Faculty of Industrial Design EngineeringDelft University of Technology

November 2007

Group 7 1093576

1140450 1348140

1178520 1182919 1145851

Brand and product strategyApplying a new framework on H&M

Katinka BergemaHanneke van den BosLoucas PapantoniouArjanna van der PlasGuido PennersSusan van Wissen

2

Table of contentIntroduction................................................................................H&M...........................................................................................Model.........................................................................................Applying the model to H&M..........................................................Conclusions.................................................................................Limitations..................................................................................References..................................................................................

1

IntroductionBranding is much more than attaching a name to a product. It is about making a certain promise to customers about delivering a ful-filling experience and a level of performance. A modern brand has to cope with for example brand introduction, new product launch and brand image. Branding nowadays is a complex task and there are lots of models that deal with innovative brand management. In-novation always goes on and gives lots of new insides and possibili-ties on brand management.This report presents a new and complete model that helps brands and companies in developing dynamic innovation, getting an over-view in the context of the brand and shows which gaps need to be closed.

In the report, first some facts of H&M are described, the history, the strategy and some keypoints. After this, our new model is intro-duced and explained.Then the application of the model to H&M is shown and there is a description how it has to be used. Finally, a short overview of our conclusions is pointed out.

2347888

3

H&M

4 2

About our model: SPInReading the Design Management by Kathryn Best and the Kellog on Branding by Alice Tybout provided a lot of food for thought to the group. Discussion after discussion we were trying to understand how branding works and how it should work in order to push a company into innovation. The main problem we recognized was the gap between the ideal internal identity that the company conveys and the external image that the customer receives through touch points like the product. One way or the other, this gap has to close. Brand driven innovation can minimize this gap and fulfill the com-pany’s promises.

Our model has been influenced mainly by three different existing models: the Brand Core Model, the Brand Assimilation Model and the Delft Innovation Model.

The Brand Core ModelThe Brand Core Model (BCM) is the basis of our model. We select-ed this model as it includes the main three stakeholders in brand-ing: the customer, the company and the product. Furthermore, the model depicts the central role of branding in marketing, innova-tion and value creating activities. Branding has to create customers instead of perceptions, as it has been used so far by most compa-nies. Branding, in this model, is the core and driving engine be-

hind the whole innovation process and act as a mediator in shaping the customers, products and company. We believe that this is the only way to bridge the gap between the company’s identity and the image a customer holds.However, the BCM only visualizes an ideal situation. It is a static model and that is not what innovation is about. Although the model does include a NPD (because the brand shapes marketing, innova-tion and value), we still suggest that this BCM model would be the outcome of a dynamic process (which is the NPD process) when the company continues, non-stopping, to run new product development processes.

Brand Assimilation model – “Hear it, Live it, Believe it’’We used the Brand As-similation model because successful branding includes both the company and the customer. Internal branding refers to the identity of a brand that is visible through its touch points; although these touch points are developed by company employees. The internal branding is of major value when companies want to remain authentic and add value to their customers. Relying on external analysis (market analysis for example) is not enough to differentiate yourself from other companies. To truly transform a company, all employees must understand the brand’s promises and their role in bringing the brand to life within their functional areas. If everyone in the organi-zation helps to bring the brand’s promise to life, this will be a sure way to market success. Customers have to live the brand as well. The brand should serve as a tool for the consumer and facilitate his/her ‘living’. This is the only way how consumers are able to undergo the real ‘brand experience’. In the end, when a company succeeds in consistently reinforcing employees and customers behaviour over time, both groups will ‘live’ the brand and overcome the strategic gap between identity and image. The Brand Assimilation model normally refers to employees, whereas we also think that a brand is also able to ‘shape’ its customers. The three stages of the model (hear it, believe it and live it) will act as a time-line in our model.

Mat

chin

g im

age

and

iden

tity

5

Delft Innovation ModelBecause a BNPD model can narrow the gap between NPD and branding, the DIM inspired us to incorporate a BNPD model. We believe that the DIM model gives a complete overview of the innovation process and the drivers behind the innovation process. The first two phases result in basic opportunities that form the basis of innovation. These opportunities are developed through pro-found market analysis whereas branding could also be an important driver for innovation. Because of this, the importance of branding becomes clear and it can even create more customer value as an important differentiating point in highly competitive markets. Since some companies have their own succesful innovation model, we didn’t include DIM in the model as such, but refer to it as BNPD.

