Taciana da Cunha Rego (S00405179) Luxury Marketing (MKT 456)

Herms is known around the world for its premium leather products. The brand itself is synonymous with luxury and its classic designs are nothing short of iconic. With the effects of the recession looming, the notion of luxury in our society has changed radically. Experts on brand management like Jean Noel Kapferer (2009) have analysed the meaning of luxury in the 21st century, arguing that its meaning has become clouded in the marketing campaigns of high-street brands. There is a need to dispel the confusion surrounding luxury (Kapferer 2009, p.311). Herms is a prime example of a company that has carefully followed the principles of luxury brand management in its core company values, price points and products. Both its brand image and marketing strategy reflect its strict adherence to luxury strategy, which differs from traditional marketing strategy and supply and demand theory. The Herms shopping experience is unique and practically impossible to replicate due to a number of factors: restricted access, its ever increasing prices, which are almost never displayed on products, its long waiting lists and more importantly its heritage appeal. When the meaning of luxury is becoming increasingly diluted, Herms remains one of the few luxury brands that have successfully maintained its standards throughout its history if not redefined industry standards. Its brand message relies not only on luxury, but the exclusivity and uniqueness of its products, something which modern luxury brands like Versace and Dolce and Gabanna have steered away from with their younger diffusion lines. While the recession has hit the luxury market hard, Herms has resisted the temptation to chase younger audiences or change their traditional product mix. They are a number of reasons why Herms has remained top in the luxury stakes. Firstly, consumers show price insensitivity towards the brand. Profits have been on a rise of 49.5% for the first half of 2011 and CEO, Patrick Thomas, is very optimistic for 2012 even in mature markets such as Europe and US (Socha 2011). Price tags of 6000+ for a handbag do not seem to scare consumers even in face of a continuous economic crisis (Thomas 2010). This leads to the fact that being expensive has a positive impact on Herms brand image. Consumers associate the brand with an exclusive style of living and status. Additionally, the perceived price of a specific product does not play a very important part as a driver of purchase for the company. Essentially, Herms is considered a luxury brand due to its excellence and craftsmanship. With more and more luxury goods produced in China, Herms did not relocate its factories. It continues to produce all of its merchandise in France in order to maintain its status as an iconic brand, which is desired by all women around the world. Finally, Herms is a global brand operating in 49 countries which has expanded very successfully into Asia and the Americas in the last decade (Mintel 2011). Herms is considered one of the most, if not the most, expensive and exclusive of luxury brands. In order to compete in the global luxury market, Herms has adopted several of Kapferers (2009) antilaws of marketing to manage its brand, focusing on the importance of brand identity. Herms is concerned with brand identity as opposed to brand positioning. It has built its identity following the European model, with a culturally rooted brand identity mixing the French aristocracy and equestrian style. The products are functional but have an extremely high quality intended to last for years. When a consumer buys a Herms product, they buy a piece of this tradition that will last for a lifetime. This history has continued to inspire the brand over the years and has created an emotional connection with clients who dream about owning a Kelly or a Birkin bag. The brand is unique. It does not compare itself with others. It continues to strive for uniqueness amongst several luxury brands in the market (Santos 2011).

When analysing its advertisements, it becomes clear that Herms sells a dream, not a specific product. All the campaigns relate to the brands history which is intrinsically connected to horse riding and all the elite appeal that it evokes. Although the companys overall profit does not depend on saddlery products anymore, the simplicity, class and style that the sport has had over the centuries are permanently present in their campaigns (Diderich 2011). The company advertises for a very specific customer. Over the years, the brand became a synonym for classic and enduring products; it is not a trend driven brand. It is targeted to high-end fashion collectors and the advertisements portray this emotional bond that the brand has created over the years. Adding to the dream created by the accessories showcased in the advertisement, the Herms store serves as multi-sensorial experience giving clients a unique, tailored service. The company is known for its client focus, offering personalised and unique services that make clientele feel special and unique (Socha 2011). Herms was one of the first companies to create waiting lists for a product. The company simply does not comply with clients demands. Although in mature markets such as US and Europe the waiting lists and exclusivity have lost a bit of momentum, in emerging markets such as China and Brazil the companys appeal remains untouchable (Esmanhoto 2011). The demand for Birkins and Kellys is massive in such markets; however, in order to maintain its exclusivity, the brand maintains an extremely restricted access to the coveted pieces. There is very limited product offer and stock. All pieces are handmade and although the clientele requests more and more handbags each year, the brand resists their demands. According to Mireille Maury, MD of finance and administration, demand is much stronger still than the numbers we are publishing, and production capacities continue to fall short, namely on leather goods (Diderich 2011). Although the company intends to open two new leather goods factories in France in 2012 to increase production capabilities, it aims to continue having a very selective distribution chain and making it very hard for consumers to purchase its products. The company understands the fact that the greater the inaccessibility,the greater the desire (Kapferer 2009). Therefore, Herms also keeps the non-enthusiasts of the brand out. For a non-client, it is necessary to buy several other products in order to be granted with a waitlisted handbag. This goes against all the traditional laws of marketing, but at Herms, its a rule of thumb. The service is extremely exclusive for all established customers with special services and mailing lists that provide customers a VIP service that it would be very difficult for non-clients to receive the same kind of treatment. After the economic recession, apart from the special customer service, the brand has started to promote trunk shows, temporary stores and limited edition products as a way to boost store traffic. According to the Herms CEO, there are several events happening every day in a Herms store around the world, which includes art exhibitions, cocktail parties and product demonstrations relating to a specific product such as scarves or housewares. Patrick Thomas believes that this tactic is extremely important to make customers feel special; one-to-one services are the focus of the company since the recession (Socha 2009). One-to-one services also ensure Herms continues to remain at the top of the luxury stakes, differentiating it from competitors. While Herms continues to remain at the top of the luxury stakes, it cannot be underestimated the pressure of the economic crisis that started in 2008 on the brand. Luxury brands have felt the impact of the economic crisis (Socha 2011). Yet, instead of lowering prices, Herms keeps raising its prices yearly in order to increase demand. According to Kapferer (2009), it is vital for a luxury brand to 3

