H&M Plansbook

Plansbook

MKT 390 Sarah Smith Spring 2013

Jayme Martin Stephanie Muschall Katie Dewert Karlyn Kubin Mason Olson

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Executive Summary

H&M is a very profitable retailer with locations in several different countries. They are able to be successful and get ahead of the competition by focusing on fast fashion. This means that they get the newest designs created and on the shelves as quickly as possible so their consumers can always be fashionable.

Throughout this media plan, we will share our recommendation on how H&M can use various types of marketing promotions in the United States to get ahead of the competition and increase their sales. All of our ideas are backed by primary and secondary research and stay within a budget that is reasonable in comparison to the size of this company.

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Situational Analysis

Client Overview Hennes & Mauritz AB, more commonly referred to as H&M, is a global retail company specializing in men and womens fashion that began in Sweden in 1947. The company also offers childrens apparel, accessories, cosmetics and home goods. H&M operates under a variety of brands, which include the following: H&M, COS, Monki, Cheap Monday, Weekday, and Other Stories. Currently, H&M operates almost 2,800 stores. These stores are spread out over 48 markets, with Germany as the largest market.

The company is known for their fast fashion, which is a term used to describe clothing collections that are based on the most recent fashion trends on the catwalk, but are designed and manufactured quickly, made affordable, and aimed at mainstream consumers. H&M has expanded their brand immensely, with 168 new stores being opened last year. The companys expansion has been entirely self-financed and sales over the past 5 years have increased by 72%. H&Ms earnings per share has increased by 183% in that time frame as well.

Furthermore, H&M has been successful financially in maintaining positive profits, even when investments and inflation have had negative effects. For the 2012 year, H&M posted a gross margin of 61.9 percent, meaning they are fairly efficient in turning raw goods into

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Client Overview (Continued) Collaboration has also worked well for H&M. Celebrity endorsements have included Madonna, Viktor and Rolf, Stella McCartney and Roberto Cavalli. Kylie Mingoue has also done endorsing for the company, whose clothing range was launched in Shanghai in 2007. H&M is a big supporter of UN programs, the Designers Against Aids initiative and campaigns to increase the use of organic cotton reduce the use of chemicals and the implement more energy efficient transportation.

H&M does business on seven core values, which are as follows: 1. Keep it simple 2. Straight forward and open-minded 3. Constant improvement 4. Entrepreneurial spirit 5. Cost conscious 6. Team work 7. Belief in people

Their creative strategies incorporate these values and all business processes are done with them in mind. H&M does currently promote their products through social media. They have a strong presence on social media platforms, including Facebook, Twitter, Instagram, Google+, YouTube, and a couple of Chinese social networks.

In regards to distribution, H&M does not own any factories. The company outsources the production of their products and then uses production offices to work with suppliers. In the production offices, H&M employees ensure the quality of both the products and working conditions of outsourced companies, while also maintaining the seven core values mentioned above.

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Industry Analysis The retail industry is extremely large and covers a wide range in the current market. Over the winter holiday, retail reached $586.1 billion in sales despite the recent decline in economic recovery. According to the National Retail Federation, retail sales are expected to increase in 2013 by 3.4 percent. However, this is lower than the previous estimate of an increase of 4.2 percent seen in 2012.

The decrease in sales is attributed to the trends seen during the holiday season, which suffered due to Washingtons public discord over fiscal concerns. Consumers are being more cautious with purchases and spending due to the economic uncertainty. The recent addition of a higher income tax across much of the United States population will also affect the amount of spending for retail stores this year.

NRF President and CEO Matthew Shay states, Pushing fiscal policy decisions down the road will lead to even greater uncertainty, and will continue to impact consumers desire and ability to spend on discretionary items. The administration and congress need to pursue and enact policies that lead to growth and economic expansion, or it could be another challenging year for retailers and consumers alike. Retailers such as H&M will have to compensate by focusing on managing existing inventories and providing unique in-store promotions and exclusive product lines.

While in-store shopping is expecting limited growth, online purchasing is expected to have a growth of as much as 12 percent. Many stores are turning to Internet-based promotions and sales to encourage growth of the online retail shopping industry. H&M currently operates some 2,800 stores in 48 markets and offers online shopping in 8 countries. Originally founded in Sweden, the company now has its #1 market in Germany with 20 percent of sales coming from there. H&M

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Industry Analysis (Continued) Seasonal factors also affect the retail industry as consumer trends change how and when they are spending. Most spending occurs around the winter holidays and in August for back to school. The retail selling cycle focuses around weather changes and seasonal sales. For example, in March, summer and spring fashion will be in full swing. April brings sales and markdowns on spring fashion. This cycle causes consumer trends to change, as well, with more spending occurring as the weather changes. By focusing on time of high volume spending, more trends can be found in buying patterns.

