Luxury Marketing

This paper discusses luxury marketing and branding strategy for Hermes and how they can increase their market return. It identifies the major issues being faced by them along with the potential opportunities. It also discusses potential recommended approaches that should be initiated by Hermes in maximizing their opportunities. The recommended approaches include brand extensions, co-branding, and ingredient marketing.

Running head: LUXURY MARKETING
Luxury marketing
Name of the student
Name of the university
Author note

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Table of Contents
Introduction......................................................................................................................................2
Company profile..........................................................................................................................2
Aspects of selection of luxury brand...........................................................................................3
Identification of the issues...............................................................................................................4
Strategic recommendations..............................................................................................................4
Brand extensions..........................................................................................................................4
Co-branding.................................................................................................................................6
Ingredient marketing........................................................................................................................8
Conclusion.......................................................................................................................................8
Reference.......................................................................................................................................10
Appendix........................................................................................................................................12

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Introduction
In the current business state of affairs, marketing is becoming more important than it was
a few years ago due to the reason that the competition is more in the recent time. Thus, with the
help of effective marketing and promotional activities, the value for the target customers is being
raised. On the other hand, it should be noted that the current era is of customers’ that states that
products and values are created according to the taste and preferences of the customers. In this
case, the role of marketing in the current time is more than just increasing the sales of the
products (Atwal & Williams, 2017). However, the current approach of marketing should be more
distinctive because of the fact that each of the competing firms in the market is initiating one and
other marketing approaches. The initiated marketing approach should be well aligned with the
product elements and target customer expectations in order to have the maximum utility and
return from the market.
This paper will discuss about luxury marketing and branding strategy for Hermes and
how they can increase their market return. In addition, the major issues being faced by them will
be identified along with the potential opportunities. This paper will also discuss about the
potential recommended approaches that should be initiated by Hermes in maximizing their
opportunities.
Company profile
Hermes is a leading French high market fashion brand operating across the world. They
are specialized in leather products, perfumes, jeweler and furnishings. Thus, different luxury
sectors are being tapped by Hermes and catering to diverse needs of the customers. One of the
major reasons behind the selection of Hermes as the chosen company is their excellent business

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performance in the last few financial years. It is reported that the consolidated revenue of
Hermes is increasing from the last few years and each of their operating markets is witnessing
growth. Thus, implementation of luxury marketing strategy will further enhance this growth and
will cement their position in the respective segment.
Aspects of selection of luxury brand
There are majorly nine criterions that should be considered in selecting a luxury brand.
Inequality The products of Hermes can only be afforded by the super rich customers and
thus it promotes inequality in the case of target customer bases.
Rarity The products of Hermes are having limited availability in the market and limited
number of customers is using them. Thus, they are scarce in nature.
Quality Quality of Hermes is top notch with special attention to the craftsmanship.
Expenditure Expenditure of the target customers of Hermes is more and high.
Distinction Hermes is positioned in the market as a brand with distinction due to the brand
value.
Excess Excess is not applicable for Hermes as mass production is not followed by them.
Power Availing the products of Hermes convey the power and authority of the users in
the society.
Pleasure It gives satisfaction and pleasure of achievement to the users by using the
products of Hermes.
Innovation Innovation is the key to Hermes as latest technologies are being used in the
production process.

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Identification of the issues
The major issue identified for Hermes is the various financial risks. It should be noted
that Hermes is operating in the high street fashion sector and thus the involvement of capital is
more compared to other contemporaries. The more the involvement of the capital investment, the
more will be the financial risks. In the case of Hermes, relationship with the suppliers is a major
issue due to the reason that they are having a few suppliers and subcontractors in their eco
system. However, their relationship with Hermes is being determined by the intensity of the
competition due to the reason that each of these competitors is associated with the competitors of
Hermes as well. Thus, it is important for Hermes to have effective and proper relationship with
their suppliers to ensure the desired quality and seamless quantity. On the other hand, it should
also be noted that a number of Hermes products are sold through different third party retail
outlets apart from their own company owned outlets. Thus, managing the same service quality to
the customers is difficult and challenging for Hermes. This is also further contributing to the
need for innovative approaches.
Strategic recommendations
Brand extensions
It is recommended that brand extensions might be effective in the meeting the objectives
for Hermes. This is due to the reason that brand extensions refer to inclusions of more market
segments and product varieties under the same brand name. This approach is being selected due
to the reason that with the help of the brand extensions, the brand identity of Hermes will get
increased (Kim, Park & Kim, 2014). As per reports, Hermes has their presence in the fashion and
accessories segment and entering in new segments such as children wear will increase the brand

