Hyundai schools us on Relationship Marketing

Hyundai has produced commercials to create awareness about its new Hyundai Assurance Program.

I don’t watch much television, so the fact that I’ve seen these commercial a few times is indicative of a strong marketing campaign.

When visiting its web site, Hyundai let’s you know that “WE’VE GOT YOUR BACK”.  The Hyundai Assurance Program, in a nutshell, lets the purchaser or leaser walk away from a new vehicle with no strings attached if they lose their income within one year of the purchase.  This is certainly a giant leap away from “you and us” towards “we”; which hints that

1. Hyundai marketers are doing their homework.
2. Hyundai marketers are focused on profitability during what is turning out to be a horrible economic climate for auto manufacturers.

Marketing Homework

Relationship Marketing, stresses long-term mutually beneficial relationships rather than individual transactions.

The current situation for auto manufacturers is primed and ready for a relationship marketing approach.  Hyundai marketers were very shrewd to implement this program and messaging when they did. Given the current economic environment, with the loss of 1.8M jobs in the last 3 months, consumers are skittish.  Hyundai is conveying to the consumer that “we are in this together”.

There may not be a large number of net new car buyers in this market.  But my guess is that Hyundai expects its assurance program to

1. Retain existing Hyundai customers.
2. Poach customers from other manufacturers.
3. Attract new customers.

A Marketing Metrics study, cited in “Winning Back “Lost” Customers:  Who Do You Woo – and How?”, states that marketers have a 5-20% chance of turning a prospect into a customer.  In contrast the marketer has a 60-70% chance of selling again to an existing customer.  This will be all the more acute in the current marketing environment.  On its surface, the Hyundai Assurance Program appears to have been specifically designed for this scenario.

Profitability Focus

In the study, “Zero defections: quality comes to services.”, it was found that profits rose between 30-85% in companies who increased customer retention by 5%.  Other studies have shown that the cost of keeping an existing customer is about 10% of what it costs to produce a new customer.

If the marketers at Hyundai have determined that they are not likely to increase revenues through net new customers in this contracting market, they may have resolved to maximize profits by focusing on existing customers.  Relationship marketing strategies like the Hyundai Assurance Program are designed to increase customer retention and, thus, increase per/customer profit.  Such a strategy would make sense for Hyundai as its ability to influence the macroeconomic variables, currently at play, is non-existent.

At a time when consumer confidence is very low, Hyundai Assurance just may be the marketing savvy that gives Hyundai an edge on the competition.

For now, though, two burning questions remain:  1) Will this strategy work for Hyundai? and 2) Will its competitors follow Hyundai’s lead?

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