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Competitive Assessment H&M is a global fashion chain that positions itself as being cost-aware and on top of fashion trends. They have three major competitors that match their market position. H&M is ranked second for largest global clothing retailer, just behind its main competitor, Spanish-based retailer, ZARA and ahead of both the U.S. company, GAP Inc., and Japanese retailer, Uniqlo.

Zara is a Spanish based clothing retailer founded in 1975 by Amancio Ortega. It is the flagship chain store of the Fashion group Inditex that includes brands such as Massimo Dutti, Pull and bear, Uterqe, Stradivarius, and Bershka. Sales from Zara made up nearly 80% of all of Inditexs revenue in 2011, as it leads the global fashion retail as a industry with the latest fashion trends and low cost clothing. Zara accomplishes this feat despite an overwhelming lack of advertising. Company founder, Ortega, views advertising as being pointless and relies solely on the look and appeal of their store windows to drive customers in. Inditex spent only 0.3% (about $43million) of its 14.25 billion 2011 revenue in advertising putting it well below the 3.5% average of fashion retailers. Zara only has about 50 physical locations in the US but drives most of its domestic sales through e-commerce on its website.

Founded in 1969, US based company, GAP Inc., is ranked third in global fashion retailing. GAP includes brands such as GAP stores, Old Navy, and Banana Republic. In 2011 GAP Inc. made $14.5 billion in revenue and spent $548 million in advertising. GAP Inc. has recently started an aggressive advertising campaign with mobile apps. Banner ads, placed on websites, direct users to their mobile app store and have led to a dramatic increase in sales over the last year. In 2011 $1.5 billion (13%) of their $11.4 billion total revenue came from mobile and online

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Competitive Assessment (Continued) The third major competitor is Uniqlo, a Japanese based retail chain founded in 1949. Uniqlo rose to prominence after it adapted strategies from GAP Inc. to produce and sell their own line of clothing. By 2007 Uniqlo rose to the top 5 in global clothing retailers. Uniqlo made near $10 billion in revenue in 2011 and spend about 5% of sales ($500 million) in advertising. Uniqlo has less than 10 stores in the U.S.; however, most of its domestic sales come from e-commerce traffic through its website. Uniqlo is aggressively advertising and expanding in U.S. markets, especially in New York.

H&M has a few indirect competitors that reach cost conscious and trendy individuals in the fashion area. A growing trend in the US for fashion is thrift shops such as Goodwill. These shops offer clothing, among other things, at deep discounts and consumers are finding fashion trending items in these stores at a much lower cost that it would be to buy from a national, or international retailer. Thrift Stores operate almost on a $0 advertising budget compared to the national brands and advertise mostly from social media and word of mouth.

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Target Market According to the H&M Market Plan, they design cheap, yet chic, clothing that targets the hip and modern man and woman age 18-45. Using MRI for H&M, we took a closer look at this target market to identify the heaviest users who would be most valuable to target with a national marketing campaign.

Demographically, women have an index number of 178 while men have an index number of 16. This means that women, in general, are 78% more likely than the average person to shop at H&M while men are 84% less likely than the average person to shop at H&M. In addition to this, women age 18-34 are 256% more likely than the average person to be an H&M customer. The typical household income of an H&M shopper is 65% more likely than average to be above $150,000 and 26% more likely than average to be between $75,000 and $149,999. The most common occupations for shoppers are sales and office and professional and related

occupations. Finally, customers of H&M are more likely to be heavy users of

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Primary Research

Method To supplement our secondary research, we conducted a survey. It was distributed online through Facebook, Twitter, and e-mail. We chose this method because it allowed us access to responses from the greatest number of consumers and gave us the quickest response time. It was administered to men and women ages 18-45 as they are the target market of H&M.

Information Gained Our survey began by gathering demographic information on potential consumers. Then it looked at their shopping patterns and preferences. We examined where consumers shop; whom they shop with; and what, if anything, they purchase. They survey ended with questions gaging their interest in H&M at that time. *See Appendix A

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Marketing Strategy

Marketing and Communication Objectives 1. Increase potential consumer awareness of H&M brand through media

exposure. 2. Increase promotion tactics for H&M brand both online and in-store. 3. Increase annual online* and in-store sales for H&M brand.

*H&M will begin offering online shopping in the United States in the Summer of 2013

Evaluation Our objectives can be measured through online surveys and customer feedback. Promotion code tracking and annual sales reports can also provide information on the success of our promotions plan for H&M.