keep raising its prices continuously. Over the years consumers must continue to feel special and part of an exclusive group. A Birkin bag that in 2005 had a price tag of 4000, costs 6000 in 2011 (Santos 2011). Non-luxury brands often utilise skimming prices, but in the luxury world this can ruin a brand instantly. Herms remains one of the most expensive brands on nearly every product category, apart from scarves and ties, which represents the only entry items available to new and younger customers starting at 150. When entering international markets, the company modulates its pricing in accordance with local distribution costs. For this reason, usually, is more expensive to buy in emerging markets such as Brazil rather than in Europe or the US. Additionally, the brand refuses the temptation to follow the commercial strategies of Cavalli and Armani and create diffusion lines to court young audiences. It is vital for a brand to increase its brand awareness and attract new consumers; however, Herms follows a different strategy. The company prefers to have lower margins of profit and fewer consumers rather than expanding to more accessible lines and risking losing its status as the best of the best (Reddy and Ternblanche 2005) . The company tries to find novel ways to increase profit without compromising its brand identity. Herms has created a new brand in China, developing cheaper and accessible products to attend consumers needs, however, such brand wont have the Herms name or be in any way connected to the heritage that Herms has created over the years (FMag 2010). With competitors like LHMV, Gucci Group and Chanel (Interbrand 2008), Herms has enormous pressure to maintain its luxury status in such a fragmented market. The company is reluctant to rely on the internet to promote the brand, viewing it as a potential threat to the unique heritage Herms evokes. While the Herms website is well designed and functional at the same time, making it very easy to navigate and find information about the brand, it cannot be considered a substitute for the in-store experience (Yeung 2008). The store only sells select lower price products online in order to maintain its exclusivity. While online shopping definitely increases profit and brand awareness, the impact it has on the aura of exclusivity that the luxury market has led Herms to maintain a very restricted distribution. In addition to online shopping, social media has been intensely utilised as a communication tool amongst luxury brands and consumers. Several luxury fashion houses such as Chanel and Prada have Facebook and Twitter pages and update them daily. However, Herms utilises social media very carefully as it aims to maintain its exclusivity and believes that the brand image is not compatible with such novel marketing tools (Oknowo 2009). Only time will tell, if the brand is taking the right approach concerning social networks. Social media has become omnipresent amongst luxury brands, but very few studies have conclusively evaluated the potential of social media in the luxury market. It is still unclear if social media aids in the overall profit of luxury fashion houses (Colliander and Dahlen 2011). Few could argue that the internet has made luxury brands more accessible to consumers. Luxury brands have benefited from societys necessity of instant communication, reaching new and existing clients worldwide. Herms is not exempt from this trend. It has expanded internationally during the last two decades. Although its main markets continue to be the US and Europe, emerging BRIC (Brazil, Russia, India and China) markets are rapidly becoming as important as the matured ones (Esmanhoto 2011). Herms has replicated the same strategy it runs in Europe and US. The company essentially follows the anti-laws of marketing in order to preserve its brand identity worldwide. 4

When expanding to international markets, there is always the risk of brand identity being diluted or its message being untranslatable in other cultures. Herms has overcome such barriers as it seems the Herms appeal is international. The brand is recognised worldwide due to the fact that it utilises the same anti-laws of marketing it has used over the years in Europe, US and Japan. The company continues to manage its brand very successfully, making its appeal perennial in any market it enters. The risk of fakes, knock-offs and inspired high street imitations has led the company to enter in several judicial battles in order to counteract such practices. However, in an increasingly interconnected world, it is very hard to deter such practices. Its a risk that the company faces but a true Herms consumer would never acquire a counterfeit as they know luxury cannot be copied (Tu 2010).

