Martin Roll

Martin Roll: Some Hard Lessons For Hyundai Motor

It is an accepted fact that one of the most valuable assets a company owns its brand. As such, companies strive to create brands that resonate with customers. For any brand to resonate, it has to tell a compelling story and offer value that goes beyond tangible features. But sometimes even that is not enough.

South Korea’s Hyundai Motor Company has found this out the hard way. Hyundai has struggled with its brand for a long time. When its cars were introduced to the US market, they had no prior brand value. To make matters worse, their quality was highly questionable. Realizing this, the company worked to improve the quality, and eventually it was rated higher than Honda and Toyota, according to various consumer surveys. In fact, its quality lagged only that of Lexus and Porsche.

Consumer Reports included two of Hyundai’s models in the top five “Most Impressive” models of 2007. Riding this wave of confidence, Hyundai introduced high-end models such as the $30,000 Azera sedan, the Veracruz SUV and the $35,000 Genesis sedan.

But Hyundai was in for a rude awakening. Reports showed that only 23 percent of all new-car buyers even considered a Hyundai, versus 65 percent for Toyota and more than 50 percent for Honda.

The financial numbers were also not very impressive. Last year the company’s earnings fell 34 percent to $1.6 billion. The market signals and sales figures have been so disappointing that it had revised its original goal of selling one million cars by the end of 2010 to selling just 700,000 cars by that date.

What has gone wrong for Hyundai?

It has often been 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 with its brand. Recently, Hyundai threw open its multi-million dollar advertising account to attract the best talents in the industry in a bid to create a new story for the Hyundai brand. This is yet another testament to the fact that a strong brand identity and associations are the most important factors in attracting customers.

Hyundai is also actively pursuing innovation on two fronts. On the product side, Hyundai will be the first automaker in the world to make hybrid cars that use liquefied petroleum and sell for as little as $16,00. Such innovation has helped the brand to be at the forefront of customers’ awareness.

On the marketing side, Hyundai has been aggressively courting customers through new types of promotions. One of the widely publicized promotions was its guarantee to sell gasoline at $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 could just walk away from their car loan without any negative repercussions for their credit rating if they lost their job.

Such strategic brand moves have started to show positive results. Hyundai’s US market share rose from 3.1 percent to 4.3 percent during the first six months of 2009. Its stock soared 92 percent in 2009, compared to a 27 percent rise in South Korea’s benchmark Kospi Index.

The Hyundai brand has experienced highs and lows in a relatively short period of time. It will be interesting to watch how well it can sustain its success in constructing a new brand story amid tough economic conditions.

Martin Roll is a Singapore-based business and brand strategist. Website: http://www.martinroll.com

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