When quality loses its ability to justify price, the power of brand exclusivity takes its place. Sure, the quality of a $30 T-shirt is probably much better than the quality of a $3 T-shirt. And how about a 300-dollar one? It can’t be 10 times better, right? Today, we will make a brief case study taking a look at the unique Hermes Marketing strategy that made their famous Birkin Bag so desired that it is now an investment tool.
Apart from the price and in many cases, the quality, there is one key distinctive feature that differentiates luxury products from the rest.
After a certain price point, you are no longer buying a product. You are buying a brand. There are multiple reasons why you would spend money on a brand name:
- To represent your wealth status;
- To raise your self-esteem (think of the Maslow’s pyramid);
- Or just because you like their products, and you can afford it.
Anyways, people have different reasons to purchase luxury brands. Even if they know it’s not all about the price-quality ratio. And of course, we are not judging anyone here, just discussing a case.
When it comes to buying exclusive items or brands, you will be surprised (or not) to find out how much money people are willing to spend to obtain them. And what does a smart company do when there are customers ready to pay an incredible amount of money on something exclusive?
That’s right – they create exclusive products just for them!
Hermes Marketing Strategy
And that was precisely the exclusivity and scarcity strategy from Hermés and their one of a kind Birkin Bag. Which, by the way, has become one of the biggest symbols of wealth in modern society.
But before we dive into the Hermes Marketing strategy, let’s see a little overview of the brand:
Hermès Paris: a company founded in 1837
Hermès is a French high-fashion luxury goods company established in 1837. True to its traditional business model that rejects mass production, the brand is famous for its high-quality manufacturing performed by hand in specialized French workshops.
The company produces a variety of luxury goods categorized in 14 product divisions that include watches, fragrances, jewellery and ties. But today, we will focus on their famous purses, and no, not the ordinary ones (which, by the way, rarely drop below $5000) The exclusive ones that drive celebrities absolutely insane.
The Hermès Birkin bag – a symbol of wealth
The story of the famous Birkin bag can be tracked down to an iconic encounter back in 1983. When, reportedly, the chief executive of the company Jean-Louis Dumas was seated next to the actress Jane Birkin on a flight from Paris to London.
As she was trying to fit her travelling bag in the overhead department of the plane, it fell down, spilling its whole content around the seats. Later , Jane Birkin complained to Dumas that she was unable to find a comfortable leather bag she liked.
Which served him as an inspiration to design one especially for her.
Nowadays, the Birkin bag is a symbol of wealth, and is highly appreciated by many celebrities.
What makes the Birkin Bag so desired?
As we already mentioned, the most obvious aspect that represents wealth status is the price. But not the only one, of course. While a regular Hermès purse can cost you around $6,000, the simplest Birkin bag starts from $11,900! These costs depend on the type of leather and whether there were any exotic skins used in the process.
The most expensive Birkin ever sold was a rare Himalaya crocodile diamond bag. It was handmade from the skin of an albino crocodile, and had more than 240 diamonds on it. There are only a couple of these in the world, and this one was sold on an auction for the mind-blowing $379, 261!
Hermés produces only 1 or 2 Himalaya Birkins per year, making this model the most rare and desired one in the world.
Even if you have the money, you can’t just go to the shop and buy a Birkin bag. You need to have connections, or a history with the brand before purchasing from the Birkin collection.
So, if you have never bought any bag or another luxury item from Hermès, don’t even bother asking them for a Birkin. In many cases, you will have to wait to be offered the honour of buying this purse by the company itself.
In fact, for a long time, the bag was rumored to have a waiting list of up to 6 years! Would you wait 6 years for a purse?
Additionally, the bags are distributed to the boutiques of the brand in limited quantities and on unpredictable schedules. Which makes them even more mysterious and rare to the public eye.
The bags are handmade in France, and each one of them has the company’s signature saddled stitching as a symbol for exclusivity.
According to the purseblog.com, all brand’s purses and handbags, including the Birkin, are handmade by one artesan in a process that takes 48 hours. Despite the pressure for mass production and automatization, Hermès is still using its traditional production processes, which gives additional value to customers.
Okay, so far, so good! And now, back to discussing the Hermes Marketing strategy, what conclusions can we draw from Hermès and the Birkin bag?
