Price strategy marketing mix of H and M

The price strategy of H&M is designed based on their customers needs which is low price and high fashion. In fact, this is the one of the biggest challenges for H&M. If not making this happen, the special feature of H&M cannot be realized. How could they combine fashion and cheapness? This objective was achieved by two steps: first, H&M outsources the production to countries where the labour cost is much lower. To control transportation cost, outsourcing was arranged according to different product. Those high fashion product which target at the European market were produced in Turkey, because of the short product life cycle. In addition, basic product are produced in Asia because they allow longer transportation time and bear lower risk. Second, the company also conduct strict cost control plan. For example,very few executives have secretaries or have cellphone priviledge(Jobber, 2007). 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.

Promotion

To develop an promotion strategy, a company should firstly identify and understand target audience. (Jobber, 2007). 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.

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Further more, H&M’s promotion strategy is highly consistent with their whole marketing strategy. According to Jobber (2007), promotion is one element of marketing mix, so it should comply with the whole marketing mix. The 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.

Third, H&M conducts an eye-catching event promotion which is to invite top fashion designer to design clothing for them, or cooperate with other companise from other fields, for example computer games or automobile company. H&M has invited Karl Lagerfeld in 2004, Stella McCartney in 2005, and cooperated with Sims 2 in 2007. During the cooperation, mass advertisements, abundant propaganda were utilised to generate public awareness. This method not only improve the product but also enhance the brand image to be more fashion and upper-class. And this cooperation again echoed the concept of fashion and quality. Cooperation with other companies from different fields can attract customers form different groups. For example, the game developed by Sims and H&M spread the reputation of H&M among people who are game players.

At last, the promotion activities of H&M reveal a high ability of quick response and overall consideration. Because H&M outsource their production in order to cut cost, they are criticized for squeezing workers’ payment. According to this criticism, H&M takes a series of action to respond. They appoint watchdog to look after the working condition, and conduct protection for environment to raise brand image. Those promotion activities are generated through interaction with customer or the entire society rather than just came up by themselves. So those approaches serve for different purposes.

Place

The features for H&M logistics are simplicity, reliability and transparency(H&M, 2010). 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. There are over 2000 stores all over the world. Merchandise produced in Asia are transported almost exclusively by ocean for the sake of low cost. Within Europe,most of the goods are transported by rail. More than 90 percent of all transports are done via ocean, rail or road. Air is rarely used except faster deliveries are needed. The aim of these choices are to reduce cost. The realization of H&M’s business ideas rely on the success of their distribution strategy. As Larenaudie(2004) asserts 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, which echoes the concept of fastness and economy. Jobber(2007) suggested that channel selection is affected by producer, product and competitive factors. H&M choose to sell clothes and cosmetics in around 2,000 stores which belong to H&M. 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 everyday(H&M website, 2010), direct command is important for correct adjustment in more than two thousand 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. It was suggested that well-known fashion retailers have advantages of their brand to attract customers(Marciniak and Bruce, 2004). Therefore it is beneficial to take the initiative to launch online shop. And This step could satisfy online customers and complement the shortcomings of store sale.

The obstruction of marketing mix to H&M

Although marketing mix provide a basic and useful framework, it is still not enough for marketers to work out a detailed market strategy. This problem was perceived from two aspects. Firstly, marketing mix needs adjustment to particular business environment. Secondly, marketing mix is more like bones rather than fresh and blood which could provide clear and detailed suggestions. According to literature, there are different ways to classify the components of marketing mix, for example 4ps, 5ps, 7ps, etc. Those elements are not equivalently important in different business. For example, the inventory become less important in cosmetic business. Marketing mix does not directly tell what elements deserve special attention for a specific business(Jobber, 2007). So marketers should balance among those mix and focus on the most important ones. It is not enough to follow marketing mix exactly and literally. On the contrary, an organization has to combine marketing mix with its own situation. Meantime, marketers can not or, at least, feel hard to come up with creative and suitable marketing approaches by only using marketing mix. For example, when decide price, marketers may need to consider competitrs’ price, storability, chain positioning, deal frequency, deal elasticity, etc(Shankar and Bolton, ). But marketing mix rarely discuss in detail. So marketing mix needs to be enriched.

Marketing mix is insufficient to insist H&M in maintaining interaction with customers. The interaction contribute to various aspects like better product design, better customer service and higher customer loyalty. Although H&M conducts an observation system in their outlets to analyze which product is popular and which product need to be remove, there are still abundant complaint. There are perception cap between the desired brand image of the company and the perceived one of customers(Hines, Cheng and Grime, 2007). Marketing mix, however, is not enough concerning about the interaction with customer.

(Sorry, I have not finished, and still have questions. First, H&M launches franchise only in Middle East, but they have not do that when entered other countries. I am still on the middle to find more materials, so I can understand deeply.)