No speed limit for Hyundai

The carmaker is tweaking its dealership and communication strategy for the rural market

As the festive season approaches, expectations are running high among car makers thanks to a good monsoon after two successive droughts. With the hinterland largely untapped compared to the saturated urban auto markets, Hyundai, for one, is fervently tweaking its dealership and communication strategy to woo consumers willing to loosen their purse strings.

Officials at India's second largest car manufacturer say while its success in the country has been built on the popularity of its entry-level passenger cars, over the years Hyundai has begun seeing itself as a "modern premium brand" and has looked beyond competing in the lowest price brackets. This means bringing quality and branding to the centre of its growth strategy.

So while mass media still has a big say in the company's communication strategies, when it comes to retail activity in Tier-III and Tier-IV markets its focus has been on outdoor media owing to their lower costs and higher visibility. Hyundai boasts 275 outdoor locations to support its rural sales outlets (RSOs). With the festive season, it is planning to roll out on-road float ads that showcase its products to the masses.

Puneet Anand, general manager and group head of marketing, HMIL, points out that unlike in case of urban buyers, who are better educated and access a rich mix of media communication, in the rural market buying decisions are influenced greatly by word of mouth. The company's sales managers in its RSOs go to the villages to look out for "Hyundai champions" who spread the word of the brand among the people.

It could be an unemployed youth who is hired, not as a regular employee but as a "spokesperson". Anand says, "Based on their experiences with people, we explain the product features." These personnel get paid by dealers, and the company provides them with mobile phones and two-wheelers. "It's not an earning model for them, but gives them the confidence of having been associated with a big brand," he adds. The company has nearly 1,000 of these spokespersons who are associated with 348 RSOs.

The company plans to increase its count of RSOs to 360 by the year-end and have two to three spokespersons for each. The contribution from the rural segment to its overall sales is 21.6 per cent, up from around 10 per cent in 2011. Hyundai claims that 65 per cent of its ad budget goes into mass marketing (above the line and television). Fifteen per cent of the expenditure is in digital media, where HMIL has grown steadily from only three per cent four years ago, and the remaining 20 per cent towards launches and other outdoor activities including hoardings. "We are not spendthrifts. Our budgets are very calculative as far as product is concerned because it is very strong. Our product does the communication. Marketing needs to ensure people know about the visibility, the product quality, distribution and network," says Anand.

In the rural market, the company's best-selling brands are Eon, i10 and Grand i10, which are priced below Rs 7 lakh. In some rural areas that are closer to urban centres, there are takers for models like Creta (Rs 9.16-14.51 lakh). As the company focuses more on premium cars - a segment where Hyundai has so far failed to make a big impression - with the recent launches of Elantra and Creta its average ticket price has gone up from about Rs 4.5 lakh to nearly Rs 6 lakh. However, Anand argues, that would not impact rural sales as Hyundai is offering "aspiration while competitors are giving hygiene products to customers".

In FY16, HMIL witnessed a 15.1 per cent growth in sales and sold 484,324 units. For the next fiscal, it has targeted sales of half a million units and either raise or maintain its market share of 17.3 per cent.

The differences in branding strategies for the urban and rural markets can also be seen in how the company uses its brand ambassador Shah Rukh Khan. For instance, it recently ran a digital campaign that included four safety videos featuring Khan. When it comes to rural areas, however, the "Hyundai champions" have a more direct involvement in persuading undecided buyers to tilt in favour of the Korean brand.

According to Devangshu Dutta, chief executive of consulting firm Third Eyesight, penetration and price are two key elements for carmakers in India.

"Companies working on deeper dealership and service network have a far greater chance of success, and given the vastness of the country that is a tough task. Given the poor road infrastructure, this becomes more critical than in many other markets. Indians remain highly price-conscious, and this applies to not only the upfront payment (or instalments, if that is the case), but also to the lifetime cost of ownership. For this, higher degrees of localisation, and providing service and maintenance at reasonable costs over the lifetime ownership of the vehicle are hugely important."