Hyundai - A brand desperate to rebrand
It is a well accepted fact within the corporate world that one of the most valuable corporate assets is the brand a company owns. As such, companies strive very hard to create brands that resonate with customers. For any brand to resonate with customers, it has to tell a compelling story, and offer value to customers that go beyond tangible features. It sounds too simple to be true.
Hyundai Motor Company has found out just this the hard way. Hyundai has been struggling with its brand for long now. When Hyundai cars were introduced in the US market, it had no prior brand value. To make matters worse, its quality was highly questionable. But realizing this, the brand made amends to the quality. Quality improved gradually to a level where it was rated much better than Honda and Toyota's quality by various consumer reports. Its quality lagged behind only that of Lexus and Porsche.
Consumer Reports included two of Hyundai's models in the top five "Most Impressive" models among the 2007 models. Riding this confidence wave, Hyundai introduced many high models such as the US$30,000 Azera sedan, and the Veracruz SUV, and the upscale US$35,000 sedan Genesis. But the company was in for a rude awakening as reports showed that only 23% of all new-car buyers even considered a Hyundai model as against 65% for Toyota's cars and more than 50% for Honda's cars.
The financial numbers are also not very impressive. Last year the company's earnings fell 34%, to US$1.6 billion and the operating profits fell from 9% three years ago to a meager 4.5% last year. The market signals and sales figure have been so disappointing that the company has revised its original goal of selling one million cars by 2010 to selling just 700,000 cars by 2010. What has gone wrong for Hyundai?
It has been often argued that in purchasing a car, which is of high value and hence a more rational purchase, quality and functionality are the most important factors apart from design and brand. Hyundai seems to have managed the three factors of quality, functionality and design.
But it has fallen short on the brand front. Recently Hyundai threw open its multi million dollar advertising account open to attract the best talents in the industry to create a new story for the Hyundai brand. This is yet another testimony to the fact that a strong brand identity and associations are the most important factors that can attract customers.
In addition to such proactive measures to enhance its brand appeal, Hyundai is also actively pursuing innovation on two fronts simultaneously. On the product innovation side, Hyundai will be the first automaker in the world to make LPG (liquid petroleum gas) hybrid cars to be sold US$16,200. Such innovation has tremendously helped the brand to be at the forefront of customers' awareness scales.
On the customer innovation side, Hyundai has been very aggressively courting customers through new type of assurances and promotions. One of the widely noted promotions was Hyundai's guarantee to sell gas at US$1.49 a gallon for one year to those customers who purchased a Hyundai car. An even more popular and strategically brilliant move was to offer an assurance to customers that they can just walk away from their car loans without any negative repercussions on their credit ratings in case they lost their jobs.
Such strategic brand moves have started to show some positive results. As against a mere 3.1% market share in the US, Hyundai's US market share has increased to 4.3% during the first six months of 2009. Furthermore, its shares have jumped to 84.2% at the end of the second quarter of 2009 from 74.4% for the same period the previous year. Overall so far, against the Kospi Index's 27% raise, Hyundai's stock has increased 92% so far in the year 2009.
As can be seen, in a relatively short span of time, Hyundai brand has experienced highs and lows. It will be interesting to watch how the newly gained success in constructing a new brand story can be sustained by Hyundai amidst harsh economic conditions.
Hyundai Motor Company has found out just this the hard way. Hyundai has been struggling with its brand for long now. When Hyundai cars were introduced in the US market, it had no prior brand value. To make matters worse, its quality was highly questionable. But realizing this, the brand made amends to the quality. Quality improved gradually to a level where it was rated much better than Honda and Toyota's quality by various consumer reports. Its quality lagged behind only that of Lexus and Porsche.
Consumer Reports included two of Hyundai's models in the top five "Most Impressive" models among the 2007 models. Riding this confidence wave, Hyundai introduced many high models such as the US$30,000 Azera sedan, and the Veracruz SUV, and the upscale US$35,000 sedan Genesis. But the company was in for a rude awakening as reports showed that only 23% of all new-car buyers even considered a Hyundai model as against 65% for Toyota's cars and more than 50% for Honda's cars.
The financial numbers are also not very impressive. Last year the company's earnings fell 34%, to US$1.6 billion and the operating profits fell from 9% three years ago to a meager 4.5% last year. The market signals and sales figure have been so disappointing that the company has revised its original goal of selling one million cars by 2010 to selling just 700,000 cars by 2010. What has gone wrong for Hyundai?
It has been often argued that in purchasing a car, which is of high value and hence a more rational purchase, quality and functionality are the most important factors apart from design and brand. Hyundai seems to have managed the three factors of quality, functionality and design.
But it has fallen short on the brand front. Recently Hyundai threw open its multi million dollar advertising account open to attract the best talents in the industry to create a new story for the Hyundai brand. This is yet another testimony to the fact that a strong brand identity and associations are the most important factors that can attract customers.
In addition to such proactive measures to enhance its brand appeal, Hyundai is also actively pursuing innovation on two fronts simultaneously. On the product innovation side, Hyundai will be the first automaker in the world to make LPG (liquid petroleum gas) hybrid cars to be sold US$16,200. Such innovation has tremendously helped the brand to be at the forefront of customers' awareness scales.
On the customer innovation side, Hyundai has been very aggressively courting customers through new type of assurances and promotions. One of the widely noted promotions was Hyundai's guarantee to sell gas at US$1.49 a gallon for one year to those customers who purchased a Hyundai car. An even more popular and strategically brilliant move was to offer an assurance to customers that they can just walk away from their car loans without any negative repercussions on their credit ratings in case they lost their jobs.
Such strategic brand moves have started to show some positive results. As against a mere 3.1% market share in the US, Hyundai's US market share has increased to 4.3% during the first six months of 2009. Furthermore, its shares have jumped to 84.2% at the end of the second quarter of 2009 from 74.4% for the same period the previous year. Overall so far, against the Kospi Index's 27% raise, Hyundai's stock has increased 92% so far in the year 2009.
As can be seen, in a relatively short span of time, Hyundai brand has experienced highs and lows. It will be interesting to watch how the newly gained success in constructing a new brand story can be sustained by Hyundai amidst harsh economic conditions.
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