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Marketing Strategy

Positioning When H&M comes to mind, consumers should think of the following qualities:

-Young and hip -Up-to-date with current trends, but not too mainstream -Unique -Reasonably priced -Quality material -Variety of styles -Variety of types of clothing (dressy/casual/sporty)

This position is distinct because the clothes have a specific look so that you can easily identify them as H&M clothing. They are known for good quality, but still not

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Primary Research

Budget

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Promotion Strategy

Internet Strategy With a young, tech-savvy market, H&M needs to move to take advantage of online interactions with their customers. It is important for H&M to make online followers feel involved and heard on the online forum. This may be difficult due to the vast amount of input received from online forums as well as determining the validity of concerns and posts. It may sound simple at first to stage user-generated content to create buzz, however, this becomes dangerous as it not only violates ethical practices but consumer backlash would be enormous if the community found out. Here are some methods for H&M to increase their internet presence as well as increase their online base and patronage.

First H&M needs to encourage user-generated content on their social media websites such as Twitter, Facebook, and Instagram. H&M will promote a monthly giveaway to registered online visitors who submit content with H&M related material. These users will be entered to win H&M products and incentives such as exclusive discounts, coupon codes and gift cards. These rewards will also be offered to registered users to refer their friends who sign up for the companys e-newsletter or register on their site. This will help bring more users to the websites as well as additional opt-in contact information for other advertising methods such as direct mailing adverts and emails.

H&M will also supplement their website with a new, regularly updated blog. The blog will contain information relating to new H&M products, fashion news, and upcoming events and products lines. The blog will be open to visitors for comments to support feedback and insight or reviews from customers about new and existing product lines or events. The blog will serve as a great opportunity to allow customers to feel involved within the H&M community. Regularly updating and responding to customer posts and concerns will increase H&Ms transparency and further increase the trust and loyalty of its customers.

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Promotion Strategy

Sales Promotion Strategy The first recommendation for sales promotions we have is to send coupons out through an emailing list. Emails can be gathered at the point-of-purchase in stores and, starting Summer 2013, online. The number of coupons and type of items they can be used on should be dependent upon the upcoming season (sandals for summer, coats for winter, etc.). Having promotions aimed at specific seasons will work because it gets people in the store to look at the new items as well as items that are from the previous season and need to sell.

The items from the previous season should be available at a discounted rate. When they are offered at this lower rate, consumers will feel like they are getting a deal and wont want to pass it up.

Coupons can also be offered to customers after they make a purchase. These will be valid at a later date. This is a good use of sales promotion because it gets consumers to come back to the store.

Finally, H&M should offer a free gift with purchase of some of the more expensive items in the store. Since H&M customers are price conscious, they will feel like they are getting a better deal and be more willing to spend the extra money if they receive this free gift. The gifts should be smaller merchandise that inexpensive to produce or needs to get out of the store. This will make the promotion less costly for H&M and could also help merchandise turnover quicker.

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Promotion Strategy

Traditional Media Objectives and Scheduling Reach, Frequency, GRPs According to the Media Flight Plan textbook, the lowest reach a media plan can have, and still survive, is 50-60%. However, to actually be successful, the reach needs to be closer to 70-75%. In addition to this, the Ostrow Model helps determine the proper frequency for each media plan based on factors like brand loyalty, share of voice, and who the target market is. With this in mind, we chose the following reach, frequency, and GRP goals:

National Spot Reach: 70 Reach: 80 Frequency: 5 Frequency: 8 GRPs: 350 GRPs: 640

H&M is not found in every city or state of the United States. So, we thought it was important to place heavier emphasis on certain cities where a bulk of stores could be found. Those cities make up are spot market and are as follows:

Baltimore, MD Boston, MA Chicago, IL Cleveland, OH Dallas, TX Los Angeles, CA New York City, NY Orlando, FL

Philadelphia, PA San Francisco, CA Seattle, WA

In the trade-off between high reach or high frequency, we decided that it was best to put a little more emphasis on reach. H&M is a well-known retailer within its target market and has a simple message to convey. This causes consumers to be able to pick up the message quicker than with other companies and with other types of ads.

Schedule In addition to the reach, frequency, and GRP goals, we chose to advertise on a continuous schedule. H&M sells clothing and accessories that are purchased in in every month, at every time of the week, and at any time during the day. There

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Traditional

Media Plan MRI Data

MRI Attribute Index Quintile Magazines I 150 Quintile Newspaper I 93 Quintile Radio I 112 Quintile TV (total) I 49 Quintile Internet I 136 Quintile TV (Prime time) I 59 Tercile TV (Day time) I 53 Quintile Outdoor I 111 HH subscribe to Cable 113 HH subscribe to digital cable 127

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Traditional Media Plan

Media Vehicles According to MRI index data, Marie Claire, Lucky, Life & Style Weekly, and Elle are the top four magazines most likely to reach our target market. These four magazines have indexes of 515, 494, 472, and 469, respectively. In addition to Womens magazines, we are placing advertisements in the general interest magazine New York Magazine, which has an index of 305.

