers can often chose between a conspicuous option (a Chanel bag) or an inconspicuous option that actually is higher in quality. This also happens in luxury experiences. However, in Hermès case, it could be an opportunity to differentiate, since their market is highly sophisticated. Their customers’ are used to products. GIve them an experience that they are not used to. ELEMENTS OF A SUCCESSFUL LUXURY EXPERIENCE AND LUXURY MOMENTS: -
Hedonism: highly intense, joyful atmosphere, personal engagement Aesthetics: role of glamour, intensity Traditions and authenticity: close to the heritage, elements that make the customer feel close to the roots Exclusivity: social signifer role.
Marketing Theories ART INFUSION The influence that the presence of art has on consumer perceptions and evaluations of products with which it is associated. Hermès has experience on integrating art in their products and has been very successful. They are familiar with collaborating with various artists to design exclusive and creative products. Hermès know how to use art in a customer oriented perspective. It’s a one of their main strengths.
Alternative Ways 1. SEDUCE CUSTOMERS 2. HERITAGE & CRAFTSMANSHIP 3. COLLABORATION : ART
Alternative One : Seduce ●
In this alternative, we suggest that Hermès focuses on developing even more its actual markets.
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It’s important to seduce European market again, since more than 50% of luxury market sales is from tourists. Perhaps to develop and widen the Petit H initiative would bring attention to the brand. Increase the number of stores in Europe.
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Concerning the tourists, Hermès should do something different in order to sustain that tourism advantage in the long term. These are well travelled tourists, they have seen everything, thus they need to be different. For instance, seduce the Chinese market who is travelling in Paris to attend a museum or exhibition promoted by the brand.
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In China, due to government restrictions, ultra-rich search for inconspicuous products, so that should be the main focus of Hermès there.
Alternative One ADVANTAGES: ● Regaining interest and profit from european consumers. ● Establish a good and sustainable tourism strategy in the long term. ● To benefit from China political terms. ● Stick to Hermès its heritage. DISADVANTAGES: ● Stuck in Europe, lose the opportunity to be internationalized, or adapt to other different culture. ● Too tradition to be innovative.
Alternative One EVALUATION OF ALTERNATIVE 1 : ● Innovative alternative. ●
Decreasing of Chinese market and European buy less ans less luxury products.
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Allow to share more about its image and history.
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Customers could be more close to the brand thanks to this alternative.
Alternative Two : Heritage & craftsmanship ●
Keep the same strategy all around the world.
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Promote each core business of the brand : ex of Twilly with the silk around the bottle.
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Improve websites: videos of realisation of products.
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A card with the product on which the name of the Atelier will be written.
Alternative Two ADVANTAGES : ● Heritage and craftsmanship are the strengths of Hermès. ● Increase sells. ● Link the customers with the atelier. DISADVANTAGES : ● To open the store it has to work in China first.
Alternative Two EVALUATION OF ALTERNATIVE 2 : ● Risky alternative because of the store/museum. ●
Interesting to promote all the products of the brand.
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Focus on heritage to not democratize the brand and still be a ultra-premium luxury brand.
Alternative Three: Collaboration ● ●
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Since Chinese market isn’t so certain, Hermès should focus on increasing its stake there. As we have seen, Hermès often collaborates with artists to create innovative products. Perhaps they could collaborate with chinese artists in order to give some new touch and vivacity to products. This may possibly increase the sales. Focus on quality, as chinese markets are more and more sophisticated Focus less on watches in Chinese Market They should focus more on other categories such as porcelain.
Alternative Three ADVANTAGES: ● Follow the actual strategy of the brand. ● Artists make uniques works and Hermès want to propose unique products. DISADVANTAGES: ● It can be seen as adapting too much to the customer, which not cause such a good impression of the brand. ● Lose focus on European market.
Alternative Three EVALUATION OF ALTERNATIVE 3 :
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Focus on art.
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Focus on exclusivity and uniqueness of the products.
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Work with Chinese artists to increase the sells in China.
Alternative Chosen : Seduce We choose the first alternative because : ● More innovative. ●
It’s important to reinforce the actual markets, while striving to develop other ones. European market needs to be recovered.
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It aims for the customers’ to feel close to heritage and exclusivity, which is the main part of Hermès strategy.
Alternative One : Seduce ●
In this alternative, we suggest that Hermès focuses on developing even more its actual markets.
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It’s important to seduce European market again, since more than 50% of luxury market sales is from tourists. Perhaps to develop and widen the Petit H initiative would bring attention to the brand. Increase the number of stores in Europe.
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Concerning the tourists, Hermès should do something different in order to sustain that tourism advantage in the long term. These are well travelled tourists, they have seen everything, thus they need to be different. For instance, seduce the Chinese market who is travelling in Paris to attend a museum or exhibition promoted by the brand.
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In China, due to government restrictions, ultra-rich search for inconspicuous products, so that should be the main focus of Hermès there.
Alternative Chosen Recommendations ●
To develop PETIT H initiative in Europe.
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Making use of Hermès Art Infusion experience. Collaborate with an architect/artist in order to make exhibitions, so that the brand can share and reinforce the identity of the brand. The aim is to seduce again the customers’ that are not buying so much and the growing market of tourism.
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To improve and create virtual intuitive experiences especially concerning Chinese tourists. Taking into consideration that there are many internet restrictions in China, it would be a classy way to impress them and to let them know what Hermès truly is about. Examples: Virtual experiences concerning the process of craftsmanship, concerning exclusive products, etc.
Thanks for reading and listening