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Company Profile Of Hennes Mauritz Marketing Essay

Paper Type: Free Essay Subject: Marketing
Wordcount: 5490 words Published: 1st Jan 2015

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1. Introduction

Let us imagine that we have gone back a decade in time. There is a woman in some part of the world flipping through the pages of a high-fashion magazine. The minute she opens the magazine she is bombarded by images of luxury goods. Luxury brand names like Versace, Chanel, Gucci and Christian Louboutin shout out to her. All she desires is to own at least one piece from these luxury fashion goods. Unfortunately, the woman earns a middling income and can only dream about owning a Versace dress or a pair of Christian Louboutin shoes. Luckily for her, in 2004 Hennes & Mauritz (H&M) came up with a brilliant collaboration which made all her dreams come true.

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For a long time access to luxury fashion goods had been limited to the elite classes. Since the 1990s there has been a boom in the luxury market because as times progressed traditional luxury brands such as Christian Dior started facing competition from emerging new luxury brands like Jimmy Choo. These new luxury brands brought in new branding and positioning strategies (Truong et al., 2009). The result of these strategies was the materialisation of ‘masstige brands’. Even though masstige brands are priced lower than super premium or traditional luxury brands, they still hold a place above conventional products and enjoy a high level of prestige (Silverstein et al, 2005).

In order to tackle competition faced from these masstige brands, certain traditional luxury brands took an unconventional step. In June 2004 Hennes & Mauritz (hereafter referred to as H&M) announced that they would be releasing a limited edition collection designed by none other than Karl Lagerfeld, chief designer of Chanel (H&M, 2004). With this step, H&M began a fresh trend of ‘co-branding’ in the fashion industry between high-street and luxury fashion brands. Since then H&M have undergone an annual collaboration project with some of the biggest names of luxury fashion, the latest being French label, Maison Martin Margiela. With H&M making continuous headlines in the fashion industry for its collaborations with luxury fashion brands, the need to study the science of co-branding, especially in fashion, is becoming vital. Thus, this dissertation aims at exploring and investigating the term ‘co-branding’ and the role it plays between high-street fashion and luxury fashion brands. As H&M are the contemporary of this trend in the fashion industry, the issues discussed in this dissertation will be mainly based on them.

1.1 Company Profile

Company name

H & M Hennes and Mauritz AB

Industry

Retailing

Sub Industry

Fashion (clothing, accessories)

Headquarters

Stockholm, Sweden

Employees

94,000

Key People

Founder: Erling Persson

Chairman: Stefan Persson

CEO/Managing Director: Karl-Johan Perrson

Table : Company Profile of Hennes & Mauritz (H&M, 2012a)H & M Hennes and Mauritz AB is a Swedish retail company, functioning in the clothing industry. The company is known for designing fast fashion i.e. chic styles at cheap prices. The first store was opened in Sweden in 1947 under the name ‘Hennes’, selling only women’s clothing. In 1968 the company bought Mauritz Widsforss, a hunting and fishing equipments store, changing the company name to Hennes & Mauritz. This was also the year the company started selling men’s and children’s clothing. Today, H&M have branched out into five independent brands which are globally recognised – H&M, COS, Monki, Weekday and Cheap Monday. Besides clothing, today the company also offers footwear, accessories, cosmetics and furniture. As of 2012, the company operates around 2600 stores across 44 countries. H&M’s top two competitors are Spanish fashion group Inditex (who own Zara and Bershka) and American retail giant The Gap, Inc. From 2004 H&M started collaborating with some of the biggest names in the luxury fashion industry, a tradition they have since followed every year. Besides H&M’s annual collaboration with some of the biggest luxury fashion houses, the company also has a long-standing tradition of getting together with super models and popular music artists to either design or be the faces of their seasonal collections and campaigns.

