Hyundai At The Crossroads

Posted by: David Kiley on March 7, 2007

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It didn’t take long for Hyundai COO Steve Wilhite to start making changes at the Korean automaker. In the last few weeks, Wilhite has initiated a review for the company’s $400 million plus ad account, as well as the $30 million plus Hispanic business.

I admit I was a little surprised that Hyundai would break with The Richards Group, which has held the business from some seven years. In that time, Wilhite is the third COO. I’m sure there is blame to go around. But despite Hyundai’s sales growth, I haven’t seen much on the marketing front from Hyundai in that time that’s memorable. In fact, the brand, for all its growth, seems to be in a very 2oth Century communications mode, rather than operating where 21st century brands need to be.

Wilhite, the architect of VW’s comeback in the late 1990s and Nissan’s marketing the last several years, is not using a review consultant. He and new marketing chief Joel Ewanick are doing it themselves. There will be five agencies competing. New York’s Strawberry Frog, San Francisco’s Goodby Silverstein and Partners , Kirshenbaum Bond +Partners and Siltanen and Partners are among the five. Strawberry Frog has no car experience in the U.S., though it handled Mitsubishi in Europe. Goodby is fresh off the Saturn business, which it separated from in January. Siltanen’s chief Rob Siltanen ran the Nissan business at Chiat/Day at one time. His agency is doing some project work right now for Hyundai.

Speculation is that Arnold Worldwide may be one of the agencies, though it is in a global review right now for the Volvo business. Arnold was Wilhite’s agency in the 1990s.

The review figures to be judged mostly on creative ideas and the ability to make them work in a congested online and off-line media world. Hyundai is going to let the dealers pretty much handle their own retail advertising. And the company is keeping its media buying separate.

At issue? Hyundai is in a hurry to become a more aspirational brand. These days, when Hyundai pricing gets to parity with Asians and Detroit product, business falls off. That’s a bad place to be: when your customers are only shopping you on price. Hyundai has no real cachet or cool factor. That’s what Wilhite is after. And it’s going to take an imaginitive old-media and digital strategy to get there.

Indeed, one executive at an agency pitching the business said, “The brief is simple…make these cars that get get good quality ratings and scores less embarrassing to drive.” Another ad exec said, “Hyundai needs to be seen as ‘smart money.’”

Hyundai reported its best-ever February for U.S. vehicle sales last week with 34,500 units sold, but that’s just 486 units north of the 34,014 vehicles it sold in February 2006. In the first two months of 2007, the automaker said it sold 62,221 new vehicles or 2,001 fewer than the same year-ago period. And that’s despite having a new U.S. factory online churning out Santa Fe SUVs and Sonata sedans.

Hyundai has had public plans to reach one million sales a year in North America in the next few years. Wilhite says, though, that the goal was too optimistic from the get-go, and that he is looking for healthy, profitable growth without pegging it to a hard sales goal. Smart move, since the march to one million was off track.

With increasingly positive reviews on its products from the auto press—Santa Fe, Sonata, Azera and Tucson—to name a few that get consistently high marks, and J.D. Power quality ratings in good shape, the thinking is that Hyundai’s image has been is holding it back much more than the product.

Agencies. Get To work!

Reader Comments

Phil

March 14, 2007 2:08 PM

It is amazing that even the cheapest Hyundai-Kia vehicle has a warranty package rivaling many in the world. They have greatly improved their designs and quality. At one point I would not have considered them, but if I could not get into a Toyota or Nissan they would become a consideration.

tam emerick

March 21, 2007 12:12 PM

The dirty little secret regarding the Hyundai/Kia warranty is that it is non-transferable. Since buyer's remorse sets in the after you buy one, most original owners trade out/up long before warranty become an issue. I give Hyundai/Kia credit for excellent marketing.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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