MARKETING STRATEGY: How Hermès Sold a BAG for $300,000
This will change your perception of LUXURY MARKETING
Hermès International, sometimes also referred to as Hermès Paris or Hermès is a French luxury goods manufacturer. Hermès as a brand appreciates a famous status in the realm of extravagance. A combination of rich heritage, exquisite craftsmanship, and high levels of quality and professionalism throughout the entire manufacturing process gives Hermès a position of superiority in the world of luxury. The company produces various luxury goods categorized in 14 product divisions that include watches, fragrances, jewelry, ties, and leather bags. According to global brand valuation firm Interbrand, Hermès came in 28th amongst the Best Global Brands 2020 with a brand valuation of USD 18.0 billion.
Today, we will do a brief study investigating the novel Hermès Marketing system that made their famous Birkin Bag so wanted that it is presently considered an investment. But before that, let's see a little overview of the brand.
HERMÈS - 2 centuries-old Paris based company
Thierry Hermès founded the company in 1837 as a harness workshop in Paris. It is to date a family-run business. It started as a saddlery with its specialty of manufacturing specially designed bags to carry saddles and moved on to producing bridles and other leather riding gears for the European noblemen. Gradually, the company’s product offerings expanded through generations, still being true to its traditional business model that rejects mass production, producing high-quality products manufactured by hand in French workshops.
THE HERMÈS BIRKIN BAG - Iconic emblem that never fails to impress the riches
The story of the famous Birkin bag can be tracked down to an infamous encounter back in 1983. When, the CEO of the organization Jean-Louis Dumas was seated close to the actress Jane Birkin on a flight from Paris to London.
As she was trying to fit the bag on the overhead panel of the plane, it tumbled down, spilling its entire content around the seats. Later, Jane Birkin complained to Dumas that she was unable to find a comfortable leather bag that supports her needs as a young mother.
This served as an inspiration to Dumas to design a bag especially for her. He immediately sketched a supple and spacious rectangular holdall with a burnished flap and saddle stitching, with a dedicated space for baby bottles. That’s how THE BIRKIN bag was born.
These days, the Birkin bag is a symbol of wealth, and is highly appreciated by many celebrities and among the Affluent.
HERMÈS MARKETING STRATEGY
EXCLUSIVITY AND SCARCITY
Not everyone can own a BIRKIN
One of the most important strategies used by Hèrmes ever since the company started in the 19th century is branding their products EXCLUSIVE and creating an ILLUSION OF SCARCITY. Today, even if you have the money and are willing to spend 10,000- 20,000 dollars on a purse, you can not buy the Birkin bag. You need to have connections, or a history with the brand (preferably have purchased some of their classic high jewelry pieces) before purchasing from the Birkin collection. In many cases, you will have to wait to be offered the honor of buying this purse by the company itself. Some customers are kept on a waitlist for a Birkin/Kelly for over 6 years!
In Hermès stores there are very few colors kept in each model for the consumer to choose even if the consumer is willing to pay a grand for the product. In most cases, if it is your first time buying a Birkin, you might not get the color, shape, size, or even the leather you prefer.
Additionally, Hermès has always been a significant proponent and user of the “limited edition” strategy and also limits the distribution of its products in its stores and brings the stock at an unpredictable time which makes it pretty rare to public eyes. Hermès products also never are/have been offered on discounts.
So scarcity creates an additional perceived value for customers. When a product of high reputation isn’t easily attenable, people are willing to spend more money to be only one of the few who have it and it becomes more valuable. Some even consider buying a rare Birkin an investment, and according to TIMES MAGAZINE- “The Birkin bag outpaced both the S&P 500 and the price of gold in the last 35 years- a time period chosen to reflect the date when Birkin bags were first produced in 1981. They say that the annual return on a Birkin was 14.2%, compared to the S&P average of 8.7% a year and gold’s -1.5%”.
CRAFTSMANSHIP AND JUSTIFICATION OF PRICE
Hand made with exclusive leathers
It is known that every single Birkin is handmade by one Artisan in a process that takes 48 hours. For almost 3 centuries, it is following the same traditional production process while the whole world is ruled by mass production, high street fashion, and automation.
There is mandatory 2-year training for a craftsman before he or she can start working on putting together any leather product in the Hermès portfolio. Though the production line is slow, the company’s philosophy of SCARCITY and EXCLUSIVITY backs it up. Hermès’ leather goods division hires only 200 craftsmen a year. This practice has been in place across the company’s six generations of craftsmen. In addition, all new employees and artisans are carefully selected and go through a three-day in-house training session called “Inside the Orange Box” that traces the company’s origins back to its founders and the history of the development of each of its products categories.
Hermès makes sure every product that is created is of great quality, creativity, and uniqueness. The Birkin bags that Hermès sells are not only unique compared to other purses on the market. They are unique even one from another. Hence not everyone can have the same model and this makes people feel special- Like being “the chosen ones!”.
Somewhere in the middle of having a high demand for Birkin and producing less- with history, reputation, exclusivity, exotic and rare materials, Hermès is able to JUSTIFY THEIR PRICE in the eyes of the customers.
PERCEIVED ANCHORING EFFECT
Birkin and Kelly as an anchor
Hermès- The brand that sells a Kelly Rose gold bag for a cost of $2 Million, and an average Birkin bag for (at least) $10,000 is the same brand that sells Twillies and silk scarves for $150- $400. Here the popular Birkin and Kelly bags act as an anchor for the customers to purchase a scarf for $400 when it can be easily purchased for $10 in the market. These purchases bring in an attachment between the brand and the customers, and persuade them to purchase the brand’s high margin products for the very price tag set!
RELATIONSHIP MARKETING
The “anti-marketing” marketing scheme
Hermès does not look at celebrity endorsements as a brand-building tactic and has stayed away from this/any form of marketing, instead focuses on building a one-to-one, personal relationship with their customers. This not only makes customers feel special but inspires them to spread the word as they have been delighted by the way they have been treated. The very fact that only A-list celebrities and the ultra-wealthy can afford and get access to their most premium and exclusive products is an authentic endorsement of the brand.
Some even wonder by their claim to “ANTI-MARKETING”- they are really not marketing or even the claim as such is a tactic to improve sales and give a boost to the brand.
Hermès does focus on digital marketing though. It has its Podcasts and documentaries. This proves that it pays off huge for a company to embrace the power of digital media. It also has a newsletter that keeps its customers informed about the company and happening around the fashion world.