1.2 Problem Definition and Purpose

Co-branding is a relatively new concept in the field of marketing. The concept has been in practice for only the past few decades and the collaborations have often yielded mixed results. Co-branding has taken place in all sectors and industries from tobacco to automobile to retail to film-making to consumer goods. Co-branding is a moderately new term in the business vocabulary which is used to describe integrated marketing activities involving two or more brands (Blackett, Boad, 1999). It is important to analyse and understand the practice of co-branding as it has been gaining recognition in the recent years and can have a considerable impact on the future of branding. More and more consumer product manufacturers are becoming interested in co-branding strategies as it is a means to gain more exposure in the marketplace, fight competition and threats innovatively and at the same time share expensive promotional costs with a partner (Spethmann, Benezra, 1994). Co-branding gives companies a great opportunity to create something new, while sharing costs, and also provides them with an opportunity to present consumers with a market they may have not explored before. Besides undergoing classical brand extensions and other brand alliance strategies (like advertising alliances and dual branding), co-branding is a strategy which presents a brand an added method to differentiate themselves in a competitive environment (Helmig et al., 2008).

While co-branding in other sectors has returned mediocre results, co-branding in fashion has generally been extremely well appreciated. American discount retailer, Target, has often collaborated with designers such as Jason Wu, Issac Mizrahi and Neiman Markus, offering their designs for a slightly higher price than Target’s usual rate. These attempts have been very well received by the mass consumers. H&M, especially, have a high success rate when it comes to this business practice. More than 1000 people entered New York’s Fifth Avenue store in the first hour when Karl Lagerfeld, Chanel’s haute couture and ready-to-wear chief designer, created pieces for H&M (de Chernatony et al., 2011). Another example would be the success of H&M and American designer Stella McCartney coming together. Queues were reported outside several H&M stores all across the world, forming from the night before the collection was launched (Okonkwo, 2007).

However, as successful as H&M’s attempts at co-branding have been, this practice of luxury brands and high-street brands coming together has lead to a lot of debate and even criticism. According to the critiques, co-branding often hampers with the company’s original brand equity and confuses the consumer. Although the names of the brands that come together are familiar to the consumer, the actual co-branded product is completely new. Thus, unable to make out what to think of the new product, the consumer makes a judgement based on the known brand names involved (Washburn et al., 2000). There have also been questions raised regarding the effect of co-branding on the image of one or both of the parent brands. Some critiques believe that co-branding hampers the reputation of highly ranked brands.

There have been sufficient works as well as research conducted on co-branding which are available to us. Considerable research has been conducted on co-branding in the retail sector. However, there has not been much detailed research on co-branding specifically between high-street fashion brands and luxury fashion brands. There are questions still left unanswered in this particular area. Therefore, this dissertation aims to investigate and study the practice of co-branding in this particular field and hopes to give a better understanding of this phenomenon.

1.3 Research Objectives

Taking into account the purpose of this dissertation, the main research objective that this study will try to answer is:

Exploring and understanding co-branding between high-street and luxury fashion brands.

In order to help present relevant answers for this dissertation, the main research objective can be further divided into the following sub-objectives:

To understand why co-branding occurs between high-street fashion brands and luxury fashion brands

To analyse the perception of consumers regarding co-branding in the fashion industry

To analyse the effect of such a collaboration on the brand image and reputation of both parties involved

To understand whether co-branding between a high-street and a luxury brand can yield successful results

1.4 Relevance of the Research

The following section provides a justification about the relevancy of this study. Arguments for both, academic and practical, relevance are discussed.

1.4.1 Academic Relevance

This dissertation surely has academic relevance in today’s time. In order to study co-branding in the fashion industry, this study has merged various branches of marketing. Brand alliances, brand equity, brand leverage and consumer behaviour are combined and discussed together to help understand the phenomenon of co-branding. Although there is significant work already done on co-branding, only a few discuss the area in which co-branding has gained the most success – fashion. Thus, this dissertation tries to give a clear and more detailed explanation of why and how co-branding in fashion occurs and the effects it has on the consumer.

1.4.2 Practical Relevance

The practical relevance of this dissertation is also of significance. Co-branding is being frequently used as a strategy to stand out in a crowded market place (Dieleman, 2010). By understanding the science of co-branding, not just for general understanding, but especially for the fashion industry, more retail clothing brands can partake in it. By studying consumers’ perception towards the collaboration of high-street and luxury fashion brands, managers can decide on whether or not creating a co-branding strategy is the right approach for them. Managers can also have a better appreciation of the effects of co-branding on their brand equity and brand reputation.

