Postgraduate Diploma: Luxury Marketing Strategies - Hermès Report

This report provides a comprehensive analysis of Hermès' luxury marketing strategies, focusing on the period of July-October 2020. The report begins with a brand background, detailing Hermès' history, product range, and global presence. It then delves into a SWOT analysis, identifying the brand's strengths (strong brand legacy, wide product range, and global presence), weaknesses (poor CRM, limited e-commerce presence, and reliance on leather goods), opportunities (expanding into new markets and product lines, and opening new stores), and threats (competition, counterfeiting, political and economic factors, and animal welfare concerns). The report explores the brand's problem, which is the challenge of maintaining exclusivity in the digital age, and outlines the brand's direction, highlighting its heritage, craftsmanship, and unique approach. The report also includes the marketing objectives, target market, KPIs, and budgeting for a Petit-h craftsmanship workshop. Finally, the report outlines the marketing goals of the campaign. The report concludes with recommendations for future marketing strategies.

PROJECT COVER SHEET
Postgraduate Diploma in Digital and Social Media Marketing
Postgraduate Diploma in Luxury Services and Brand Management
Postgraduate Diploma in Fashion Marketing and Management
Name of Module : Luxury Marketing Strategies (Jul
y - October 2020 Term)
Project Title: Group C report
1)
2)
3)
Student’s Signature:
(Group Leader)
Student’s Declaration
The attached project is my own work, and has never been submitted for assessment on any ot
her course before. Proper reference has been made to all sources published or unpublished w
orks and the ideas of other persons.

Brand background
Founded by Thierry Hermès in 1837, Hermès is a French luxury brand which has bee
n specializing in artisanal leather goods, perfume, home furnishings, jewellery, accessories a
nd watches to serve the royal family and European noblemen since the 19th century. It origin
ally provided saddles, bridles and other leather riding gear to the noble before establishing i
ts first store in Paris. It also launched the beauty products which are lipsticks, lip balm, lip lin
er, brush and makeup accessories in 2020 with 3 colors of lipsticks as limited edition during
each season respectively in March and September. Its first shop is located in 24 Rue du Faub
ourg Saint-Honoré – 75008 Paris, France so its first regular lipstick collection consists of 24 c
olors.
As a long-lasting, family-run and independent brand, it has created many popular an
d classic items that keeps its customers waiting and extends the waitlist longer and longer to
wait for purchasing the leather goods such as ‘Kelly’ bag, a Sac à dépêches and ‘Birkin’. It is b
ecause it commits to maintaining the majority of limited hand-made production in France.
Today, it operates over 300 stores worldwide in 45 countries and an official online st
ore with 43 production sites and approximately 15,000 employees.
SWOT Analysis:
Strength

Hermes has a strong French brand legacy and markets its product globally with a net
work of 300+ exclusive stores, which 180+ are directly owned by the company (Gürel and Ta
t, 2017). Hermes features a wide range of products, i.e. men’s and women’s ready-to-wear,
furniture, jewelry, leather goods and saddlery, wallpaper, tableware, watches, petit and frag
rances.
The company also houses well-known designers throughout its history, including Lola
Prusac, Jacques Delahaye, Catherine de Karolyi, Monsieur Levaillant, Nicole de Vesian, Eric B
ergère, Claude Brouet, Tan Giudicelli, Marc Audibet, Mariot Chane, Bernard Sanz, Martin Ma
rgiela, Jean-Paul Gaultier etc and many more, all at the same time maintaining a consistent
brand image (Abdel-Basset, Mohamed and Smarandache, 2018). All Hermes products are st
andardized globally and neither launch region specific products nor on sale and discount, an
d Hermes does not encourage celebrity endorsement. Only very rich and A-listed celebrities
will get their most exclusive product.
The brand continues with strong social marketing activities like global donations, maintainin
g jobs and not needing government subsidies - Hermes has been consistently profitable eve
n in the context of covid-19. It has strong net income attributable to owners of the parent ,3
35 million Euro in the first half year of 2020 which is 56% dropped against the first half year
of 2019.
Weakness
A main complaint from consumers of Hermes is that the CRM program is not well-de
veloped. Sales people of the Hermes store are reported to make customers feel disrespecte
d with their attitude. i.e. Customers are kept waiting during payment progress although ther
e isn’t a line; and personal information recorded from the salespeople of customer’s purcha
ses are not ultised (Sarsby, 2016). More specifically, the salespeople fail to contact consume
rs immediately after the replenishment of their beloved items (i.e. lipsticks) even though the
y know and keep their preferences/ purchase history in the digital ‘black book’ for reference.
Not only so, Hermes’ exposure in e-commerce is relatively low compared to other luxury bra
nds (Binotto and et.al., 2016). The brand has made efforts by launching an online store and i
nstagram page, but it's still lacking in e-promotion as there is not an official Facebook, Twitte

