Business Marketing

Raw Material
When it comes to the world of marketing, it is important to know the demand of your product prior to launching the product. The demand for crocodile leather bags of Hermes is in very high demand. On average, Hermes is able to produce approximately 3,000 crocodile leather bags while it takes the skin of 3-4 crocodile to make one bag.  Currently Hermes is breeding their own crocodile in a farm in Australia. In order to prevent the expensive exotic skin from bites, these animals need to be kept separate from one another. The skin is a raw material which will be then go through several processes before becoming a component part.

Evaluation  Criteria includes  quality, service, and price.
Quality has always been a priority for Hermes and that is what stands out from the rest of other luxury brands. For example, in order to put together a bag, it takes a craftsman aka an artisan to do so as details are need to be extremely neat and accurate. Each stitches are done by hand. When it comes to service, every Hermes stores, have a specialist for certain product such as a silk specialist for their scarve line. Also you can your Hermes bag in any color possible because you can order i tot be made for you. You can also drop your bag off for a repair for discoloration or to fix other issues. That is what takes their service to the next level as other brands haven't able to do. On the other hand, the price point can perceive as expensive, but it depends on ones perception. The price is definitely well worth the quality that will last a very long time.

Developing and Managing Products

 Product stage of Hermes

When it comes to product life cycle of Hermes, it is difficult to determine unlike other high end luxury brands or products. Hermes products are known to be timeless with the quality that last forever.  That is why it worth every penny spent. For example, Birkin bags which first introduced to the market in 1982 after several decades later, the same leather bag is still in high demand. There are many factors that help determine where and which direction the product is heading. I have chosen to use Birkin bag as an example. The name Birkin is the last name of a British actress Jane Birkin

whom the bag was originally made to in the name of Hermes after he mentions about having to find a quality bag that could take care all of her needs to Jean Louise Dumas, Hermes Chief executive. During the introductory stage, the bag became famous because it was name after Jane Birkin as well as the fact that she would always walk around with it.  The growth stage is astonishing because they weren't able to keep up with the demand since the bag needs to be handmade one step at the time. Now the bag is in maturity stage as sales still increase at a decreasing rate because of the slow growth of our economy. 

Segmenting and Targeting Markets

Hermes has been known of it heritage for over 100 years. The main market of the company is focused on women' collections including bags, accessories, scarves, perfumes, shoes and jewelry. It has also creates collections for men and kids which have also been successful because people believe in its quality and how Hermes could give you a social status. The main target is women because women are majority of consumers. women make up more than 80% of consumer purchases. That when gender segmentation comes to play especially in a luxury market. Women always find ways to make themselves look better. After successfully conquered loyal women customer.

Hermes launches their men collections that includes suits, ties, shoes, belt, and perfumes to create a new market segmentation of its brand. The most recognizable products or best seller are ties, wallet, shoes, and belt. The Items mostly have Hermes logo on it and that gives away the price of the product when people see them. The upcoming Men's Fall collection 2015 will focus on polished mood with refined yet relaxed outfits mood. Their product are always made with the most extravagant materials such as; double faced cashmere, Scottish plaid madras, baby lamb glossy skin. This is what unique about Hermes besides everything is made by hands. Men customers do not only buy for themselves, but for their women as well. That is why they play a big role in Hermes marketing.
Geographic Segmentation
Hermes have 150 stores worldwide and 2 main stores in Manhattan which are located on Madison Ave and Broad St. in Financial district. Hermes chooses locations where high income individuals and families reside. Yet, these  stores are also nearby tourist attractions. With the high buying power, Hermes will able to sustain their expenses.

