InterviewsAl Ries Shares His Thoughts on the Hyundai Brand

September 12, 2014

In 2012 Al Ries and I had a pleasant chat on Global Branding and how a brand such as Hyundai is doing in that area. I would like to invite you to read the summary of this interview below.

A Hyundai Genesis is a vehicle for people who don’t really care about brands and brand names.

Al Ries: While marketing is becoming a global function, there are always differences between countries. This is especially true when it comes to names. Some names can sound good in one language and bad in another. We work with a lot of companies in China, for example, and almost every Chinese brand name won’t work globally because it sounds bad and is difficult to spell in English.

English has become the second language of the world. If you want to build a global brand, your brand name better sound good in the English language.

Tom: Interesting! So let me ask some questions about your opinion of marketing and branding activities of Hyundai in some countries like Iran. Iran is a rich country and of course, with a big gap in social class differences. But in Iran you can see a lot of luxury cars suck as Mercedes Benz even more than Germany and Lexus more than everywhere. So I want to know what they (Hyundai) are doing in these kinds of countries? Hyundai because of the price- You have to pay duties 100 to 120 percent, also looks as a luxury brand in this market. Maybe that’s a reason who we can say it’s can be an exception.

By the way, I believe that despite the huge success of large companies such as Hyundai in investment, they have not been successful in Branding. When the name of Mercedes-Benz is mentioned, Thousands of images of the product price, logo and even consumers’ appearance come to our minds. But this is not the case of Hyundai. From automobiles to mobile phones, Elevators and even subways, all of them are part of products entered the market with the name of Hyundai. So the first query, let me ask you this: do you agree with my argument that due to noted reason, Hyundai can just be a famous name and cannot be considered as a brand?

Al: I agree that Hyundai is successful product, but not a successful brand. There are three reasons why this is so.

1. Line extension. Hyundai has put its name on many different products.

2. A weak name. In the English language, Hyundai is not a good-sounding name. The name is pronounced “hun die,” which was a battle cry in World War II. (The Germans were referred to as “Huns.”

3. A cheap price. Hyundai vehicles have sold well in America because they are inexpensive. It’s difficult to build a brand if your only advantage is a “low price.”

In the long run, brands become similar. That doesn’t mean that brand loyalty is not important; it certainly is. But it means that most consumers would be willing to accept a number two or three brand if their preferred brand was not available.

Tom: Hyundai cars (even the models such as Santafe and Azera) are considered as luxury cars. One of the critical reasons is that, in the current situation, the price of non-Iranian vehicles for us in Iran is four times the price of them in your country. But my researches showed that in Iran, Appearance is a factor influencing the mind of Iranian consumers. For example, since Toyota cars have a more moderate appearance in comparison with Hyundai, they have fewer fans, whereas Toyota has originality. Don’t you think it can be seen as a gap? Of course, in Iran, Hyundai owners are jealous of Mercedes owners as well. Nevertheless, how you analysis the future of these two Rivals in countries like Iran.

Al: I don’t know enough about Iran to compare the two brands: Hyundai and Mercedes-Benz.

In America, of course, Mercedes is perceived as a luxury vehicle, and Hyundai is perceived as a cheap vehicle.

Tom: What is your idea about the Hyundai logo in the Automobile industry? I don’t know the reason why I always draw this conclusion in my mind that the Hyundai logo has been copyrighted from Honda.

Al: The Hyundai trademark is similar to the Honda trademark. Both are just stylized versions of the letter “H.”

Since Honda was building automobiles before Hyundai, it’s logical to assume that Hyundai copied Honda.

But the truth is, both trademarks are weak and ineffective.

It’s very difficult to associate a single letter with a brand. One exception is “W” which has become a successful hotel brand in America

But, in general, using a letter of the alphabet as a trademark is fundamentally a waste of time and money.

“H” is a particularly overused letter in trademarks. In the hotel industry in America, for example, three chains use an “H” as their trademarks: Hyatt, Holiday Inn, and Hilton.

English has become the second language of the world. If you want to build a global brand, your brand name better sound good in the English language.

Tom: Apparently, Hyundai managers prefer the money instead of Last longer products, strategic marketing and brand. In your old books, you had some predictions about IBM, General Motors and Microsoft that surprisingly, all of them have happened. Today, I want to know your prediction, which is close to my thoughts.

Al: In America, Hyundai is successful because the brand delivers a lot of value for a little money. But that can’t last forever.

As the cost of production of vehicles in Korea continue to increase, Hyundai in the long term is going to have to raise its prices. That will make the brand less competitive in the marketplace.

Up till now, there have been very few automobile brands targeted at the low-end of the market. I believe that will change in the future as Chinese automobile brands invade the global market.

Tom: Most of us kept some photos of Mercedes’s new models along with the photos of super-luxury automobiles like Lamborghini during our childhood. Despite the efforts of Hyundai to offer a luxury automobile like Genesis, why we don’t see the photos of Hyundai on the Children and youth bedroom wall, but the photos of Lamborghini and Mercedes.

Al: Hyundai had launched two luxury vehicle models: the Genesis and the Equus. Neither of them have sold very well in the American market.