Our model: SPIn (Strategic Product Innovation)

We wanted to develop a dynamic framework, that can visualize how companies can build a brand essence through time. The complete framework consists of three stages, in which the third stage reflects an ‘ideal’ situation. The model changes according to a time-line. This time-line does not reflect ‘time’ in its essence, but the model

changes dynamically according to the ‘Hear it, Believe it, Live it’ phases (brand assimilation model). Next to this, the model is a circle, divided in several charts. The movement of this circle IS the actual NPD process:

Phase 1: Hear it!The wheel does not move. The NPD process has not yet begun. The charts (company, product and customer) are separated by ‘perceived’ bounda-ries. These ‘perceived’ boundaries refer to the fact that almost every company wants to innovate, recognizing the customers’ values and market their products, but they do not know how to do this effectively. Branding has not yet started to play a role in the product development and there is a big gap between the company’s identity and its image. Phase 2: Believe it!

The BNPD SPIns the wheel. The company starts to seek for opportunities, internally and externally, and innovation is ahead. Bran- ding plays a major role internally, as it boosts the company to be authentic and rely on its skills and values, instead of simply relying on external opportunities. Once the company has detected some opportunities, the brand starts to ‘believe it’ and acts in order to fulfill these opportunities. The boundaries between the charts change into opportunities since the core-brand starts to shape marketing, innova-tion and value activities. The perceived gap be-tween image and identity starts to loosen up.

Phase 3: Live it!This is the final stage of the company. The compa-ny has gone through several successful NPD pro- cesses that have resulted to a coherent, picture of the Brand, which is visible to the customer and the company employees as well. The gap be-tween the image and the identity has disappeared and both the customer and the company live the brand.

6

Product Company

Product

Customer

Customer

Company

The role of BrandThe main stakeholders -the customer, the company and the pro- duct- overlap thanks to the mediating role of the brand:

Intersection between the company and the product: the brand shapes the marketing activities in order to develop products that reflect the company’s identity and the customers’ values and needs. Most important is that marketing is fully based on its own brand platform and program.

Intersection of product and customer: the brand shapes innovation by developing a clear bran- ding strategy and customer platform direction to product development and R&D. Next to this, customer input, initiative and intelligence are also important to augment the complete innova-tion process.

Intersection of customer and company: the brand shapes value by developing value net-works to establish an authentic company/customer value. The branding platform is synchronized because customers’ needs are involved.

7

Applying our model to H&MH&M is a very strong brand and is doing sublime at innovation and customer segmentation. However, the performance of H&M at for example the area of mutual value is poor. Therefore, we think H&M is in the second phase of the model, inclining to the third phase.

Customer perspectiveH&M is very customer focused in terms of segmentation. Although H&M produces products that are considered mass production, H&M has very strict target groups that are addressed separately.

ValueThe value of H&M is perceived different by H&M and their custom-ers. H&M considers itself offering fashion and quality at the best price, while producing the items according to their corporate social respon-sibility policy. The customers mainly value H&M for their ‘low price – acceptable quality’ pro- ducts and are unaware of the social responsibility policy. H&M could thus improve at this point, by communication their social responsibility policy with the customers as Benetton for example has been doing quite successfully for years.

Company perspectiveThe company itself doesn’t seem to have a consistent view of the brand H&M. The corporate communication of H&M doesn’t match the attitude of the shop assistants. Moreover the attitude of the shop assistants appeasr to differ between the H&M shops in differ-ent city. For example: the shop assistants in Utrecht are more fash-ionable than the shop assistants in Delft. Workshops for all the new staff in all the levels of the company might be an option to improve the employee segmentation.

H&

M.c

om

3

Marketing Regarding the marketing, H&M seems to have a very strong marketing concept, consisting of campaigns, adverts, appearances in the media, at premieres and the stores. How-ever, the message of these marketing tools, the message don’t seem to be consistent. Mainly, there is a gap between advertisement and the shopping experience. Whereas the adverts are quite gla- morous, the shops –especially in the Netherlands- are quite messy and inconvenient: like shopping for groceries in the Aldi. The gap between the adverts and the shops could be closed by improving the shops or let the adverts reflect more on daily life, as the WE-store is doing.