Marketing Communications

Competitive advantage of Hermes is the incredibly timeless products that are made with highest quality which also meant to use a lifetime. The right marketing channel is very important to the overall image of the brand. It takes decades to build reputation yet it takes tremendous effort to keep it. The way the brand communicate with its old and new customers is crucial when it comes to customer relationship as well as acquiring new customers. Most high end brands do not promote itself as their reputation comes from its true value of the products and services it's offering.
Hermes uses intergrated marketing communication by establishing a page on Facebook to connects with their younger customers. Customers can also view all of the products online. However, very few customer will make a purchase online because of its exclusiveness of the products. When the products are expensive, there are many decision making involve before making a purchase. For example, women would like to see how their purse would look when they handle it and how would the real material would feel in their hands. It is very important to physically touch and smell the products. Another example would be purchasing a perfume. the bottle might look attractive and give consumers temptation to buy. However, people would need to go into a store to smell because there is no other way for them to deliver the smell. For that reason, a store is an important channel to many brands to use a showroom for their customers to come, see, and touch the products.

Product Concepts

The goal of any brand is the differentiate their product from the rest of the market and that is when a unique product concepts comes in to play for Hermes in a luxury good world. Hermes has amazing done product line extension. From producing saddles from the beginning of the brand, now it has a variety of product lines from leather goods, perfumes,  accessories, bedding, decorative objects, clothing, and etc. 

Luxury goods are common known as specialty goods because they are not widely available and expensive. Hermes products are known to be made by hand with the highest quality, so there is no doubt that their goods will come with a hefty price tag. The most highly demanded product item is the Birkin bag with often comes in a variety of color and exotic materials. Here are a few examples; 

Besides all the fancy bags, Hermes also have a product mix that serve their Hermes loyalty in everyway.  For a few, luxury is a lifestyle and some like to show their brand loyalty by using different kind of products their favorite brands have to offer. Luxury defines social status. It provides a reference of a good taste. These following products are custom made and not available in store as there is not enough demand in the market. 

Porceline

It is going to be an expensive game.

While I think Hermes also has a very selection of shopping products that include watches, jewelry, perfumes, and scarves. They are still expensive compare to other brands, but affordable compare to other product on their product mix.

The logo of Hermes was first designed and introduced in 1950's. It compromises of a Duc carriage which is attached to the horse to symbolize the origin of the company of a horse saddles manufacturer. The orange color gives its unique and edgy style to the brand.  Their advertisements are often display in French to highlight the origin of the company and its authenticity.  

Personal Selling and Sales Management

Hermes is highly respected luxury brand and has a rich heritage which lives up to their mission statements. They always strive to excellence and perfection to exceed customer satisfaction.
Personal selling is very important to Hermes because the brand and the product have a high value as well as custom made and hand made. It is a neigh market compares to other commodities. For that reason, the brand isn't highly advertised or ever consider sales because it will decrease the value of the brand. Customers have guarantee of quality, caftmanship,  timeless design, and rarity.

Inside an Hermes, there are personal shoppers or stylists who will guide and help you find the right product for you though the store. They will walk right beside you and answer any questions you may have regarding the products. These sale associates are highly trained to be knowledgeable of all the products in the store, so they are not hesitant to answer any questions.  They are close to brand consultant. However, to keep their customers engage and involve, they post latest campaign on their social media such as Facebook and instragram. Many celebrities post their photos wearing Hermes clothes as well as handling their famous Birkin bags. It although doesn't sell the product but helps expose the products to wider group of people regardless of age, sex or race.

Her's sale philosophy is beyond making the highest sales unit, but making sure that customers satisfaction is their priority in order to maintain a priceless relationship with them. In addition, to every purchases, Hermes packs their goods in a delicate high quality dust bag which is put inside an iconic orange Hermes box again. Then lastly tied with an Hermes printed ribbon. Although I do not see that it adds value to the good but it well compliments the product itself. It reminds customers that they treat their products with care as well as their customers.

Advertising, Public Relations and Sales Promotion

Hermes is known for every luxury goods they make from handbags, scarves, clothes, accessories, shoes, and etc. When it comes to advertising, it is very important to them to to close the medium and accurately go through media planning in order to accomplish a successful ad campaign that deliver the message. There is a ad campaign of Hermes back in 2008 that could still remember till today because of its extravagant. In my opinion, the elephant is a sign of power. The colors are miraculous beautiful on the pain black skin of the animal. It also show feminism because of the tone of the color and the designs on the elephant. 