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identity (Warc.com, 2019). For example, the current premium customer base prefers to have high
street fashion products for the younger ages also. It recommended that children fashion products
should be positioned across their existing distribution centers and alongside their existing
products. This will help them to cater to larger target segments leading to more sales volume and
revenues (Chun et al., 2015).
In terms of brand extensions, it is also recommended that advertisements should be made
outside of their target segment. This is because children wear is not included in the current
product portfolio of Hermes and thus advertisements should also be made outside the existing
customer segments. This will ensure that larger target segments including the new segments will
be covered under the new brand extensions. On the other hand, it should also be noted that the
advertisement budget should be increased with time in order to increase the demand (Dall’Olmo
Riley, Pina & Bravo, 2015). It is recommended that in the initial stage of the introduction of new
brand extensions, Hermes should leverage on public mediums such as social media and outside
media. With the help of social media marketing, the initial buzz will be more as the huge active
users in the social media will be aware of the introduction of the new product line in the market.
Furthermore, more mediums should be used in the later stage including the electronic and print
mediums. This will help to increase the market awareness about the launched products along
with gathering the feedbacks from the customers (Sheng Goh, Chattaraman & Forsythe, 2013).
This will require increase in the advertising budget.
It is also recommended that the brand extension strategy of Hermes should also include
watches in their list of accessories due to the reason that in the current time, watches are included
in the fashion products. Thus, Hermes should introduce a separate brand for watch in the market.
As of now, they are only having a single variant of watch but that is not enough in dealing with

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the premium watch brands. This strategy can also help Hermes in increasing the brand identity
by catering to different needs of the existing customer segments as well as of the needs of the
new customer segments. However, in this case, it should be noted that preferences for watches
are wide and broad and thus should be placed and positioned across different levels according to
the change in the market trends (Hennigs et al., 2013). The target customers will not be equal for
the watch brand of Hermes and will include customers across different groups. In terms of
demographic variables, the groups will be based on the genders and income levels and on the
basis of the behavioral variables; these groups will be based on the types and designs of the
products. Thus, it can be concluded that brand extension will be beneficial for Hermes in
increasing the brand identity and business operation of them in their existing markets along with
in the new segments (Carter & Curry, 2013).
As per the issues identified for Hermes, the intensity of competition will get mitigated
because of the fact that the more will be the product variants, the more will be the market
coverage. Majority of the competitors for Hermes like Dolce & Gabbana and Gucci are majorly
focused on the fashion sector. Thus, brand extension will offer competitive edges to Hermes over
them.
Co-branding
Apart from the brand extension, co-branding may also be effective for Hermes in
enhancing their current growth rate along with managing the value propositions for all the
stakeholders involved. For instance, the co-branding strategy of Hermes should be initiated with
the customers as well as with the suppliers. In the case of suppliers, there are number of suppliers
of Hermes operating in trading and producing of authentic fabrics such as wool from Mongolian

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tribes. These factors can be used as competitive advantages. It is recommended that certain
suppliers should be included in branding activities by Hermes. For example, Hermes can
introduce authentic fabric based fashion products in order to increase the differentiation in the
market and added value propositions for the customers (Cunha Forehand & Angle, 2014). With
the help of co-branding between the suppliers and Hermes, the supplier relationship management
will be more effective. The interest of the suppliers will be more in the case of Co-branding as
their brand name will be involved. The quality of the materials can also be maintained due to the
higher coordination among all the involved stakeholders. Thus, the challenges for Hermes in
relation to the supplier relationship management will get mitigated (Iglesias, O., Ind & Alfaro,
2017). Initiation of the co-branding strategy will not dilute the brand equity of Hermes because
strategic alliances will be done with the brand of same stature. In addition, the entire product
portfolio will not come under the co-branding; rather certain products will be co-branded. Still
the approach of this strategy will be amended as per the feedback of the target customers.
On the other hand, it is also recommended that co-branding strategy should be initiated
on the customer side. In the current era of marketing, taste and preferences of the customers are
the key determining factors of competitive advantages and with the help of the co-branding, the
products to be introduced by Hermes will be based on the trend among the target customers
(France, Merrilees & Miller, 2015). For example, the co-branding strategy with the target
customers should include the strategic relationships with other brands such as retail brands. This
will be beneficial because the brand identity of the partnered retail firms can be leveraged by
Hermes. However, it should also be noted that brand equity of Hermes will not get diluted
because currently, number of products of them are available with the third party retailers. These

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retailers will be chosen on the basis of their premium positioning. Hence, the brand equity will
be intact.
It is recommended that Hermes can also initiate the co-branding strategy with different
non profiting organizations. This will help them to increase their brand goodwill among their
target customers. In the current time, the premium customers are well aware about the ethical
branding of the companies. Hence, co-branding of the products with them will increase the
emotional benefits of the customers. In addition, the social responsibility of Hermes will also get
fulfilled with this strategy.
Ingredient marketing
Ingredient marketing is a new form of marketing where the major promotional focus is on
the ingredients being used rather than on the finished products. It will be effective in the case of
Hermes as that they use authentic and quality raw materials in their production process. Thus, if
the ingredients being used by Hermes are promoted, then it will create differentiating value for
them. There are a number of strategic resource advantages used by Hermes in terms of the raw
materials and promoting them will enable the target customers in differentiating between the
available options in the market (Lillywhite & Simonsen, (2014). Brand identity can also be
enhanced due to the initiation of the ingredient marketing because customers will identify
Hermes not only in terms of logo and other brand elements but also in terms of materials being
used. On the other hand, this strategy will not motivate the customers to buy a particular product
but the existing customers will be satisfied by the usages of quality ingredients in the process.
Conclusion

