Marketing Strategy H&M

Contents

1. Customers ........................................................................................................................................................ 2
1.1. Segmentation strategy ............................................................................................................................. 2
1.2. Targeting Strategy ..................................................................................................................................... 2
1.3. Positioning Strategy ................................................................................................................................... 2
2. Competitors .................................................................................................................................................... 3
2.1. Porter 5 Forces............................................................................................................................................ 3
2.2. Zara .............................................................................................................................................................. 3
2.3. Gap .............................................................................................................................................................. 3
3. Macro Environment ....................................................................................................................................... 4
3.1. PESTEL ........................................................................................................................................................... 4
4. Type of company ........................................................................................................................................... 4
4.1. Company lifecycle.................................................................................................................................... 4
4.2. Marketing Mix ............................................................................................................................................. 4
4.2.1. Product ................................................................................................................................................... 4
4.2.2. Price ......................................................................................................................................................... 5
4.2.3. Promotion ............................................................................................................................................... 5
4.2.4. Place ....................................................................................................................................................... 5
5. From …Now…To ............................................................................................................................................. 5
5.1. SWOT ............................................................................................................................................................ 5
5.2. Competetive Advantage Kottler ........................................................................................................... 6
5.3. Confrontation ............................................................................................................................................. 7
5.4. Porter Strategies ......................................................................................................................................... 7
5.5. Ansoff Strategy ........................................................................................................................................... 7
5.6. Marketing mix ............................................................................................................................................. 8
5.6.1. Mix 1 – Products and Services ............................................................................................................. 8
5.6.2. Mix 2 – Price............................................................................................................................................ 8
5.6.3. Mix 3 – Promotion .................................................................................................................................. 8
5.6.4. Mix 4 – Place/Process ........................................................................................................................... 8
5.6.5. Mix 5 – Presentation .............................................................................................................................. 8
5.6.6. Mix 6 – People ........................................................................................................................................ 8
1. Customers
The STP process demonstrates the links between an overall market and how a company chooses to compete in
that market.

1.1. Segmentation strategy

These are approaches to subdivision of a market or population into segments with defined similar characteristics.
Demographics and psychographic segmentation are used for H&M to reach all their customers. H&M is spread
throughout the world. This means that the company targets many religions, culture and lifestyle. Therefore, their
marketing has to be done differently in different areas.

1. Segments by class: H&M strategy is offering high fashion at low prices, typically targeting working class,
lower middle class and students.
2. Segments by class/home: The most popular segment is women aging between 15 and 30 years, either
still living at home, in student dorms, or in their first house in urban regions
3. Segments by age: The most popular segment is women aging between 15 and 30 years commonly
known as generation Y, ambitious with high buying power.
4. Segments by family life: Typical college to graduate females life at home single, on their own in dorms
or in their first home, either single or as a young couple without children.

Influences: Cultural, social, personal and psychological influences result in a lifestyle and personality. This group
is looking for affordable fashion and typically shop at more than one store. They are fashionable consumers who
see shopping as a social activity providing pleasure in their daily lives. They buy clothes each season, want to
follow trends and are very up-to-date. According to Maslow’s hierarchy of needs, they would fit perfectly in the
social part: belongingness/love.

Decision making: A consumer follows the "consumer decision-making process". step one on the process is to
recognize a need, step two (if needed) to search for internal or external additional information about the product
or service. Then the consumer evaluates the new information to make the decision to purchase, or not. In H&M's
case the typical costumers are following something similar to the decision making progress: "routine response
behavior". Which means the consumer is frequently buying a low-cost product or service with little search and
decision time. This process can be compared to the impulse shopping many H&M consumers do because of their
ongoing sales and over all low prices.

1.2. Targeting Strategy

The selection of potential customers to whom a business wishes to sell products or services. The target
customers of H&M belong to the group of fashionable and trendy consumers who see shopping as a social
activity provide pleasure in their daily life, who wants to follow the trends without investing a lot of money. The
target market for H&M is for younger people. Even though H&M offers clothing and accessories for all ages, their
target market is women. Women usually shop more for them, but also buy all their children's clothing and often
their husbands as well. With their low prices H&M targets woman in the lower middle class and working class,
this is a concentrated targeting strategy. Because their focus is to sell a fashionable product for a low price they
target married to single woman, mothers and daughters. Many single young women who always want to stay on
top of the fashion trends are constantly upgrading their closets with H&Ms new affordable items.

The consumers are not highly brand loyal; rather they shop at multiple retailers in search for the perfect fashion
pieces. They shop anywhere from four to six stores on average. Customer attractiveness is high, customer
loyalty is low. According to dancehall dilemma theory, these are targets for conversion, attractive enough to be
worth chasing.

