Hyundai Motors Marketing Strategy India

8/11/2019 Hyundai Motors Marketing Strategy India

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Grizli777

Case Analysis of Hyundais

Marketing Strategies in India


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Executive Summary

Hyundai Motor India Limited (HMIL) is a wholly owned subsidiary of Hyundai Motor Company, South

Korea and is the second largest and the fastest growing car manufacturer in India. HMIL presently

markets 20 variants of passenger cars in six segments. The Santro in the B segment, Getz Prime in the B+segment, the Accent in the C segment, the Elantra in the D segment, the Sonata in the E segment.

The case describes in detail the entry, product, pricing, distribution and promotional strategies of HMIL.

The case briefs the challenges faced by the company and its marketing plans in future. It also includes a

note on the Indian passenger car industry, the leading player and its marketing strategy.

Challenges Faced

To develop a strategy to regain its leadership status in the B segment

To develop more products in B and other segments in order to give more options to the

customer and compete with MUL

To overcome its limited production capacity


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Analysis

STP : Maruti Udyog vs Hyundai Motors India Limited

Segmenting:

Maruti:

The segments which MUL served ranged from A segment to the upper C segment. They had cars ranging

from Maruti 800 to Baleno. MUL had the highest market share in the B segment due to the number of

models that it offered when compared to HMIL.

HMIL:

On the other hand, HMIL served segments starting from B to E. The cars which HMIL sold ranged from

Hyundai Santro to Sonata. In this way, Hyundai catered to the upper class of the society as well. In the B

segment, when compared to MUL, HMIL had only one car Santro whereas MUL had 3 models to serve

the same segmentZen, Alto and Wagon R. Also from the case, it is evident that the B segment was the

highest growing segment in the Indian auto industry and by having only one car to serve this segment,

their overall market share was less when compared to MUL. This was even though Santro was initially

the highest sold car in the segment.

Targeting:

Maruti:

MUL initially targeted the Indian middle class by releasing the Maruti 800. This allowed them to capture

around 85% of the market share. With the liberalization of the Indian economy, many other foreign

companies also came into India. This forced MUL to come up with more models to serve different

segments of the society. Currently MUL targets the Indian middle and upper middle class.

HMIL:

HMIL initially wanted to introduce a C segment car to target the upper middle class. However their

surveys indicated that the B segment (and hence demand for smaller cars) was much more and hence

they launched Santro to serve customers in the B segment. Initially HMIL targeted customers from 35-45

years. With the increase in competition from 2002 onwards, HMIL started targeting consumers in the

age group of 25-30 years as it believed that the average age of car buyers had come down. It also

targeted the luxury segments (D and E) where MUL did not have a presence. Our primary consumertarget is middle to upper income professionals who need true value for their money and comfortable

ride in city conditions.


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Positioning:

Maruti:

Initially the Indian market had 2 models Fiat and Ambassador, which were of inferior quality but high

in price. With majority of the Indian population being in the middle class, MUL decided to position its

first model (Maruti 800) as an affordable small car. This helped consumers to graduate from 2 wheelers

to 4 wheelers.

HMIL:

HMIL marketing strategy focused on bring out the differentiating factors when compared to its

competitors. Santro was initially positioned on the design aspect. Later on Santro was positioned itself

as a complete family car. The brand was targeting those users who wanted to upgrade into the B

segment. Hyundai This was when the target group of consumers was between 35-45 years. With the

increase in competition in 2002, Hyundai repositioned Santro as a sunshine car in order to attractconsumers from the 25-30 years segment. Sunshine was communicating two intangibles: Freshness and

youthful attitude. The brand was moving to a " Change your life " positioning.

With regard to the other models, Hyundai Accent was positioned as a next generation car and this was

highlighted by its base line The Next Step. On the other hand, Hyundai positioned Sonata as a

luxury/premium car and emphasized on the same with the base line Dreamt by everyone. Owned by a

few.

HMILsMarketing Strategy (4 Ps )

Hyundai Santro

PRODUCT

Cars were considered as convenience options and compact cars. These enter the MaslowsHierarchy of

Needs at the safety and security level and find a place in every level above that. Relating the Needs

Hierarchy to Demographic classification in India, it was observed that the lower middle and middle

income consumers generally are at this level. Hence, the product was designed to meet the needs of this

segment of consumers. However, keeping in mind the volume of sales needed for breaking even, there

was a need to provide additional features (add-ons) which can transform the car in to a luxury package

to appeal to business class people and the youth. Positioning and promoting the product on the basis of

the factors that motivate the consumers at this level of the hierarchy would prove an effective strategy.