1.5 Limitations

As mentioned in the company profile, H&M have also collaborated with popular music artists like Madonna and Kylie Minogue to conceptualise and be the faces of limited edition lines and collections. Also, the fast-fashion company has collaborated with Finnish textile company, Marimekko, in the past to use their fabric designs on their products (Wettergren, 2010). These celebrities and companies are also brands in their own; however, this dissertation will not be discussing them. Only H&M’s collaborations with luxury fashion brands will be taken into account. Thus, this dissertation only examines the relationship of a high-street and luxury brand, and not between other categories of brands.

This dissertation does not discuss the process of co-branding between H&M and the luxury brands, but the motive and effects of the collaborations. The questions this dissertation tries to answer are why co-branding occurs and what are the possible outcomes of it. How co-branding occurs is a question this study does not venture into. Also, this dissertation does not go too deeply into the marketing activities of the co-branded products and retail collections. Thus, answers to these questions will not be available in this study.

1.6 Structure

The following section of this dissertation talks about existing concepts, theories and research conducted that led to the formation of this study’s research question. The section is a review of existing literature as well as a presentation of the theoretical framework. Concepts such as brand management, co-branding, fashion marketing, co-branding strategies, fashion strategies and so on will be discussed. The third chapter talks about the methodology selected to conduct this research. The chapter talks about the justification of choosing the research method as well as the possible limitations of the same. Chapter four represents the findings of this research as well as gives a discussion for each of the findings. This chapter evaluates the relevant research findings for each of the research sub-objectives. The final chapter of this dissertation presents a general discussion of the entire study, highlighting the key areas and important research findings. At the end of the dissertation is a list of references; sources which helped with the research of this study as well as sources one can look into for the purpose of further reading.

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2. Literature Review

2.1 The Concept of Branding

Branding building is an important concept in the science of marketing and several definitions of this concept exist. The official definition of branding given to us by the American Marketing Association is that a brand is “a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.” This means that even though a product or service may satisfy the same need as another, a brand provides it with an element which differentiates it from other products or services of the same kind (Kotler, Keller, 2011). The process of brand building is imperative for almost all companies, products and services because building successful brands promises future income stream and profit. Brands help build consumer loyalty which means that consumers will keep coming back to buy the brands and will support them even during crisis situations (de Chernatony et al., 2011).

However, the profile of the consumer is changing from what it used to be. The market place is getting more and more crowded with the constant addition of new products and services. Not only does this mean that there is a lot of fierce competition, but also today’s consumer has a lot more choice than from a decade ago. Thus, it is extremely necessary to make one’s brand stand out. This is where the concept of brand management comes in. Appropriate and effective practise of brand management can lend a hand in leveraging a brand, which leads to the making of a successful brand. The concept of brand management was created by Procter & Gamble’s Neil McElroy (Harvard Business School, 2000). Effective brand management can lead to high brand equity. Brand equity is the additional value which products and services are seen to have, besides the functional value that they possess. This value is measured on the basis of what consumers feel and think about the brand as well as the market share and profitability that the brand enjoys (Keller, 2008; Aaker and Joachimsthaler, 2000; Aaker, 1996; Aaker, 1991). Proper practice of brand management can also do wonders for the brand image. Brand image is impression of the brand’s personality (real or imaginary) that has been developed in the consumer’s mind (Business Dictionary).

Various techniques can be applied under brand management in order to leverage a brand. One of these techniques is brand extension. Brand extension is a marketing strategy wherein a company uses a brand name which already exists in order to penetrate into a new, different product category than which it is established in (Swaminathan, 2003). A somewhat new development has been formed from brand extension in recent decades which is known as the process of co-branding.