Hermes Ads are targeted current consumers and new consumers. Advertisting can be found in high ends fashion magazine that only target toward consumers who have more purchasing power. Ads are on the site as well as their Facebook page. Sales promotion, rebate,and coupon have never been a strategy for Hermes to reach out for their customers because its value is beyond the number of units being sold. In addition, they also have video of different ads  to reach out their customers. When it comes to royalty marketing program, Hermes does it by never lower their band products quality and that's what keep their customers coming back through generation. It is also easier to acquire customers when the satisfaction is proven through generation

Marketing Channels and Retailing

As an exclusive retailer, Hermes, only has limited number of their retail shops which is known as exclusive distribution. However, the shop doesn't just offer typical retail services. Hermes hire employees who are specialized in certain products. For example, if there is a scarves collection in the shop, there would also be a silk specialized since their scarves are made from silk. Having a specialist is very vital to the retail as their clients are spending a lot of money on each product. It is important to ensure customer satisfaction of the product by helping or suggesting colors, sizes, or styles that will suit each clients perfectly. They are also known as personnel. Retailing is not only of Hermes marketing channel, the other is their site which you you possibly buy every product except the Birkin and Kelly bags which needs to be purchase in store only.  As an exclusive retailer, the service is expected to be as high as the price as well as the quality of the product. Location is crucial which leads to demand in high gross margin to pay their highly trained associates, the rent, and everything else. It runs as a specialty store. Different locations are targeted toward different target market. Every Hermes store are located in a highly expensive area which also attracts both tourists and locals.

When it comes to choosing the retailing mix.
The products are everything of the brands. Hermes have expanded their products line from casual to high end clothing, sport clothing, jewelry, saddles equipment, travel luggages, watches, leather goods, furniture, tableware, bedding and decorative objects. Their online channel seems to offer the most of Hermes, while the store still keeping their exclusiveness to carry certain products. The presentation of the display in the store represent a timeless fashion with bright colors. The store rather on the spacious side. All of the associate are in business attire. The store I went to was on Board st/ Wall st. in Financial district. Beside the website and the store, Hermes also have two application on iPhone that are for scarves and tie. One is called Hermes Silk Knots which shows their clients different style they can do with their scarves. The other is called Hermes Tie Break which help their clients take a break from their reality of office, airport, and etc to play a game and discover as well as master the art of tying a tie. I find it to be very interesting for them to launch an game application as they mightbe trying to connect with younger target market.

Consumer Decision Making

There is always something that drive us to purchase something whether it is necessary or not.

Consumer decision making is very crucial to the brand's marketing. We buy products for various reasons. There are 9 reasons that make consumers choose Hermes Birkin bag:

1 Quality over quantity, nobody in the market makes bags by hand like Hermes and that says everything about the brand and the quality of the bag itself.  Every bags are a piece of art which are handcrafted by Parisian artisans. 2. Many designers sell expensive bags, but does it really expensive nor look expensive? 3. Owning a Birkin doesn't only mean that you have a good taste, but it also shows status. There is no need to impress people because the bag will do it. 4 Color is the key. Dying leather is a very tricky process because the color often fades quickly when being uses a lot. Hermes has bags in every color including rainbow and they do it very well in getting the right shade. 5. Versatilities is the key to the Birkin bag. It can be use from a very casual event to a highly formal events. The brand also offer variety of products from clothing to accessory to housewares. 6. Hermes can also customized your bag with possibly any materials from gold to diamonds. 7. When there's a major buy, there has to be trust with whom you are buying. Hermes is one of the few independent company that is still own and run by family. 8. Hermes doesn't beg celebrities to carry their bags around because every bags deserve a respect. 9. Every handbags hold its value which means that it can be sold with a higher or similar price. Hermes offer a spa service to their Hermes loyalty to repair their bags to as close as new as possible. I think these reasons give consumers enough knowledge of why people are willing to drop a huge chunck of their money for a bag at an Hermes store as well as everything else. There will be a lot of people who will doubt buying Hermes products because of its hefty price tag. It is part of financial risk that they will need to make just like everything else they buy. I believe that everything we buy is an investment, so choosing wisely is the key to success to in managing money no matter how much you have