1.3. Positioning Strategy

Is a marketing strategy that aims to make a brand occupy a distinct position, relative to competing brands, in the
mind of the customers. H&M is a retailer that is looking to provide consumers with fashionable, high-quality
clothing at the best price possible. They offer “fast-fashion” clothing, in other words from runway to racks in
record time, and sell European influenced clothing in the American market. Additionally, H&M carries clothing in a
variety of categories including women’s casual, men’s business, children’s wear, footwear and accessories. The
company is the second largest clothing retailer in the world, the largest in Europe and actively engages in E-
retailing. H&M is also economically, socially, and environmentally sustainable.
2. Competitors
Strategic technique used to evaluate outside competitors. The analysis seeks to identify weaknesses and
strengths that a company's competitors may have, and then use that information to improve efforts within the
company. An effective analysis will first obtain important information from competitors (and then based on this
information predict how the competitor will react under certain circumstances.)

2.1. Porter 5 Forces

Porter five forces derive five forces that determine the competitive intensity and therefore attractiveness of a
market.

Threat of New Entrants: The threat of new entrants is high. Entering the apparel industry does not require huge
capital investments and many individuals have the means to start a clothing line. In addition, there are many
manufacturing contractors available and this contributes to making the market more open to new entrants.

Bargaining Power of Suppliers: The bargaining power of suppliers is low because there are many suppliers with
little differentiation available. Increased globalization and thus international trade provides more options for
retailers to source from foreign manufacturers. Moreover, manufacturers from low wage countries, such as China
and India, face more competition.

Bargaining Power of Buyers: The bargaining power of buyers is high because there is an overabundance of
retailers in the market. Buyers have low switching costs as it is free to switch one’s purchasing preference from
one brand to another.

Threat of Substitutes: There are no direct substitutes for apparel, but there are substitutes to retail. Online stores
provide another channel in which apparel can be marketed and sold.

Intensity of Competitive Rivalry: Rivalry is high because there are a large number of similar retailers including
both large and small firms. Furthermore, slow growth resulting from the recession has decreased the level of
demand in the apparel industry intensifying competition.

2.2. Zara
A Spanish company specializing in disposable chic fashions that are here today and gone tomorrow. Located
mostly in Europe, the firm’s stores answer to popular trends by telling designers in Spain what customers are
asking for locally.

 Grown-up Eurochic
 Two weeks turnaround
 Fewer stores
 Own production facilities
 medium profit %

2.3. Gap
is known for providing jeans, khakis, and T-shirts. The firm built its iconic casual brand on basics for men,
women, and children, but over the years has expanded through the urban chic chain Banana Republic and ailing
budgeter Old Navy. All Gap clothing is private-label merchandise made exclusively for the company.

 Classic casuals
 Slow reaction time to changing trends
 Failure to attract young shoppers
 Never taken off abroad
 All basics at all price
 Nine month cycle
 Chronic overstock problem
 3000 stores
 low profit %
3. Macro Environment

3.1. PESTEL
PESTEL analysis is a framework to analyze and monitor the macro-environmental (external marketing
environment) factors that have an impact on an organization.

Political: Foreign exchange fluctuation, Taxes and quotas for non-European countries, Strict regulations where
production is located.

Economic: Global active company, Rising prices of raw materials, Weak economic conditions, Growing Asian
markets, Highly competitive sector, Rising labor cost in the far east countries

Social: Fast moving fashion trend, Changing demographic, Increasing going green consciousness, Price-
sensitive customers

Technological: Development towards more sustainability, Development of new recyclable fibers

Legal: Working conditions and wages at supplier factories, Legal regulations for chemicals in clothing,
Environmental regulations,

Environmental: Weather (short term), Climate change (long term), Long-term availability of natural resources
(cotton, water, etc), Chemical pollution (production and shipment), Use of recyclable fibers

4. Type of company
H&M is an apparel and accessory store founded in 1947 in Sweden known for offering the latest fashion trends.
H&M specializes in taking advantageof the season’s latest looks inspired by design houses around the world and
providing women, men, and children contemporary clothing styles at low prices.