2.2 Co-Branding

Co-branding is a brand leveraging technique where two or more brands, each having significant recognition in the eyes of the consumer, co-operatively come together to create “a single unique product” while retaining the names of all the brands involved (Blackett and Russell, 1999; Leuthesser et al., 2003). This term is also referred to as ‘brand alliance’ and ‘composite branding’. Co-branding provides marketers with the choice of opting for a short-term alliance, thus making it an attractive opportunity. It is not necessary for co-branding to be a long-term affair, as along other benefits, marketers are mainly looking for a quick sales boost (Spethmann and Benezra, 1994)

As discussed by Nunes et al. (2003), co-branding can be divided into four different types. They are as following:

Promotional/sponsorship co-branding – Here a company co-brands by being a part of an event’s activities so as to link its image to that particular event in the mind of the consumer.

Example: Conseco ‘the official financial services provider’ of NASCAR

Ingredient co-branding – In this type there is a primary brand, which acts as an important component of the secondary brand.

Example: Sony Vaio laptop with an Intel microprocessor

Value chain co-branding – Here two or more companies come together in order to create a brand new experience for the consumer to increase differentiation. It can be further divided into three types:

Product-service co-branding – Yahoo! and SBC Communications coming together to form SBC Global Networks

Supplier retailer co-branding – Architect Michael Grave creating a line of co-branded products specially for American retailer, Target

Alliance co-branding – Airline alliances such as Star Alliance and SkyTeam

Innovation based co-branding – In this type two or more companies come together in order to present a brand new product or offering, to increase customer value as well as corporate value.

Example: Boating shoe manufacturer Sperry Top-Sider collaborating with New Balance to create an ‘athletic boat shoe’

It is a known fact that brands play an important role in influencing culture in consumer societies. They not only satisfy one’s utilitarian needs, but also serve some hedonic purpose. It is not in the power of the marketer to create the hedonic value that the brands hold. It is only the consumer who is in control of the feelings and meanings associated with a particular brand. Thus, it is safe to say that a part of the brand’s equity is in hands of the consumers. Thus, the reason marketers decide on a co-branding strategy is to not only access the utilitarian benefit which a certain brand offers, but also to generate the hedonic value which the association with that brand would bring. There is a transfer of status, imagery and reputation of one brand to the other. Co-branding also reduces costs, as the R&D, production and marketing expenses get shared between the parent brands. Thus, co-branding is a quick way of improving all the aspects of marketing related issues (Askegaard and Bengtsson, 2005; Nunes et al., 2003).

There are also risks and disadvantages to co-branding. There is the risk of dilution, where a brand loses meaning for a consumer because of the co-branded product. There is a chance of a co-branding strategy resulting in a potential competitor. This happened when IMB partnered with Microsoft to develop DOS. Microsoft then had very low brand equity, but today they are a giant in the computer world. There is also the risk of devaluation. When aligning with a low valued brand, a high value brand may lose its reputation in front of the consumers. Co-branding may also limit a brand’s market reach as they might be targeting the same consumer group with the new product as well (Nunes et al., 2003; Leuthesser et al., 2003).

Many theories and research have been conducted on brand alliances and their possible spillover effects. One of the first ones was by Simonin and Ruth (1998). A study was conducted by them to evaluate the change in the attitude of consumers due to the spillover effects of co-branding. The results of that study have matched the results of many other newer studies conducted on brand alliances. Baumgarth (2004) created a brand alliance study, based on Simonin and Ruth’s study. The results of the study matched with the hypotheses presented by Simonin and Ruth. Baumgarth’s model added improvements by giving importance not only to the brand fit, but also to the prior attitudes consumers have towards the brands. In a study conducted by James et al. (2006), it was found that the personalities of the two brands involved have an impact on the perception of the consumers towards the co-branded product. Bouten et al. (2011) too conducted a study, basing it on the Simonin and Ruth paper. The result of their study was that a perfect fit of both, the brand image as well as the existing products of the parent brands is required for a successful brand alliance.

