Hyundai Gains with Marketing Blitz

The weakness of Korea's currency benefits the automaker. It has poured millions into high-profile ads that are helping it gain market share

By Moon Ihlwan and David Kiley

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Four days before swimming sensation Michael Phelps won his eighth gold medal at the 2008 Beijing Olympics, Hyundai Motor America's marketing director, Joel Ewanick, got a phone call from the South Korean automaker's U.S. media buyer. "If you want to be the first ad up after Phelps raises his arms in victory, you can have it, but I have to know this minute," Ewanick recalls of his conversation with Tim Spengler, president of New York's Initiative USA. "I approved it on the phone without checking with anyone," Ewanick adds.

Hyundai Motor's $1 million-plus Olympics ad marked the start of a marketing blitz by the Korean automaker. Fueled by Korea's cheap currency, the campaign has intensified since the auto industry fell into its deep slump. Hyundai has gained a price and profit advantage against its Japanese, European, and U.S. rivals as the won has weakened 23% against the U.S. dollar since January 2008. That means cheaper production costs in Korea and higher profits when Hyundai converts dollars from U.S. sales to won.

The company has channeled much of its windfall into promotional activities. "There has been a close correlation between a jump in Hyundai's marketing spending and a fall in the won," says Suh Sung Moon, an auto analyst at Seoul brokerage Korea Investment & Securities. Hyundai has been struggling for years to shake its cheap-car image even though it has invested $6.5 billion to improve quality over the past five years and plans to keep spending 5% of its revenues on R&D annually. Now the company is taking advantage of the weakness of its competitors to make a leap forward in image and market share.

To see Hyundai's strategy in action, just watch American TV on big nights such as the Super Bowl and the Academy Awards. The company poured an estimated $7 million into ads for each of those events and plans to be a big presence in televised National Football League games this fall. "The goal is to find the high-profile moments the U.S. still shares on TV and have Hyundai share the stage," says Ewanick.

Striking a Chord

To attract more customers to its showrooms, Hyundai ran a summer promotion guaranteeing customers a year's worth of gas at $1.49 per gallon. And the company allows buyers to return their cars and cancel their loans without hurting their credit ratings if they lose their jobs. "These programs are designed to take away reasons for people not to buy a Hyundai," says Brad Benson, a Monmouth Junction (N.J.) dealer.

The strategy is delivering results. Marketing outlays by Hyundai Motor headquarters in Seoul rose 58%, to $693 million, for the first six months of this year from the same period in 2008. (Overall spending is higher, but Hyundai's subsidiaries don't disclose details.) Global market share is now a record 5%, up from 4.3% last year. And Hyundai's share of the U.S. market has jumped 1.2 percentage points, to 4.4%. The company posted a record profit for the three months ended in June, with net earnings up 48% year-over-year, to $664 million on $6.6 billion in sales. Korea Investment & Securities expects Hyundai to post net earnings of $1.7 billion on sales of $25 billion for all of this year.

Hyundai's goal is to move from No. 6 in unit sales globally to becoming one of the world's top five automakers by 2011. And the company is winning recognition at last: J.D. Power & Associates recently named Hyundai the top nonluxury brand in the U.S., ahead of Honda (HMC), Toyota (TM), and Ford (F). Says Sean Kim, Hyundai's senior vice-president for global marketing: "We are beginning to strike a chord with consumer psychology."

Moon is BusinessWeek's Seoul bureau chief. Kiley is a senior correspondent in BusinessWeek's Detroit bureau.

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