In 2012, Genesis accounted for just 4.8 percent of Hyundai’s sales. And Equus accounted for just 0.6 percent of Hyundai’s sales.

Consumers differentiate between “models” and “brands.” Genesis and Equus are not brands, they’re models. And because consumers consider them to be models, their reputation is linked to the Hyundai name. And most consumers in America, for example, consider Hyundai to be a “cheap” vehicle, not a “luxury” vehicle.

Tom: There is one question in my mind. Frequently, I see that the oldest and first items of each category are recorded on it. Kleenex and Xerox are in these categories. But we never call luxury automobiles, Mercedes. Does this law apply in FMCG products?

Al: There are two characteristics that determine whether a brand name can become “generic” for the category. Brands like Kleenex, Xerox, Band-Aid, Coke and others.

One is how dominant the brand is in the category. Brands like Kleenex, Xerox, Coke and Band-Aid have more than 50 percent market shares.

Mercedes-Benz was the first automobile brand, but today in America its market share is just 2.0 percent. No brand with a low market share can ever become “generic” for the category.

The second is the physical appearance of the brand. Each automobile has a distinctive look so people would hesitate to call a “BMW” a “Mercedes.”

On the other hand, a Xerox copy looks no different than a Canon copy. And the same is true for many other brand names that have become generic for their categories.

Xerox totally dominated the plain-paper copier market for more than a decade, thanks to its strong patents. So for more than a decade, consumers referred to any copy as a “Xerox copy.” When competitors came into the market, consumers continued to use the words “Xerox copy” instead of the words “plain-paper copy” or “Canon copy.”

Tom: Let me ask another question about FMCG. How do you think about the meaning of brand loyalty for these products? When we tend to provide a box of mineral water from brand A, and we see that this brand cannot be found in the shop, we decide to select and accept Brand B. Whereas the brand A has the most share of mind in our brains and we usually have provided that many times. But it seems that there is an exception in brand loyalty here. What is your analysis?

Al: There are very, very few categories where brand loyalty is absolute. Most consumers prefer Coca-Cola to Pepsi-Cola, but I don’t know of anyone who would refuse a Pepsi-Cola because he or she was loyal to Coca-Cola.

In the long run, brands become similar. That doesn’t mean that brand loyalty is not important; it certainly is. But it means that most consumers would be willing to accept a number two or three brand if their preferred brand was not available.

Tom: let us return to the main subject. In the English language, Hyundai and Honda are almost pronounced the same. But apparently, in Korean and Japanese languages, their meanings are very different in pronunciation and concept. Nevertheless, it may be considered as copy work by many people. Anyway, Hyundai has a long history. According to this fact, do you recommend renaming?

Al: While the sounds are similar, most Americans pronounce Hyundai (Hun-die) and Honda (Hon-da) differently.

To most Americans, Honda is a good-sounding name and Hyundai is not. And I would certainly have recommended that Hyundai use a different name on the global market.

However, it’s too late for a name change. Hyundai has become a major brand in America, albeit at the low end. In 2012, Hyundai was the sixth largest-selling automobile brand in America with 4.9 percent of the market.

What Hyundai could do, however, is to launch its Genesis model as a separate brand. And that’s exactly what I would recommend.

Genesis competes with Mercedes-Benz, BMW, Lexus and other high-end brands. But its market share (0.2 percent) is nowhere near Mercedes (2.0 percent) and the other luxury brands which also are around 2 percent.

Tom: After all these years of Hyundai activities, do you recommend separating companies under different names again- like the work of Toyota about the Lexus?

Al: Absolutely! The most profitable companies in the world are multiple-brand companies like Procter & Gamble, with 23 brands each with sales exceeding $1 billion. (Over the past decade, Procter & Gamble had a net profit margin of 14.0 percent.)

Also, Toyota has done exceptionally well with its Lexus brand. For a number of years, Lexus was the largest-selling luxury vehicle brand in America. Even today, its sales are comparable to BMW and Mercedes.

Tom: Do you think that Hyundai Genesis seems to be initiative and original car?

Al: No. I think that the Hyundai Genesis is just a well-built and well-designed vehicle with an attractive price.

The problem is the brand. Many buyers of luxury brands like Mercedes, BMW, Lexus,

Cadillac, Audi and others would never consider buying a Hyundai Genesis because of the “Hyundai” name.

An automobile is a “badge” brand. It tells people what you think of yourself. Do you consider yourself to be “above average?” If so, you probably would never buy a vehicle called “Hyundai.”

Tom: And I want to know your answer about this one!, if you were supposed to receive an automobile as a Christmas gift, which one of these cars did you prefer, Hyundai Genesis as a luxury car or Lexus of Toyota as an original car?

Al: A Lexus.

My brother just bought a new car. He bought a Lexus. In the past, he has owned Mercedes and other luxury brands.

A Hyundai Genesis is a vehicle for people who don’t really care about brands and brand names.

Our research shows that just 20 percent of consumers buy on price and performance only. The other 80 percent are concerned about price and performance, of course, but they also want to buy “the best brands.”

Tom: Thanks, dear Al, for taking the time to share your valuable thoughts with me.

Al: All the best
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