r and Weibo page, which most luxury brands focus on now with Covid lockdowns.
Covid pandemic further brings out Hermes' issue of being over reliant on leather goo
ds. Owing to the concerns over public hygiene and safety, Hermes closed all production sites
and production lines in France under COVID-19 pandemic in March 2020. Since its leather go
ods are artisanal, customers are even required to wait for longer to purchase their beloved l
eather items. This implies that the revenue they could gain from the leather goods may not
rise and it would be even harder for them to survive under the outbreak of COVID-19.
Opportunities
In the context of pandemic, it causes the rent to have a significant decline in residen
tial and commercial properties in most counties. Hermès can consider enlarging, or opening
new shops in areas expensive in rent. Its shop in GuangZhou is currently renovated and enla
rged. Hermès also opened a new flagship shop in Sydney in June this year. Opening the new
stores in HaiNan Province is a wise decision in order to benefit from the new Free Tax Zone
policy in China.
Product wise, Hermes can tap into China and emerging Asian marketing i.e. Malaysia
Singapore with golf-related items, baby Hermes lines and high-end cosmetics products to in
crease the source of business. At the same time, Hermes can increase the investment on pe
tit-Hermès to expand their leather goods business.
To increase a short term turnover in securing new cash flow of the company in the gl
obal pandemic , Hermes can expand its choices on Secoo for a limited time as well, which als
o helps lead nurturing (Wongsunnopparat, 2018).
Threats
As a result of the LVMH hostile takeover, the said company owns nearly 22.3% of Her
mes. In an attempt to prevent the share percentage from rising, Hermes has created a separ
ate family holding that controls 50% of shares to ensure protection. However LVMH is still o
ne of their biggest competitors in the extremely saturated luxury fashion market, not to me
ntion Chanel, Gucci, Prada, Dior are also competing.

At the same time, the rise of high quality counterfeit products are also spreading glo
bally, especially in China. Which is bad news, as Hermes relies heavily on business from the
Chinese in this pandemic era as it is not as economically affected as other countries. Politics
continue to play a part in the China economy, if new rules apply i.e. anti-corruption, an inte
rnational conflict between countries to countries, it may further cause a significant drop-do
wn in business.
Lastly, use of animal’s skin damages the company's brand image over years. PETA ha
s been taking action against Hermes for many years. As the new generation of buyers becom
e more environmentally conscious, this would continue to take a toll on Hermes business.
BRAND PROBLEM
Aside from the general Covid-19 induced problems, the heart of Hermes is creating t
he most luxurious of luxuries. There should be an ambience of mysterious and exclusivity su
rrounding its products (Wilson and Robson, 2019). In a new digital age of social media, onlin
e shops, and reselling shops, the latest spending generation’s perception of luxuries is chang
ing. In the past, being able to buy an Hermes Birkin or Kelly was extremely hard, but now it’s
more about the purchaser’s spending ability than accessibility. Although with the current tr
ends such as Chanel, Dior, Gucci, LV have urged to put their products on a digital platform, d
oing so for Hermes would lose the exclusivity that Hermes handbags stand for.
As one of the few luxury brands that still rely heavily on their leather goods products,
Hermes products catalogue is meek in comparison to its competitors. Where many brands
now have forfeited endangered species leathers, Hermes' insistence to continue with specia
l leathers and unique furs can be off-putting for a generation that is becoming more and mo
re consciously aware (Manville, Matthias and Campbell, 2017).
BRAND DIRECTION
Hermès is widely recognized as one of the most luxurious brands in the world. Unsur
prisingly, heritage, authenticity and craftsmanship are the pillars of its brand strategy. Howe
ver, there are two aspects of Hermès’ positioning, which are truly unique: its equestrian root
s and its light-hearted approach.
Hermès, when communicating its brand, doesn’t seem to take itself too seriously co
mpared to other luxury brands. Christophe Lemaire, former artistic director, said: “At times i