Developing a Global Vision

Hermes International SCA is presented in Europe, America, and Asia through its exclusive retail shops. The company operates through numerous subsidiaries, such as Castille Investissements, Maroquinerie des Ardennes, Holding Textile Hermes, Hermes Canada, Hermes Istanbul, ERM WHG Warenhandels Gmbh and Hermes GmbH, and Manufacture des Haute Maroquinerie. Though profits last year jumped 64% to €5.65 billion from €3.44 billion last year, they were buoyed by a capital gain linked to its decision to relinquish its 23% interest in rival Hermès International SCA to shareholders. Overall, business is improving, the company said. Fourth-quarter sales grew 10% as the U.S. market gained pace and as European sales improved late in the period.


Hermes achieved its 2014 sales target and is looking to expand in Germany through bigger stores in cities where it already has shops, an executive was quoted as saying by a German paper.
However, Hermes expects sales growth to slow in this year, a sign that weakness in China’s market for high-end goods is now hitting the pinnacle of the luxury business. It expects revenue to grow 8%, decelerating from an 11% increase last year, citing “economic, geopolitical and monetary uncertainties over the world.” Year-on-year, sales in Asia outside Japan grew 8.9% in the fourth quarter. Watch sales, which fell globally by 13% at constant exchange rates in the quarter, were particularly hard hit in China, the company said. Not only Hermes sale has dropped in China, other luxury goods and premium liquor and spirits have also affected from the crack down in Beijing on corruption and luxury spending among public officials.  

The Marketing Environment

Hermes products are targeted to men and women with an exceptional taste. Not only Hermes has emerged as the most ascendant company in the $300 billion luxury market, Forbes also listed this 177 years old company as the world's 13th most innovative public company. Hermes is definitely focusing on their marketing in the new up and coming market in China as they have the most buying power.

Victoria Beckham with her Kelly bag

Victoria Beckham with her Birkin bag

Kim Kadashain with her Birkin bag

Marketing Environment Factors

Hermes has always postponed itself as a brand with strong heritage through the long history if its family which is still own and operate the company today.
Its marketing strategy is to be a unique and highly exclusive luxury brand, so mass production is not the key. As well as it only targets elites and affluent consumers who can afford their product and appreciate the luxury. According to their pricing strategy, it limits access to the brand following specific association with product characteristics. For these reasons, Hermes is not available to every market channels to maintain its exclusivity. Although it offers online retails, but exclusive products such as Kelly and Birkin bags are only available in the stores because they need to be preorder.

In 2013, Hermes Sport Life Clothes with a premium luxury goods to show their consumers that they can also look elegant and stylish while playing sports. Hermes also seeks younger consumer through social media like Facebook by posting videos of new collections, commercials, and related events. Hermes also achieves to reach young segment with contemporary comfortable collection for everyday use.

Ethics & Social Responsibility

Luxury and Sustainability seem to be the opposite words, but I think we can all agree that it feels good to be able to give back to the society in any which way we possibly could.  Some people are even willing to switch brands to the one that gives back. 

I believer that the values luxury brand like Hermes stand for align perfectly with green practices as it focuses on timelessness, durability, innovation, and fine craftsmanship. These are all of the characteristics that mirror the underlying goals of sustainability and social responsibility.

Birkin 

Its timelessness is what makes the Birkin bag sustainable because its durable and long lasting quality. Besides the quality of the bag itself, Hermes also offers spa package to the bag such as repairing minor scratches and etc that even helps the bag last longer. Uniqueness of the craftsmanship is the soul to the bag and the brand.

In addition, Birkin bags are handcrafted in Hermes factory in Paris, France which also known as their original workshop. In a month, the shop is expected to produced 15 crafted bags. For these reasons, it is able to reduce carbon footprints unlike mass production of other brands which cause global warming and other environmental issues. I believe that anything that we buy is an investment. Although the bag comes with a hefty price tag but it is truly worth the quality. There is no question asked that we all want a product that can last a life time. That's why sustainable products are very important. 