ProductH&M proves to be good at producing cheap products of reasonable quality, inspired by the latest catwalk trends. With daily new pro- ducts in store, the H&M has a unique selling proposition, compe- ting with – as H&M states- every other fashion company. Offering a broad range of product for a broad range of people, H&M seems to be doing well.

InnovationH&M is very innovative and has extremely fast and numerous NPD cycles. However, the role of the custo- mer in this innovation process could be improved. Whereas other compa-nies, like Nike is doing for almost a decade now, adapt to the individuali-zation trend by enabling their custo- mers to design their own items, H&M is just offering their products as they are. Customers are involved only spo-radic into the designing process, although cooperating with trend-setting customers might bring the brand closer to the customer.

BNPDAs discussed under innovation, H&M is innovating and developing all the time. H&M has its own innovation model, that might benefit from the Delft Innovation Model in terms of evaluation and the combination of internal and external focus.

8

ConclusionThe most important aspect of our BNPD framework is the emphasis on the internal role of branding. A company has to grow from the inside based on its skills and values in order to be authentic and full fill its promises. The only way to achieve this is by making the employees live the brand (assimilation model). Next to this, the model describes the central role of branding in marketing, innova-tion and creating value. The brand should be integrated in the NPD process in order to create opportunities. In this way, it is possible to let customers and company ‘live’ the brand.Compared to other models, SPIn focuses more on a dynamic situa-tion. We believe a company can only succeed in branding when it’s continuously working on the branding.

We believe that H&M is situated between the ‘hear it’ and ‘believe it’ phases since there are a lot of inconsistencies within the company. Although H&M is heading to the right direction (consistency in all touch points), at the moment they haven’t succeeded yet. The most important point is that the customer cannot ‘live’ the H&M expe-rience. The experience differs from shop to shop, from product to advertisement and also in the website. In relation to internal branding, workshops are necessary to establish a common brand essence for employees. Also, selecting the right employees accor-ding to the brand’s values would create an internal, consistent view of the company that reflects the identity of the brand.

LimitationsAlthough our model tries to decrease the gap between a company’s identity and a consumer’s image, there are few limitations to dis-cuss after applying this framework to H&M.

The model focuses more on big companies that have to develop new products continuously in order to survive in an extreme com-petitive environment. When companies have a large portfolio, the image a consumer holds of the company can become more fuzzy and distorted. The gap between the company’s identity and the consumers’ image increases. For a relatively small company (when branding is an important part of their NPD process), it can be less difficult to close this gap because a consumer can hold a clear

image of the company since only few touch points have to reflect a company’s identity.

Our model includes a time-line (‘hear it, believe it and live it’) which is more long term orientated we believe: getting customers and em-ployees ‘live’ the brand (which is your end goal) takes more time and effort. The model can give a general direction about the current’s position of a company but not a specific position since it is difficult to determine where you are as a company. The model describes how it should be but it does not provide a step by step explanation on how to achieve this and what happens exactly between the three situations. Therefore, the model does not act as a manual in order to become more ‘successful’ as a brand since it does not give a clear description of different steps a brand should perform.

Referenceswww.hm.com (Latest visit at 8 November 2007)

Facts about H&M (Latest visit at 8 November 2007) www.hm.com/filearea/corporate/fileobjects/pdf/common/COMMON_FACTSANDHISTORY_FACTSABOUTHM_DUTCH_PDF_1176385513865.pdf

Kellogg on Branding: The Marketing Faculty of The Kellogg School of Management, Alice M. Tybout and Tim Calkins, 2005

Design Management: Managing Design Strategy, Process and Imple-mentation (Ava Academia), Kathryn Best, 2006

www.tenayagroup.com (Latest visit at 8 November 2007)

www.branddriveninnovation.com/wp-content/brand%20driven%20innovation.pdf

Imageswww.hm.comwww.nike.comwww.benetton.comwww.prophet.comwww.tenayagroup.com

6