4.1. Company lifecycle

Company Lifecycle is maturity Stage:

 Sales Peak Struggle to keep the sales up due to competition / price wars
 Cost Low per customer Reduce costs, supplier margin lowers. Focus on lean processes
 Profits High Focus lies on margin, therefore profits remain.
 Customers Majority Habit consumer, Consumer is well informed
 Competitors Stable Growing, due to the crisis price wars drive consumers into competitors arms

4.2. Marketing Mix

4.2.1. Product
H&M is classified as a brand that offers homogenous shopping products. This means that their consumers
purchase their products at H&M because of its pricing and features. Many consumers that shop at H&M get
attracted to purchase several items they didn't plan to get. The reason to that is the convenience of having all
departments in one retail store, which gives H&M a large Product mix width. Every department H&M offers have
various product lines to be able to attract as wide demographically as possible.

Since H&Ms focus is to sell good quality products inspired with the latest fashion, for a unbeatable price, they
always have new product lines coming up.

H&M is a retailer that is looking to provide consumers with fashionable, high-quality clothing at the best price
possible. They offer “fast-fashion” clothing, in other words from runway to racks in record time, and sell European
influenced clothing in the American market. Additionally, H&M carries clothing in a variety of categories including
women’s casual, men’s business, children’s wear, footwear and accessories.

Products and services have something called "product life cycle" which includes 4 stages- Introduction stage,
Growth stage, Maturity stage, and Decline stage. Since a product doesn't last forever it's important that company
stays on top of their innovations or development of their products and services. Marketing managers use this life
cycle to forecast the products future and develop a marketing strategy as effective as possible for that particular
product.

H&M has always something new coming up. But by being a clothing brand H&M doesn't have to focus on the
innovation of a whole new product. H&M's focus is on staying on top of the fashion trends.

In the fashion industry there is a fairly short product life cycle because trends and tastes change regularly. Once
fashion is introduced, there is a rapid growth stage and before it reaches maturity, sold at dump prices to make
space for the latest fashion

4.2.2. Price
The price strategy of H&M is designed based on their customers’ needs which is low price and high fashion. H&M
outsources the production to countries where the labor cost is much lower. To control transportation cost,
outsourcing was arranged according to different product. Those high fashion products which target at the
European market were produced in Turkey, because of the short product life cycle. In addition, basic products
are produced in Asia because they allow longer transportation time and bear lower risk. The company also
conduct strict cost control plan. For example, very few executives have secretaries or have cellphone privilege.
These two steps allow H&M to achieve a low price fashion business.

Although H&M’s low price is the foundation of success, I would argue that the low price also give H&M a image of
bad quality. This image hinders H&M from keeping their customers. When a young girl turns to a middle-aged
lady or a school girl becomes a office lady, H&M may not suits them. As a result, H&M face a challenge of
constantly attracting new customers. This challenge may calls for more cost in promotion.

4.2.3. Promotion
To develop an promotion strategy, a company should firstly identify and understand target audience. H&M’s
target customers are young women who want more fashion cloth at low price. Young people have plenty access
to information. A multi-channel promotion strategy including advertising, internet promotion, sales promotion was
adapted by H&M. These multi-channel strategy increases the exposure of H&M.

product of H&M is low price and high fashion which is based on their customer needs. The promotional actions of
H&M focus on the two features. It is easy to find the posters of H&M are in fashionable style and always with the
price of the clothes. On H&M’s website, price is put at obvious position. Although Zara and Gap, H&M’s main
competitors, put the price online, they usually put it small. On the contrary, advertising of H&M always highlights
the low price to build awareness of their low price.

H&M conducts an eye-catching event promotion which is to invite top fashion designer to design clothing for
them. This method is not only improve the product but also enhance the brand image to be more fashion and
upper-class.

4.2.4. Place
The features for H&M logistics are simplicity, reliability and transparency. H&M design clothes and outsource it.
Basic goods are made in Asia, while fashionable goods are made in Turkey. Instead of owning factories, H&M
chooses to own outlets. The realization of H&M’s business ideas rely on the success of their distribution strategy.
Lightning turnaround is the reason for the success of H&M.

H&M distribution channel is direct distribution, from producer to customers. By cutting middle transaction, it
reduces cost and assures quick delivery. H&M choose to sell clothes and cosmetics in around it’s stores. Store
selling, on one hand, assures basic access to customers and helps the command from headquarters go to outlets
efficiently and correctly. Because the inventory for H&M is refreshed every day, direct command is important for
correct adjustment in stores. On the other hand, controlling so many stores gives rise to the managerial cost.
Besides stores, H&M starts to launch online sale in several areas.