t seems like the fashion and luxury world has become a little bit like a war [zone]. (Allan, 20
16) And Hermès doesn’t want to play that game.” The brand’s tone of voice is refreshingly li
ght-hearted: sometimes playful, and sometimes more whimsical and quirky, an interestingly
different approach to how they present their craftsmanship.
A brand change that Hermes has tried experimenting with is developing a lower line
of luxury, i.e. the new market of cosmetics. Hermes have dwelled in perfume goods previou
sly, but with 2019’s induction of Hermes Rouge, the brand is trying to reach consumers of a
younger spending market. However, there have been mixed reviews on the product quality,
which is a bad look for a brand that markets itself as the luxurious luxury.
Another strategy has been to expand the Hermes shopping experience such as the e
xperience shop in Meatpacking district in NYC with a cafe, and the three-storied-flagship sto
res in Hong Kong. Although one may have trouble finding and buying the most famous Birki
n or Kelly bag in the actual store, Hermes hopes to bring in traffic by upgrading their store lo
cation with better experience. As a region that spends heavily on leather goods, Asia specific
areas like Hong Kong are an important part of the plan.
Objective(s) of the marketing plan(s) - Craftsmanship workshop of Petit-h
MARKETING GOAL
 Bring in the younger market, increasing engagement, and to make use of the existing
CRM.
 Hermes legacy: A continued mission of luxury.
TARGET MARKET
This promotion is also for celebrating the 45 years anniversary of Hermes in Hong Ko
ng, and tourists are not able to come to Hong Kong in light of COVID-19. The target market
will only focus on people residing in Hong Kong.
Buyer Persona 1
Hermes existing customers and their family members, it can be their kids, boyfriends
or girlfriends and beloved friends. (Smolynets and et.al., 2016)
Buyer Persona 2
Age from 30s to 50s who work or live nearby Landmark Central
Buyer Persona 3

People who love hand craft products and are willing to learn how to make the uniqu
e leather products from the craftsmen of Petit-h.
MARKETING OBJECTIVES
400 to 450 guests joined the craftsmanship workshop of Petit h in November and De
cember through RSVP invitation sent by Hermes or Landmark and 50 unique leather pieces
made by the guests.
KPIs
 200 to 500 unique visitors look up the details of the event on Facebook, IG and Her
mes website each week.
 100 sign-ups each week from week 1 till the week before the event ends
 40 to 50 guests showed up each week
 4 to 8 new leads generated each week
 4 to 8 handicrafts products born each week
 Minimum 2 satisfaction survey received upon the session ends.
 Weekly measurement on social media presence, numbers of shares, like, #hashtag
After event:
 Gather customer event satisfaction reports.
Make adjustments accordingly to the event to improve satisfaction points.
 Gather Customer contact details during the report.
Those who came to the event are potential customers - assign specific SA to follow u
p on their visits and ask for their purchase preferences in Hermes.
 Check for media mentions from fashion bloggers and social media influencers, or eve
n online news outlets.
Review their experiences and make adjustments accordingly.
After the event, check the customer event satisfaction report for comparison.
Budgeting
 Basic costs will mostly come from relocating the Hermes craftsman from Paris to Hon
g Kong for those 2 months. Flights, accommodation, food, transport.

2 craftsman (to rotate) = approx 90K HKD in salary
Accomodation (2 guest) X 2 months = 20K HKD for Airbnb
Flight (2 craftsman) to and back = approx 10K HKD a medium priced airline
Food budget (2 craftsman) = 6K for eating out/groceries
 Guest costs will include small fingering foods and photography (polaroids to take ho
me as souvenirs)
Guest (maximum 4/session) X 3 sessions X 9 weekends = 108
108 x 200+ (food budget per person) = approx 30K max
Photography (2 per session * 3 sessions * 9 weekends) = 54 polaroids
60 polaroids = a pack of 10 (cost 60 * 6+2 for safety) = 480HKD
Photographer can be store staff = little to no additional cost
 Location + on event staff can be store staff = little to no additional cost
Extra money for lunch for event staff (2 staff): total 5K
 Cost of leather for the event = unneeded company asset re-used
Customer made Petitie H charms can be purchased by them if they want
Price of leather approx 50K (including shipping to HK)
 Total approx: 200K HKD budget for this event
ENVISIONED OUTCOMES
Change perceptions about Hermes attitude
Hermes is always being criticised for lack of respect for the customer and not engagi
ng enough to know what the customer wants (Gâdău, 2017). Through this event, it can sho
w initiation from Hermes in an attempt to get closer to its customers by sharing a ‘secret’ - t
heir unique craftsmanship.
Effective leads-nurturing
Through the event, Hermes can learn more about their customers by having them in
volved in the product design in the workshop. Hermes will have effective leads-nurturing fro
m the customers, and their respective friends and families as the guest they brought in may
have never used or purchased Hermes product before.
Social Media exposure

The campaign will also help to create buzz on the social media. Hermes is always lack
ing exposure on the internet. With Hermes branded elements such as small cookies and sna
cks during the event, it will urge attendees to post that they are in an exclusive event on soci
al media.
Excess leathers re-used (wasted company assets repurposed)
It is arguable that Hermes largely wasted the materials due to the process of quality
assurance. The company can make uses of its redundant materials in this event, producing
more easy-accessible products to customers. It could help to reduce the negative impact an
d increase sales of other than core leather products (Zhang and et.al.,2020).
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