As brand alliances started getting popular, researchers started concentrating on the term ‘co-branding’. Abratt and Motlana (2002) devised a five-step brand transition process for companies who wanted to undertake co-branding. The process stresses on the importance of understanding consumer perception as well as the fit of the brands involved. The same result was seen in the strategic framework for co-branding created by Leuthessar et al. (2003) which would help marketers assess co-branding opportunities in order to leverage their brands. On the basis of this framework, possible co-branding can be assessed by the nature of the parent brands as well as their target audiences. Co-branding was slowly starting to be seen as an important marketing strategy. As a result of this, an ontology based co-branding strategy system, called OnCob, was created by Chang (2008). This system helps marketers and brand managers research the co-branding phenomenon based on the concepts of aim, category and effect. Co-branding was further researched by Chang (2009) to present a roadmap and guide for companies wanting to co-brand. Different industries were discussed wherein some results were successful, while some were a complete failure. Also, a co-branding matrix was presented, which gives researchers a better understanding of this emerging science.

The effects of co-branding on brand equity were studied by Washburn et al. (2000). The research results showed that co-branding is a win-win situation for both the brands involved, irrespective of their perceived brand value. When a high equity brand is paired with another high equity brand, the final co-branded product is perceived to have high value as well. Also, Washburn et al. found that in the case of a low equity-high equity brand pairing, it is the brand with a lower value that benefits the most from the co-branding, and although the positive effects might be less for the higher valued brand, co-branding does not have any negative effects on it. Motion et al. (2003) conducted a research on corporate co-branding and its effect on corporate brand equity. The research was conducted by studying the sponsorship of rugby team, All Blacks, by Adidas. The result of the study was that co-branding has a positive effect on the corporate brand equity, however as concluded by other studies, it is important that the parent brands have a common vision and similar brand values. Besharat (2010) undertook a study combining the strategies of co-branding and brand extension. A comparison between co-branding and brand extensions with respect to brand equity was carried out. The final result of the study matched the results of many previous studies i.e. the success of a co-branding strategy depends on the existing brand value of the parent brands. However, there was no significant difference between consumer perception of co-branded products or brand extensions. As long as the consumers saw a fit between the new products and the brand, they accept the new product positively.

A research was conducted by Thompson and Strutton (2012) to find out the effects of co-branding when one of the parent brand co-brands into a product category where it does not exist. However, the analysis showed that such an alliance is not likely to be successful. For a co-branding strategy to be successful, it is important for consumers to perceive a high level of fit between the brands involved. Another finding is that if a low value brand collaborates with a brand that is perceived highly in the eyes of the consumers, the co-branded product is likely to be viewed favourably. Thus, the brand fit plays an extremely important role in the success or failure of co-branding strategies.

Erevelles et al. (2008) conducted a study on ingredient co-branding in the B2B sector, an area which does not have much research done. The finding of the research is that ingredient co-branding occurs in B2B sector usually when there is a threat of entry from a more fiscally rich competitor. Thus, brands get into an ingredient co-branding strategy to block out this competition. Besides this, the secondary brand also has monetary benefits as the ingredient supplier provides their component at a reduced cost.

Askegaard and Bengtsson (2005) proposed the importance of cultural meaning in co-branding. Compared to the conventional approach to co-branding, their paper provides us with a new perspective. They suggested that each brand characterises certain symbolic and cultural meanings to the consumers, ones that may not be visible to us directly. The cultural meanings of the parent brands have a heavy influence on the meaning that the co-branded product represents. However, the interpretations provided by Askegaard and Bengtsson are far too imaginative and descriptive. No matter how creatively brand managers develop cultural meaning for a co-branded product, at the end it is only the consumer whose interpretation of brand image and meaning count.

2.3 Fashion

2.3.1 Luxury Fashion

Luxury brands consist of those products and services which are generally associated with the affluent and the elite class. The luxury fashion industry is a global multi-billion dollar sector. Hundreds of brands are a part of this industry, some of them being Louis Vuitton, Chanel and Prada. Besides being valuable, luxury brands are some of the most influential in the world. For luxury goods, branding plays an extremely important role and is the core competence. This sector places high importance on branding and marketing strategy development by the use of human emotions and psychology (Okonkwo, 2007)

Tynan et al. (2010) sought out to address the nature of the value of luxury brands and how value can be co-created. Instead of taking the more common managerial perspective, they took into account the perspective of the consumer. They developed a theoretical framework and researched case studies to find out what types of value consumers look for in luxury branded goods. The result was that although a utilitarian value was a must for all luxury goods, it was the hedonistic or symbolic value which acted as drivers for the purchase of a luxury good and was seen as the differentiating factor by the consumers.