The base model of the all-new Hyundai Santro i.e. Santro LP was fully loaded with a range of exciting

new features. Its unique design provides the car with more head room which allowed for easier entry


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and exit. Visibility became better with Santro as the drivers seat was higher. Also seating postures were

improved by proper economic designs of the seats. In addition to these design features, a number of

safety features like rear door locks for child safety, collapsible steerable column, and ultra high strength

steel bars for protection against side collisions were also provided. This provided a look of stability, a

sense that it is packed with energy and ready to deliver a dynamic drive. It had features like heater, air

conditioner and power steering.

The next version of Santro i.e. Santro LE had additional features like central locking, back wipers, power

windows, body colored bumper, remote tail gate release and tinted glass throughout the car. The most

advanced model i.e. Santro GS has features like fog lamps, rear defogger, waistline molding, full size

wheel cover in addition to those provided by Santro LE.

PRICE

Hyundai decided to take Maruti heads on with the pricing of their upcoming Hyundai cars. The reason

being that they believed that customers would not be reluctant to pay a bit more for value add. The

base mode of Santro i.e. Santro LP was priced at Rs 2.89 lakhs whereas the next 2 models i.e. Santro LE

and Santro GS were priced at Rs 3.49 and Rs 3.69 lakhs respectively. The idea was that Hyundai with

their extensive service network and brand reputation for making reliable cars should get the customers

nod over their competition.

PROMOTION

As the strategy would be creating brand awareness, an advertising contract with Saatchi & Saatchi was

made, who then decided to use the Bollywood superstar Shah Rukh Khan. The first phase of the

advertising campaign was an ad that concentrated on introducing the car by using humor to remove the

ignorance. The second phase of the promotion concentrated on clearing any queries that prospective

buyers may have had. This was done once again through an ad featuring Shah Rukh Khan. It mainly

focused on highlighting the cars features. Also Hyundai promoted the car through their existing

customer base by running a customer satisfaction campaign which televised existing customers

experiences through ads. During the latter part of 2002, Santro was repositioned as a sunshine car to

target younger consumers. Once again, new TV commercials were made to promote the repositioned

Santro.

On the other hand, to tap the rural market, Hyundai joined hands with dealers in rural areas and

promoted Santro through road shows. Also to ensure that the rural consumers were aware of thequality (which was the USP), they also promoted through test drives.

PLACE

Santro was launched across India (both in urban and rural areas).


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Hyundai Accent

PRODUCT

The new Hyundai Accent was claimed to be similar to the Japanese Mitsubishi Lancer in terms of

technology and luxury. Areas where the car had the latest technology included remote controlled music

system, engine immobilizer, keyless entry system etc.

Also in October 2002, a diesel variant of Accent was also released which was built using the CRDi

technology. This allowed the car to be quieter and comfortable when compared to other diesel cars in

India and this was attributed to its better engine.

PRICE

Price and Quality were the two most important factors looked upon by middle income consumers

before they made a purchase. To ensure that the car provided a stiff competition, the car was priced at

a lower price when compared to Lancer. It was priced at Rs 5.35 lakhs. This was to provide luxury to

consumers at a more affordable price when compared to their competitors.

PROMOTION

Brand awareness and information about the new car were promoted more using the print media when

compared to the TV which was preferred in the case of Santro. The idea was that as this was a higher

valued product, they intended to focus on a particular part of the consumer segment. The ads were so

developed to highlight the latest technological features being provided. On the other hand, TV ads were

used to promote the diesel variant of the Accent.

PLACE

Accent was launched across India.

Hyundai Sonata

PRODUCT

The new Hyundai Sonata was technologically compared to the Japanese Honda Accord. The aim was to

target higher income consumers and hence the strategy focused on the higher end technology that was

used.

PRICE

To ensure that the consumers were attracted towards the car, Hyundai priced the car at a lower price

(Rs 16,00,000) when compared to Honda Accord (Rs 17,00,000).


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PROMOTION

Brand awareness and information about the new car were promoted using TV advertisements.

PLACE

Accent was launched across India.