Marketing lessons from Hermés
Let’s be honest. When it comes to their design, the Birkins are not the most jaw-dropping bags that you can find out there. Of course, it depends on the style of each person, but generally speaking, they have a pretty simple design. So what exactly makes them so special?
To make the right conclusions, let’s sum up the reasons for the popularity of the Birkin between celebrities and wealthy people:
- Brand reputation and history: the company was established 180 years ago, and it has managed to build up a solid and authentic reputation for itself;
- Craftmanship – handmade bags produced by artesans;
- Exclusivity – rare and unique bags that not everyone with money can afford;
- Price – that makes the Birkin a status of wealth for people.
Fun fact: Hermès Birkin bag is considered a solid investment tool, having increased in value by 500% over the 35 past years. According to Baghunter, an annual return on one of these goods is 14.2%, exceeding even gold on the scale.
The main reason why is because many people can’t buy the purse even if they have the money to pay the original price. Many people don’t want to purchase a lot of other, regular Hermés purses to be offered a Birkin one. Or simply don’t want to wait for an indefinite amount of time. This means that these purses are later sold on auctions or the so-called “black markets” for times the price.
So how would you apply all this information to your own business? Of course, if your strategy is based on low prices instead of differentiation, the following approaches might not work for you. But if you are in the high-end business, here are a few lessons that the Hermes Marketing strategy to learn from:
Lesson 1. The illusion of scarcity
It is a concept that creates additional perceived value for customers. When a product has the reputation of being scarce, people are willing to spend more money in order to be only one of the few who have it. Because it is so rare, it becomes more valuable as it is hard to get hold of.
Obviously, possessing a mass-produced item doesn’t give the same experience as a scarce luxury good. Especially if not many people have it, even among celebrities and wealthy people. So, if you are selling high-quality products and want to differentiate yourself, you can consider designing an exclusive collection or a product with a higher purchase barrier.
Or you could use the scarcity principle on your existing products by adding unique elements that make them rare and exclusive.
Lesson 2. Price justification
The next lesson we can learn from the Hermes Marketing approach is price justification. Remember, you can set any price on a product or a service as long as it is justified in the eyes of the customers.
Producing a regular bag or a pair of jeans and adding a 1000$ tag to it without the right branding will not make people go crazy by itself. Brand reputation and awareness is not something that you earn overnight. And, unless you are using extremely rare quality materials that no one else does, you will need to establish your company as an authority brand to justify prices.
Hermès justified their prices with a combination of factors such as history, reputation, exclusivity, exotic and rare materials. So, you will need to work on building your brand the right way in order to justify your prices. Not all companies that put high prices on their products are successful.
The Birkin bags that Hermés sells are not only unique compared to other purses on the market. They are unique even one from another. You see, when someone wants to purchase a Birkin, they cannot chose a model they like.
Instead, they are put on the waiting list, and the brand will send them a random purse once it’s ready from production. It can be any model – they can’t chose neither the colour nor the design. They can be sent anything, and it is completely out of their control!
This level of uniqueness gives even more value for Birkin bag owners. They know that there is only a limited number of their purses in the world, and not everyone is able to have the same model as them. So, you can differentiate yourself by creating a unique product that makes people feel special. Like being “the chosen ones!”
4. Relationship Marketing
According to various sources, the Hermes Marketing approach is something they call Anti-Marketing. In other words, they managed to build a $6 billion business without a marketing department as such. Which sounds incredible!
Which, of course, doesn’t mean that they aren’t doing anything Marketing-related. But instead, they focus on the so-called Relationship Marketing, or building a one-to-one, personal relationship with their customers.
This not only makes customers feel special, but inspire them to spread the word as they have been delighted by the way they have been treated. Which is definitely a win-win! So, a lesson I think we can all learn from is that customers, especially for high-end brands, want to feel unique and special. And Relationship Marketing is one of the most wholesome ways to do that.
And that was all from me for today, folks! I hope you enjoyed my article on the Hermes Marketing strategy, and I hope to see you in the next time! In the meantime, if you want to learn more from other successful brands, you might like reading:
And of course, if you have any questions, do not hesitate to let me know in the comments below!