Here's the inside of the Hermes factory and part of the making Birkin bags:

According to the Guardian, slow fashion is the heart of the brand ethos which also known as sustainability and durability. Although, Birkin bags are inaccessible to the majority of people, it is very interesting to see that their profit has only been higher in the recent years. To sum up, quality is the true value of any products. The idea of luxury goes beyond price tag as it also symbolizes social status and personality of the owner of the product.

Strategic Planning for Competitive Advantage

Hermes is a French luxury brand which has been established since 1978. It has carried the craftsmanship of the family's philosophy until today. It is one of the oldest family owned and controlled companies in France. A desire of excellence in the highest quality that a client deserves has never faded as time changes. Their products focus on the beauty of precision and timelessness as well as letting the materials express their best quality through the design and cutting. “Every Hermès object has to be perfectly done and in the best material and in the best way, that’s a matter of fact for us, a basic standard. If it’s saddle, it has to be the perfect saddle, and the same goes for every other category,” explains Hardy, a creative director of Hermes fine jewelry division.

Hermes definitely has a unique brand history that enable to maintain a clear competitive edge over other brands in its niche as luxury goods. Birkin is one of the most popular collection of Hermes. The idea of the bag starts back in 1981 when the chief executive of Hermes, Jean Louise Dumus, was seated next to Jane Birkin, a British actress, during a flight from Paris to London. Barkin explained to Dumas how it has been hard to find a leather bang that not only fits her needs but as well as the style and color. For these reason, the first Birkin bag was created for Jane Birkin 1984 it has become famous sine then. To sum up, understanding your customer needs is the most important key to win your competitors. 

In 2013, Hermes has total revenue of $5.2 billion with has increase by 13% from 2012. The company is continue to grow quickly in Chinese market while other luxury brands like Louise Vuitton and Gucci sales have dropped. A currently economy gives luxury products advantage to grow significantly in a specific region, Asia. As one of the most powerful luxury brand in the world, Hermes was given an opportunity as the increase of demand in luxury products grow in countries like China and South Korea which have recently played a big role in global economy. 

Although the demand is high, their Birkin bag is far from accessible to most people as a result of its heavy price tag. Crocodile Birkin bags can retail for $60,000 in Hermès stores; leather Birkin bags for about $10,000. It has also become a social status to celebrities, socialites, and entrepreneurs. Lastly, Hermes has built termendous values in its brand and products that I have never seen any brand has done before.

Brief History and Mission Statement

Hermès is a French manufacturer established in 1837, today specializing in leather, lifestyle accessories, perfumery, luxury goods and ready-to-wewar. Its logo, since the 1950s, is of a Duc carriage with horse.

Thierry Hermès (1801–1878) was born in Krefeld (Germany) to a French father and a German mother. The family moved to France in 1828. In 1837, Thierry Hermès first established Hermès as a harness workshop in the Grands Boulevards quarter of Paris, dedicated to serving European noblemen. He created high-quality wrought harnesses and bridles for the carriage trade, winning several awards including the first prize in its class in 1855 and again in 1867 at the Expositions Universelles in Paris.

Hermès Frères advertisement, 1923

Hermès's son, Charles-Émile Hermès (1835–1919), took over management from his father and moved the shop in 1880 to 24 rue du Faubourg Saint-Honoré where it remains to this day. With the help of his sons Adolphe and Émile-Maurice, Charles-Émile introduced sadderly and started selling his products retail. The company catered to the élite of Europe, North Africa, Russia, Asia, and the Americas. In 1900, the firm offered the Haut à Courroies bag, specially designed for riders to carry their saddles with 

them.

The Hermès scarves became integrated into French culture. In 1938, the Chaîne d'ancre bracelet and the riding jacket and outfit joined the classic collection. By this point, the company's designers began to draw inspirations from paintings, books, and objets d'art.

The Birkin, another famous Hermès handbag was named after English actress,Jane Birkin,who lives in France. After a chance encounter with Jean-Louis Dumas, she complained that her "Kelly" bag was not practical for everyday use. Consequently, he invited her to France where they co-designed the bag. 

The fashion label being based on the concept of “quality over quantity” is one of main reasons that Hermès has been so successful.