Reddy et al. (2009) studied the prospect of brand extensions for a luxury brand. In order to do so, they fashioned a ‘Premium Adgency Grid’, which “measured the extent to which a particular brand extension matches up to the values embodied by the core brand”. The luxury brands were divided into the four quadrants of the grid – Star Brand, Aspiring Star Brand, Waning Star and Dying Star. With the help of this grid, marketers could measure their luxury brand’s brand adgency and then consider expansion opportunities and the possible risks.

A framework was created by Moore and Fionda (2009) illustrating the various dimensions of the luxury brand to guide its marketing in the fashion sector. Their model identified nine key components which were deemed important for the creation of a luxury brand. Each of the nine components included sub-categories, which according to them, must be consistent for the successful creation of the brand. All of these components must be managed simultaneously for the creation and maintenance of a successful luxury fashion brand position. Thus, the Moore and Fionda model states that the management of a luxury brand should be consistent and coherent. However, the case companies in this research were all British and thus, the results are geographically and culturally narrow. A cross-cultural investigation would have provided a firmer insight in the marketing of luxury fashion brands.

A five-factor model and brand luxury scale was designed by Vigneron and Johnson (2004) to provide luxury product marketers with an instrument to measure the amount of luxury a certain brand contains. According to Vigneron and Johnson, luxury is contained in brands in a matter of degree. Some brands have a very high level of luxury, while some very low. The brand-luxury scale helps measure the level on luxury in a given brand. The research found that luxury is a multidimensional factor and this can be proved by the five-factor model. These dimensions can be established and monitored by using the brand luxury scale in order to create a lasting luxury brand. However, Miller and Mills (2012) argue that more than anything else, it is the perception of brand leadership that counts. In order to attain clarity on the subject of luxury brand marketing, they developed a conceptual model – the Brand Luxury Model (BML). This findings of this model state that trendy, up-to-date and visionary brands and perceived to be more luxurious than brands that try to be unique, imaginative or original. The BML also showed that consumers perceive a match between themselves and the image of the luxury brand user’s with psychological or symbolic value. This finding is in sync with the research carried out by Liu et al. (2012)

Liu et al. (2012) explored the effect that the various concepts of self-congruity theory have on the consumer. Self congruity theory was developed by Sirgy (1986), which refers to the likeliness of a potential consumer to psychologically compare themselves with other objects and stimuli (brands in this case). This theory has been widely used to understand brand purchase behaviour (Sirgy, 1986). The three concepts studied by Liu et al. are Brand Personality Congruity, Brand User Imagery Congruity and Brand Usage Imagery Congruity. The relationship of these three types of self-congruity to the customer attitude and loyalty toward a luxury brand are studied in this paper. The study focuses on two brands – CK and Chanel – to understand the effect of a potential consumer’s self congruity in the purchasing of luxury brands. The study found that Brand User Imagery Congruity and Brand Usage Imagery Congruity are much stronger predictors of attitude and loyalty than Brand Personality Congruity in either of the brands. It was found that the consumer’s own self-image and perception of a typical user’s image as well as usage imagery play an important role in a consumer’s purchase intention and attitude towards a brand. The findings of this study were similar to the previous claims made by Sirgy et al. (1997), Liu et al. (2008) and Sotiropoulos (2003).

2.3.2 High-Street Fashion

High-street fashion describes the clothing retailers who cater to the mass-market. These retailers design and sell clothes which are affordable and are used for mass-consumption. The brands either have independent stores, franchises or are a part of chain stores. As the high-street fashion market started getting crowded with the introduction of more and more brands, competition started running high. In order to combat this competition, many of the high-street brands started the concept of ‘fast-fashion’. These are brands like Zara, H&M and Mango who create affordable, trendy and disposable items to cater to the consumers’ demands. Fast-fashion gives brands a competitive edge as they turn the latest runway designs to chic disposable clothes that the mass-market can afford (Tungate, 2008; Hines and Bruce; 2001).

Following the success of fast f

 

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