HMILs Strategy

Entry Strategy

Prior to the presence of Hyundai Motors in India, the country had its own share of car providers ranging

from Indian companies like Maruti Udyog Limited, Fiat to foreign players like Ford Motors, Toyota

Motors, Honda Motors etc. So rather than just entering the market and then deciding on which

segments to serve, Hyundai Motors did a careful analysis of the Indian automobile industry. This wasdone through discussions and surveys with dealers, consumers and vendors. It was only after analyzing

these results did HMIL release its first car. This analysis helped them as prior to this, they had planned to

release a car in the C segment but the analysis told them that the most profitable and growing segment

was the B segment due to which they went ahead and released a car in the B segment.

Operation Strategy

To ensure that they have maximum profits, HMIL focused on creating a low cost strategy. For this

reason, they set up their own manufacturing plant in India to take advantage of the low labor and

manufacturing costs. This was opposite to what the competitors were doing as they only had assembly

units in India. Also in comparison to other car companies, HMIL entered India by starting its own

subsidiary whereas other companies had entered through joint ventures with Indian companies. HMIL

was able to provide higher quality cars at lower prices when compared to its competitors. This was as

they were able to use better and the latest technology while at the same time were able to use the low

cost labor and other manufacturing facilities available in India.

Product Strategy

While competitors imported their existing successful models from abroad for the Indian market, HMIL

went against the trend by developing models especially for the Indian market. This allowed it to design

cars suitable more for the Indian environment and hence Indian tastes.

Also HMIL launched products in the segments where there was lesser completion from MUL (who at the

time was one of the biggest competitor) i.e. in the D and E segment. This was through proper

understanding of the Indian consumer requirements.


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Hyundai entered Indian market in 1996. Before entering the company conducted an in depth research of

the existing situation of the industry. According to their research the following opportunities existed in

the Indian market:

The small car segment was neglected though a strong demand existed.

Similarly, the economic segmentation showed that no product existed in t he lower B segment. Existing products were technologically inferior.

A large pool of cheap and educated labour was underutilized.

The government policies in certain states were pro-investment and were doling out incentives

to attract foreign investments.

HMIL took a number of steps to exploit these opportunities.

HMIL targeted the small car segment in the lower B division. As the demand already existed for

this segment, HMILs flagship product SANTRO was an instant hit.

HMIL captured a major share of the market by rolling out SANTRO in a record time of 17

months.

Indian cars were technologically inferior. HMIL came up with a superior product with a lower

cost. To manage lower costs Hyundai set up its manufacturing plant in Chennai, India instead of

assembly units.

They also utilized the abundant cheap and educated labor in the process.

Tamil Nadu was extending concessions on land rates. HMIL chose a strategic location in this

state. It gave them access to both sea (port) and land (national highway) transportation routes.

The proximity to ports facilitated exports.

By 1999 the competition in the small car segment increased. To mitigate the risk of operating with a

single product, since 1999 HMIL has come up with newer car models and also with variants of the

existing models. HMIL also stretched the length of its product portfolio from lower B to E segment.

In 1999, HMIL introduced Accent in the C segment. It was positioned as a technologically

advanced car. A diesel variant was introduced in 2002, with path breaking CRDi technology.

HMIL entered the luxury car segment Segment D with Sonata in 2002. It was positioned as a

premium car.

HMIL realized that the average age of the first time car buyers had come down. To attract this

segment, HMIL targeted newer segments for Santro by positioning it as the youth car the

sunshine car in 2002. They came up with variants like Santro Zing.

To tap the growing rural market, HMIL came up with innovative marketing strategies and

involved dealers in the rural area in the effort to ensure higher visibility and awareness about

the products.

In 2004 another segment D car Elantra was introduced.

Getz introduced in higher B segment filled the only existing gap in HMILs product portfolio from

segment lower B to D.


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Alternate Solutions for HMIL

The major challenges that HMIL currently faces is how to regain its leader status and market share. We

believe that HMIL needs to take multiple measures to achieve their target. These measures are:

Continue to innovate

Emerging markets are a fertile ground for innovation. The challenge of reaching dispersed, low-income

consumers in emerging markets often spurs significant innovation. These innovations will become the

basis for 'attacker' strategies that can be used to challenge the competitors. Innovations and

improvements in technology, design can help to manufacture higher quality cars at a lower cost. This

will help to attract more consumers. HMIL should focus on its strengths of delivering excellent quality

and performance.

Diversify

To ensure that it has its presence across multiple segments, HMIL should look to manufacture and

releases new models to compete with Maruti etc. They should add new cars to their product line and

get more into and within segments like the B and C segment which are one of the fastest growing

segments in the Indian auto industry. HMIL should leverage on its ability to launch technologically

superior products and its innovative marketing strategies to come up with new models in the existing

product segments. This might cannibalize on the market share of their existing cars like Santro and

Accent but the effects of the same can be advantageous to HMIL as it can attract competitors

customers. They should look to exploit the customer value perceptions concept that they have used tillnow.

