H&M Marketing Strategy: Case Study Analysis & Recommendations

The many marketing challenges of competing as a clothing retailer across multiple nations have forced Hennes & Mauritz (H&M) to take a customer- and cost-centred approach to managing its marketing, cost, supply chain, and production operations. H&M's core strength is the ability to deliver trendy and chic clothing at a fraction of the price of originals. This product positioning strategy, supported by the philosophy of treating fashion as if it were perishable produce, pervades the company's culture and is reflected in how H&M manages its product development, retailing, and financial management operations. Underscoring all these characteristics is the consistent marketing positioning of delivering exceptionally trendy, chic, and fun clothes for young women in the 15–30 age segment.

H&M designs all merchandise in-house, relying on a design team of 95 professionals in Stockholm who deliver designs to outsourcing manufacturing partners globally. The outsourcing network comprises approximately 900 garment shops located in 21 low-wage countries, including Bangladesh, China, and Turkey.

H&M is challenged in its distribution and retailing locations, which represent the weakest area of its marketing strategy, despite the company spending 4% of revenues on marketing. This weakness is related to H&M's difficulties in expanding globally; the company has at times selected locations that place it in direct competition with low-price leaders in the same segment — as was the case with the retail location selection in Newark, New Jersey. Keeping current with designs, keeping suppliers focused on responding rapidly to demand, continual price management, and global expansion into new retail locations are all major strategic challenges for H&M. This paper analyzes the marketing strategies H&M needs to pursue to ensure continued profitable growth.

At the center of H&M's appeal to young women in the 15–30 age segment is the company's ability to deliver fashionable, trendy, and chic clothing at low prices — earning it the reputation for "cheap chic" across its retail stores. This is a unique, differentiated, and defensible market position that the company must continue to strengthen and refine based on ongoing customer feedback. To do this effectively, H&M should invest in customer listening systems, advisory boards, and an increasing reliance on the Internet as a means of communicating with customers about what they want and how they view H&M's clothing and brand.

The design team of 95 clothing professionals, managed by Margareta van den Bosch, is instructed not to look to the catwalks of London, Milan, New York, Paris, or Tokyo for fashion ideas. The need to continually develop and produce highly unique clothing for the 15–30-year-old women's segment must pervade the designers' priorities and efforts. Because seasonal changes in fashion represent the biggest strategic risk the company faces — either generating successively higher levels of customer loyalty or alienating customers who search out other brands — H&M needs to do considerably more than it currently does to develop ongoing communication with its customers.

Creating an Internet panel of 15–30-year-old women to review designs, share ideas about how they want their clothing to fit with their leisure and professional interests, and submit ideas for new accessories and clothing in exchange for gift certificate incentives could all serve as contributing sources of new product ideas for the design teams. In addition, H&M should hold events for its most loyal customers — including sponsoring up-and-coming musical acts — to increase loyalty while simultaneously gathering feedback on the latest proposed designs.

The design team should work to transform the entire creative process into a collaborative one with customers. This could include a section of the H&M website where women in the primary segment would have access to intuitive, easily used web-based applications to create their own designs, competing for the chance to win an H&M wardrobe and to see their own design actually produced by the company. All of these strategies together invite H&M's most critical customers to the design table on a global basis, regardless of their time zone, nationality, or prior experience with the brand.

The company already has the beginnings of brand and store loyalty, with same-store sales increasing between 4% and 5% per year. Nevertheless, H&M must create entirely new and innovative programs to stay connected with its most critical customer segment if it hopes to grow this figure further and remain relevant with its product designs.

H&M's pricing strategy continually stresses "cheap chic," supported by the rapid design-to-production process the company has created for quickly delivering fashionable clothing at low prices. Relying on a low-price strategy is risky over the long term because it forces the company to focus continually on innovative new designs and a highly efficient product launch process at the beginning of each fashion season, in order to quickly recapture the costs of development, production, and distribution. The vertical integration of new design development and production is highly efficient today, generating a 52% gross margin according to the figures provided in the case.

Because pricing is just as much a part of the company's positioning and differentiation as its unique designs, H&M needs to take a more aggressive approach to managing pricing strategies across its distribution network. This includes defining price optimization strategies for its most popular apparel and creating greater pricing discipline for materials obtained through its supply chain. The company should set clear, achievable yet aggressive cost targets for its network of garment shops as well. The risk is that if a fashion season is missed due to production or logistics delays, the company may be forced to discount existing designs, significantly impacting gross margins until the next generation of clothing can be launched. Pricing therefore requires much more aggressive and focused management to ensure its role as a long-term competitive differentiator is preserved.