In addition to heavy magazine use, we have decided to utilize radio heavily. The Arbitron report shows Pop Contemporary Hit Radio (Pop CHR) ranked first with adults age 18-24. Additionally, it was ranked seconds for adults 25-34, but number one with women. Geographically, Pop CHR held the number one rating in Boston, Dallas, and Los Angeles. It ranked among top three in New York, Orlando, and Seattle-Tacoma. All six of these locations are spot markets for our traditional media plan.

We are not promoting heavily via television networks due to the low index numbers, however we want to include some advertisements on cable because

households in our market that subscribe to cable possesses an index of 113.

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Traditional Media Plan

Media Units The H&M Marketing plan will be utilizing a continuous schedule, so the same spots and inserts will be appearing throughout each month of the year during our campaign. To reach our targeted GRP and Reach goals, we have created a media plan allotting 30 points to Net Cable- Late fringe, 50 to Net Radio, 150 to Magazines, and 120 to Internet. Additionally, we allotted 50 points to spot cable and 240 to radio.

To further break down the media vehicle purchases, we have 20 points to the evening drive and 30 to nighttime spots for net radio. Womens magazines account for 120 of the 150 points for magazines, and general interest magazines use the other 30. Internet Keyword/Search has 50 points, Internet targeted sites has 50, and Internet Sponsorship has 20. In spot media, 100 points are allotted to both evening drive and nighttime radio, with the remaining 40 spent on morning drive radio. *See Appendix B

Rationale As MRI and Arbitron data show, these media will reach our desired audience. Magazines, radio, Internet, and outdoor all have an index above 100, meaning they are more likely than the average person to utilize those media. Each specific vehicle chosen also has high index numbers or data supporting the reach of the members in our target audience.

Our target market consists of women between the ages of 18 and 44, whom are generally receptive to advertisements targeted to women in magazines, radio, and Internet. They are aware of their surroundings, so they will notice outdoor advertisements as well. The overall message for our brand is affordable clothing

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Appendices Appendix A Survey Questions and Results

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Appendices Appendix B Traditional Media Plan

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Appendices Appendix B Traditional Media Plan

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Appendices Appendix C Month in Detail

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Appendices Appendix D Sources Arbitron. Radio Today. Rep. N.p.: n.p., 2011. Print.

Brown, S., & Grannis, K. (2013, January 28). National retail federation: Nrf forecasts 3.4 increase in retail sales for 2013. Retrieved from http://www.nrf.com/modules.php?

"Business Concept & Growth." Hm.com. H&M, n.d. Web. 19 Feb. 2013. .

Clifford, Stephanie. "As U.S. Retailers Retreat, a Japanese Chain Sees an Opening." The New York Times. The New York Times, 23 May 2012. Web. 14 Feb. 2013. .

CNN. "Zara, a Spanish Success Story." CNN. Cable News Network, 15 June 2011. Web. 14 Feb. 2013. .

Folan, Kerry. "Fast Fashion Face off: Heres How Uniqlo Compares to Zara, Gap, and H&M" Racked National. Racked National, 20 June 2012. Web. 14 Feb. 2013. .

Gap Inc. "About Us." About Us. Gap Inc., 2013. Web. 14 Feb. 2013. .

"H&M | Company Profile." H&M | Company Profile. Ed. Caroline Jones. N.p., n.d. Web. 14 Feb. 2013.

"H&M Hennes & Mauritz AB Company Information." Hoover's. Hoover's Inc., n.d. Web. 19 Feb 2013. .

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Appendices Appendix D Sources

"H & M Hennes & Mauritz AB Full-Year Report." Bloomberg. Cision, 30 Jan. 2013. Web. 18 Feb. 2013. .

"H&M in Social Media." Hm.com. H&M, n.d. Web. 19 Feb. 2013. .

Kats, Rimma. "Gap Exec Reveals More Aggressive Mobile Budget Plans for 2012." - Mobile Marketer -. Mobile Marketer, 02 May 2011. Web. 14 Feb. 2013. .

"Production." Hm.com. H&M, n.d. Web. 19 Feb. 2013. .

"Profile of H&M: A Pioneer of Fast Fashion." - Research and Markets. N.p., Oct. 2007. Web. 14 Feb. 2013.

"Our History." Hm.com. H&M, n.d. Web. 18 Feb. 2013. .

Uniqlo. "COMPANY | UNIQLO." UNIQLO. Uniqlo Company, n.d. Web. 14 Feb. 2013. .

"Women's Clothing-Brands, H&M in Last 12 Months." MRI Reporter. N.p., n.d. Web. 19 Feb. 2013. .

Zara. "Company - ZARA United States." Company - ZARA United States. Zara, 2010. Web. 14 Feb. 2013. .

Documents

H&M Plansbook