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Thus, it can be concluded that there are three major options left with Hermes in
enhancing their business in the long term. Each of these three options is discussed and analyzed
in this paper. Further, different recommendations have also been discussed on the methods of
implementing these approaches. This should be noted that the market segment where Hermes is
operating is highly competitive in nature, thus distinctive and a unique approach to marketing is
required. In accordance to this situation, diverse approaches are discussed in this paper. It is
expected that effective implementation of these strategic steps will help Hermes in ensuring the
maximum return from the market.

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Reference
Atwal, G., & Williams, A. (2017). Luxury brand marketing–the experience is everything!. In
Advances in luxury brand management (pp. 43-57). Palgrave Macmillan, Cham.
Carter, R. E., & Curry, D. J. (2013). Perceptions versus performance when managing extensions:
new evidence about the role of fit between a parent brand and an extension. Journal of
the Academy of Marketing Science, 41(2), 253-269.
Chun, H. H., Park, C. W., Eisingerich, A. B., & MacInnis, D. J. (2015). Strategic benefits of low
fit brand extensions: when and why?. Journal of Consumer Psychology, 25(4), 577-595.
Cunha Jr, M., Forehand, M. R., & Angle, J. W. (2014). Riding coattails: When co-branding helps
versus hurts less-known brands. Journal of Consumer Research, 41(5), 1284-1300.
Dall’Olmo Riley, F., Pina, J. M., & Bravo, R. (2015). The role of perceived value in vertical
brand extensions of luxury and premium brands. Journal of Marketing Management,
31(7-8), 881-913.
France, C., Merrilees, B., & Miller, D. (2015). Customer brand co-creation: a conceptual model.
Marketing Intelligence & Planning, 33(6), 848-864.
Hennigs, N., Wiedmann, K. P., Behrens, S., Klarmann, C., & Carduck, J. (2013). Brand
extensions: A successful strategy in luxury fashion branding? Assessing consumers’
implicit associations. Journal of Fashion Marketing and Management: An International
Journal, 17(4), 390-402.

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Iglesias, O., Ind, N., & Alfaro, M. (2017). The organic view of the brand: A brand value co-
creation model. In Advances in corporate branding (pp. 148-174). Palgrave Macmillan,
London.
Kim, K., Park, J., & Kim, J. (2014). Consumer–brand relationship quality: When and how it
helps brand extensions. Journal of Business Research, 67(4), 591-597.
Lillywhite, J. M., & Simonsen, J. E. (2014). Consumer preferences for locally produced food
ingredient sourcing in restaurants. Journal of Food Products Marketing, 20(3), 308-324.
Sheng Goh, Y., Chattaraman, V., & Forsythe, S. (2013). Brand and category design consistency
in brand extensions. Journal of Product & Brand Management, 22(4), 272-285.
Warc.com. (2019). Hermes enjoys high consumer demand | WARC. Retrieved from
https://www.warc.com/newsandopinion/news/hermes_enjoys_high_consumer_demand/
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Appendix
Brand pyramid
According to the brand pyramid, there are three major dimensions to be considered in the
case of brand extensions. These are the brand, consumer needs and competition. Thus, the brand
extension strategy should be initiated by considering these three factors. In the case of brand
extension strategy of Hermes, the brand extension will fit with their existing business process
and resources because of related sectors will be targeted. For example, premium watches will be
introduced, which is in line to their current premium fashion accessories.
On the other hand, the brand extension approach of Hermes will be relevant for their target
customers because customers availing the products of Hermes will get the same level of
satisfaction and value. Moreover, as the new extension is in the same field, thus the customers
will get to relate with the new value.
Lastly, the brand extension will help Hermes in gaining sustainable advantages over their
competitors because not many of their competitors are having presence across different sectors.

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With the extension of the brand in the new sectors, Hermes will be able to cover the larger
market areas.
Consumer benefits ladder
According to the consumer benefits ladder, different levels of benefits of the customers
should be met in order to stay relevant in the market. In the case of ingredient marketing,
emotional benefits will majorly be gained by the consumers because of the fact that promotion of
the quality and authenticity of the raw materials being used in the products will create the sense
of satisfaction among the users. On the other hand, functional benefits will also be gained
because the usages of the quality materials will surely have utility for the end users.

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