🚀 #6 - Let's talk about Hermès

👋 Hey Neil here,

In the world of luxury brands, there is one that stands above the rest. As the subject line of this newsletter suggests, I am talking about Hermès.

Now, I could go on and on about what makes Hermès so wildly coveted. If you are interested in that, this podcast does a thorough, and I do mean thorough, dive into its history and operations.

I, however, want to discuss the business tactics and marketing mechanisms that they employ and show you how you can apply them to your own offers.

So let’s start with product quality. 

Hermès has built a reputation for producing some of the highest quality goods, specifically leather goods. From sourcing the finest of materials to deploying craftsmen level precision techniques to construct their products.

While their competitors have cut production costs and moved labor offshore, Hermès has adamantly kept their craft-making in France, while still training and employing their staff as they did 100 years ago.

It is this level of product quality that justifies them to charge high ticket prices for their seemingly common goods. For reference an average Gucci handbag goes for about €3,000, while the average Hermès bag retails for more than 3x that at about €10,000 a bag.

However higher prices and quality alone aren’t things that lead to Hermès’s success. There are other bespoke leather goods makers that employ a higher level of craftsmanship and charge higher prices.

This reason Hermès stands above the rest is because Hermès is able to set a standard of quality and share higher prices at scale.

Which they achieve in a very counterintuitive way though scarcity. Right now, if you were to walk into any Hermès retailer and ask to buy their most sought-after goods, you would be denied. Even if you have the money right there and ready for it. Even if you want to pay over retail for it. Hermès will turn you away.

That’s because Hermès reserves their flagship products for their most valued customers. The ones that best exemplify their brand, and more importantly the ones that have an extensive buying history.

By making their best and most desirable products so hard to get, Hermès encourages people to buy their entry-level goods first.

In fact, there are entire subreddits dedicated to the art of actually getting allotments while minimizing the amount you need to spend with the brand before you are offered the chance to buy one of the desirable and scarce products.

In marketing & biz ops terms. By making their flagship products so scarce, Hermès is able to drastically increase customer lifetime value (CLTV) and ensure brand loyalty.

So here are key takeaways you can import into your business.

• Ensure your offers are high-quality

• Charge high ticket prices

• Delivery/fulfillment of your product should not suffer as a result of scale

• Install time-based or quantity-based scarcity

• Once you have satisfied customers you can sell them multiple things and increase CLTV

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Cheers!
Neil