Would You Buy a $30,000 Hyundai?

Most people wouldn't, so the South Korean carmaker has hired a new ad agency to move its image upmarket in the U.S.

by David Kiley

Hyundai Motors America chose Goodby Silverstein & Partners as its new ad agency on Apr. 17. Goodby, which until recently had been handling ad duties for General Motors' (GM) Saturn brand, is charged by the Korean automaker with "moving the brand to a whole new place in consumers' heads," according to Joel Ewanick, Hyundai director of marketing.

Hyundai (HYMLF) has been the fastest-growing automotive brand in the U.S. since 2000, but that growth has hit a wall. Sales last year were flat, at 455,000, despite the addition of two new products in new categories for the South Korean automaker—the Azera premium sedan and the Entourage minivan. Hyundai is just now launching the Veracruz crossover sport-utility vehicle, and next year it plans to introduce a rear-drive, premium sedan modeled after the BMW 5 Series at a price of around $30,000. "Right now our brand doesn't support these vehicles, and we have to change that," said Hyundai Chief Operating Officer Steve Wilhite earlier this month at the New York International Auto Show.

Goodby bested a list of some of the most creative ad agencies in the U.S.: Strawberry Frog, Kirshenbaum Bond + Partners, Arnold Communications, and Siltanen & Partners. The review was conducted rapidly, with agencies selected five weeks before they all presented to Hyundai at its Fountain Valley (Calif.) headquarters last week. "We operate at Hyundai speed," quipped Ewanick, referring to the speed at which Hyundai has been bringing new models to market.

"Have a Nice Car"

The San Francisco-based Goodby is known for campaigns for Saturn, the California Milk Processors Board, Comcast (CMCSA), Hewlett-Packard (HPQ), and Häagen-Dazs. At Saturn the agency had a hard time connecting with the client on a strategy, and Saturn went through three advertising themes in five years. The idea, or slogan, Goodby pitched for Hyundai this month was "Have A Nice Car," though Ewanick said that the line the automaker launches the agency's new work with will be different.

Ewanick, who had worked with Goodby when he was the advertising director at Porsche more than a decade ago, said the tone and strategy of Goodby's work is what won them the business. Ads presented in the competition position Hyundai as an overachiever in providing "real people" with what they want: a nice car.

Indeed, Hyundai has been overachieving on several fronts except for sales. Last year Hyundai scored third-best in the industry on J.D. Power & Associates' Initial Quality Study, which measures consumer complaints in the first three months of ownership. It was ahead of Toyota (TM), as it has been in two of the last three years, and behind just Porsche and Lexus on that study. It also boasts several five-star crash safety ratings on its models, including the Entourage minivan, Sonata sedan, and Santa Fe SUV. (Like BusinessWeek, J.D. Power is a division of McGraw-Hill (), as it has been in two of the last three years, and behind just Porsche and Lexus on that study. It also boasts several five-star crash safety ratings on its models, including the Entourage minivan, Sonata sedan, and Santa Fe SUV. (Like BusinessWeek, J.D. Power is a division of McGraw-Hill (.)

Moving Beyond Entry-Level

Minnesota Hyundai dealer Patrick Terhaar says Hyundai is suffering from being perceived too much as strictly an entry-level car and brand, despite the introduction of more upmarket models and recognition for quality. "A lot of people just can't see themselves in the brand," says Terhaar. That assessment is borne out in sales. Sales of Hyundai's least expensive car, the Accent, are up 74% in the first quarter. Sales of the Sonata sedan are down 30%.