Penetrate more into the rural markets

The rural markets are one of the largest untapped markets in India. HMIL should look to target these

segments by introducing lower cost cars. This will help them to increase their market share and thereby

to retain their leadership status.

Expansion of production capacity

HMIL should expand its production capacity in order to produce the required number of cars to be

released into the market. HMIL had a production capacity of 2,00,000 cars per year as against 5,00,000

cars churned by MUL in a year. It should make sure that the production crunch that happened in 2004

due to the release of its new model Getz should not repeat again. The lack of enough production

capacity is expected to affect the companys market share as it would not be able to fulfill increased

demand.


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Strategy for TataNano

The great wonder car by Tatas has stunned the entire world. Critics who often said that it was not

possible to make a car at a price below $3000 were taken to a back sit when Ratan Tata the chairman of

Tata Motors unveiled this car in New Delhi at a price of $2500. Much of India's low-cost production edge

comes from cheap labor and a large part of the low-cost assembly in factories and plants is donethrough manual operations. However this situation is changing fast with companies wanting to increase

productivity by automating their lines. Tata cut costs by minimizing components, particularly steel, and

taking advantage of Indias low production costs. Because of its size, it requires less metal, has a smaller

and lighter engine than other cars, smaller tube-less tyres and a basic interior. Tata divided the

components into two types proprietary designs and Tata Motors design. For proprietary design

components, Tata went with established suppliers who then worked on the development from Indian

technology centers hence saving further cost. The cost associated with employing engineers in

international development centers was a costly affair which made Tatas use local design capabilities.

For components and systems designed in-house, Tata Motors chose suppliers with strong processcapabilities who could give valuable suggestions and improvements in the designs. Nearly everything

has been sourced locally and the Nano boasts of greater than 95% of content sourced locally since day 1.

Tatas suppliers were an integral part of the design and development process. Tata not only worked on

its own processes but also helped its vendors innovate. Instead of annual contracts, Tata went with long

term volume contracts with its suppliers, driving down the costs even further.


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Segmentation and Targeting

The low-cost car is clearly intended for the masses. It should be aimed for the first-time car buyer in

India - a huge market despite the increasing number of cars in the urban and semi-urban areas. It also

attracts the buyers of other small cars like Maruti 800.

As the product is newly launched in the most competitive segment of the market, a substantial

promotion budget to sell the product to the customers is needed. Geographical analysis of Indian

population indicates that the consuming population is concentrated generally in bigger cities. As Nano is

designed for both middle and lower income groups, they need to target cities where there is a good mix

of the working middle class and lower working class population. Further, they can target the single

working class, the newly married couples without kids & married couples with 2 kids categories of

Lifecycle segmenting. Also due to the low price of the car, the rural market should also be targeted.

Positioning

Using product differentiation Nano should be positioned as the most convenient, value added car model

for the above target market used. The marketing strategy will be focused on promoting the car as

economic car for the next generation.

Pricing strategy

Tata initially targeted the vehicle as "the least expensive production car in the world" aiming for a

starting price of 100,000 rupees or approximately $2300 US despite rapidly rising material prices.

Promotion Strategy

Road Shows

The company should look to stage road shows, to display vehicles in the pavilions during various college

festivals and exhibition. This car will appeal to youngsters more.

Television advertisements

Advertisements to promote and market the product should be shown on leading television channels.

Major channels should be used to promote and to reach out to the target segments.

Radio

Radio is the medium with the widest coverage. Studies have recently shown high levels of exposure to

radio broadcasting both within urban and rural areas, whether or not listeners actually own a set. Many

people listen to other people's radios or hear them in public places. So radio announcements should be

made and advertisements should be announced on the radio about the product features and price,


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qualities, etc. This is especially important to reach out to rural areas which comprise part of the target

segment.

Print Ads

Daily advertisements in leading newspapers and magazines should be used to promote the product.Hoardings, banners, neon signs can also be displayed outside theatres and shops to promote the new

brand.

Online Community based marketing

This will help to create a pre launch buzz about the car. This can use tools like blogs to allow discussions

among members.

Place

As the car is a compact car available at a very low cost, Tata should target all major urban cities and rural

areas. They should use a multi tier network of dealers to reach the rural areas.

Hyundai Motors Marketing Strategy India

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