The definition of luxury in the 21st century is a hot topic of debate among fashion insiders. The definition continues to evolve, reflecting changes not only in society, but also technology. The marketing strategy of Herms has not changed considerably over the years despite competitors increasing reliance on the internet and other social media tools. This constitutes its unique selling point as not only an exclusive brand, but also a mark of prestige, heritage and good taste. This will be the new standard of luxury in the 21st century. While the meaning of luxury has becomes diluted, heritage will increasingly play an important in role in conveying the essence of luxury in the decades to come. A Herms client is part of the family so to speak and its saddle making tradition. One cannot simply buy into the family. To be a Herms client, one has to earn the right to access its products. Adding to Kapferers debate on the meaning of luxury, it must be noted the value of a unique product and the importance of a one-to-one client focused service. Product and service are vital in maintaining Herms position in the luxury market. As the high-street increasingly seeks to imitate the marketing strategies of high end brands, it must continue to distinguish itself by offering services and luxury goods, which cannot be imitated, because of the long legacy of the brand. Although the recession, expansion and black market all pose threats to the brand identity of Herms, they also represent opportunities for Herms to reinstate its brand as timeless example of luxury and court younger audiences.

REFERENCES Colliander,J and Dahlen,M. (2011). Following the Fashionable Friend: The Power of Social Media. Journal of Advertising Research. 10 (1), 313-315 Concoran,C. (2010). Advertisers Go Social: Brand-Blogger Linkups Marketing's New Rage. WWD: Women's Wear Daily. 200 (43), 1-6. Diderich, J. (2011). Asia, Europe Drive Hermes Sales. WWD: Women's Wear Daily. 202 (95), 1-3. Esmanhoto, S. (2011). Brazil's Luxe Boom Gains Momentum.. WWD: Women's Wear Daily. 201 (2), 4. FMag. (2010). Hermes launches new brand in China. Available: http://uk.fashionmag.com/news124130-Hermes-launches-new-brand-in-China. Last accessed 21st December 2011 Gumbel, P. and Fortune, E. (2008), "Mass vs. Class", The Luxury Issue, vol. 156, no. 6, pp. 52-58. Interbrand Branding Studies. (2008). The Leading Luxury Brand 2008 [online] Available at: <http://www.interbrand.com/en/knowledge/branding-studies.aspx> Last accessed 3rd December 2011. Kapferer, J and Bastien, V. (2009). The specificity of luxury management: Turning marketing upside down. Palgrave Journals. 16 (5/6), 311-322. Mintel. (2011). Luxury Goods Retailing - Global - August 2011. Available: http://gmn.mintel.com/query/5845079/performance/market. Last accessed 3rd December 2011. Okonkwo,U. (2009). Sustaining the luxury brand on the Internet. Journal of Brand Management. 16 (1), 302310. Pfeifer, M and Zinbauer, M. (2010). Can Old Media Enhance New Media? Journal of Advertising Research. March (1), 42-46. Santos, J. (2011). Hermes . Available: http://jusantos.com.br/page/2/. Last accessed 21st December 2011. Socha, M. (2009). Fashion's Digital Wave: Brands Seek Control In Social Media Boom. WWD: Women's Wear Daily. 198 (123), 1-5. Socha, M. (2009). Powers of Persuasion: Europes Luxury Brands Try the Personal Touch. WWD: Women's Wear Daily. 197 (72), 1-5. Socha, M. (2011). Hermes Profit Surges. WWD: Women's Wear Daily. 202 (46), 3-11. Reddy, M. and N. Terblanche. 2005. How not to extend your luxury brand. Harvard Business Review 83(12):20-+. Taylor, D et al. (2011). Friends, Fans and Followers: Do Ads Work on Social Networks?. Journal of Marketing Research. March (10), 258-260. Thomas, D. (2010). BAG WARS. Newsweek. 156 (21), 42-45. 6

Tu, K. (2010). Counterfeit Fashion: The Interplay Between Copyright and Trademark Law in Original Fashion Designs and Designer Knockoffs. Texas Intellectual Property Law Journal. 18 (3), 419-449. Yeung, A. (2008). Adam Yeung on Hermes. Asias Media & Marketing Newspaper. 1 (August), 9.

Appendix 1 Hermes is considered one of the most luxurious and exclusive French high fashion house. It was established in 1837 as a saddler company and nowadays it specializes on leather, accessories, perfumery, ready-to-wear and lifestyle products such as housewares. Herms untouchable reputation for quality and classic design has led the brand to survive recession almost unscathed. The company has been developing new product lines which complement existing classic items rather than undertaking traditional brand extensions in order to preserve Herms brand image. Although it is very important to attract a younger clientele, the company has been very cautious in adhering to new marketing tools such as social media and online marketing. Herms has been growing very fast in BRIC markets and most of its profits is now coming from China (Mintel 2011). Appendix 2 The article will be submitted to the Journal of Fashion Marketing and Management which is published by the Emerald Group. The journals aim is to provide a forum for the publication of refereed, academic papers and more applied case study material in the fashion manufacture and retail sectors (Journal of Fashion Marketing and Management 2011). The journal presents the perfect platform to reach academic and industry readers interested in the fashion industry. The journal reviews trends in fashion trade, production and consumption in order to comprehend the issues that currently affect the retail industry.