5. From …Now…To

5.1. SWOT
Strengths
  Leader in Global market (2nd)
 Leader in European market (1st)
 Affordable & high quality clothing
 Fast-fashion
 Throw-away fashion
 Strong presence in multiple markets (Women, Men, Kids…)
 Celebrity endorsements
 Strong social media presence
 Price does not affect quality
 Company website and blog
 E-retailing

Weaknesses

 Brand awareness of individual apparel brands sold in stores

 Brand Loyalty
 Customer retainment
 Fit is not consistent due to variety of manufacturers and supplies
 Customer service

Opportunities

 Promote current sustainability practices

 Increase word of mouth in both female & male audiences
 Online market including social media
 Mobile Marketing

Threats

 Primary competitors: The Gap, Zara

5.2. Competetive Advantage Kottler

Where to compete

 Core product: the basic offering

 Actual/ Expected: Additional benefits normally provided with the core offer
 Augmented: core product to which additional products and services may be added to generate multiple
revenue streams.
 Potential/ Intangible: Brand, image and perception
5.3. Confrontation

5.4. Porter Strategies

Porter’s four generic strategies are cost leadership, differentiation, low cost to narrow market strategy and niche
strategy. H&M has cost leadership strategy. H&M offers fashionable clothing for cheap prices selling to broad
markets. This strategy is also very suitable for the current economic situation. H&M with this strategy also set
high entry barriers for the competitors.

H&M has achieved ability to be efficient. As there is low profit margin being cost leader, H&M is very focused on
expansion and increase of market share. It is important for H&M to sell more volumes of the product to earn
profits. Fixed costs are high and by every product made variable costs are lowering. It has secured suppliers
because H&M doesn’t own factories itself but have long term production contracts with factories in Bangladesh,
Morocco and Turkey. It is very important buyer to textile sellers as H&M buys large quantities several times per
year. H&M has good long term contracts with its producers and suppliers.

5.5. Ansoff Strategy

To relate Ansoff with H&M we will start off with Market Penetration. H&M should encourage its current customers
to buy more. H&M should introduce new items frequently, which keeps customers coming back again and again
to check out the latest styles. It should have a unique selling point for its products which should differentiate it
products from some other competitive businesses such as Gap and Zara.

Competetive marketing strategy options. Existing products, existing markets call for market penetration or
expension strategy.

1. Improve cost position

2. Alternative emphases for differentiation
3. Focus on best customers
4. Strategically innovate to remain competetive
5.6. Marketing mix

5.6.1. Mix 1 – Products and Services

H&M’s target market believes that customer service is an incredibly important part of the shopping experience.
However, customer service through the use of employees can be very expensive. To keep employee costs low
and add the value of customer service, a loyalty program could be implemented. This loyalty program will consist
of consumer cards, point earning deals, and tiers. It will be an opt-in program and will protect consumer privacy
by keeping their shopping habits and information private.

Consumers will have the opportunity to sign up for an online profile on H&M’s website and through a mobile
application. Consumers will be asked to provide basic demographic information and to take simple style quizzes.
Previous purchase information will be available for the consumer’s use. Additionally, there will also be a link to an
optional survey where consumers can let H&M know about their shopping experiences and how H&M can
improve their next experience.

5.6.2. Mix 2 – Price

Superior Value is when the customer recognizes that you are offering a combination of quality, price and service
which is superior to your customers’ expectations and your competitors’ proposition.

In order to encourage consumers to shop more, the loyalty program will consist of four tiers that will be based on
spending habits. Once the consumer has reached the top tier they will receive a new card that will directly
indicate their H&M status. The consumer’s tier will be re-evaluated based 6 month periods to determine if they
should move tiers. Additionally, once the spending level has been met, they have to maintain this spending habit
to remain there. Kate Moss will gain 1% discount, Adriana Lima 2%, Miranda Kerr 3% and Gisele Bündchen 5%.
The cards are named after the top 4 Forbes 500 supermodels.

5.6.3. Mix 3 – Promotion

In order to engage the target audience H&M will develop a new page on the H&M website that will integrate
different social media channels. This new page will be called Community Forum and will be connected with
Twitter and Facebook. The creation of this webpage will initially be promoted on H&M’s social media channels
and company blog. There will be an open forum for consumers to talk about H&M clothing and accessories. In
order to create an exclusive community feel only H&M consumers with online profiles can access the content.
This will provide H&M with a channel that can be used to directly communicate with the target audience.

5.6.4. Mix 4 – Place/Process

The campaign will take place over the course of six months. The tactics implemented in this campaign have the
potential to remain permanent fixtures in H&M’s future marketing campaigns.

5.6.5. Mix 5 – Presentation

H&M will develop a new page on the H&M website that will integrate different social media channels. This new
page will be called Community Forum and will be connected with Twitter and Facebook.

5.6.6. Mix 6 – People