Please use your imagination as you look at the bullet list below. The list is describing a car; try to imagine what it looks like, how much it would cost, and who would make it:
- Large-sized luxury sedan
- 4.6 liter V-8 engine
- Adjustable air suspension
- Reclining, heated, cooled, and messaging rear seats
- Adaptive HID headlights (projector lights that turn as your turn)
- Standard 19″ wheels
- Back-up camera
- Rear seat entertainment system plus mini-fridge
- iPad pre-loaded with owner’s manual in every car
- Personal salesperson who will stop by your house at your convenience for a test drive
- Dedicated service personnel that will pick up your car for scheduled maintenance
How much would you pay for a car like this? How much do you want a car like this? Who would make such a vehicle?
The car I’ve just described will cost $60,000 when it goes on sale this fall. Would you pay that much for this kind of car? What if I told you it was made by Lexus? Yes? What about Mercedes-Benz or Rolls Royce? Yes? Ok, what about Acura or Infiniti? Still a yes? What if it were made by Honda? I would still buy one if I had the money. What if it I were to tell you that this car will be sold this fall at Hyundai dealerships alongside $10,000 Hyundai Accents.
That’s right… this car is a $60,000 Hyundai. It is the Hyundai Equus to be precise.
Would you pay $60,000 for the car I described up above knowing that it is a Hyundai?
Some people might say no. In fact, when visiting a Hyundai dealership about 1 month ago, a salesman informed me that Hyundai was discontinuing the Hyundai Veracruz because people did not want to spend $40,000 on a luxury SUV made by Hyundai.
This brings up topic of positioning. In the minds of most consumers – Hyundai means cheap cars. Toyota, Nissan, and Honda had this same problem many years ago and launched Lexus, Infiniti, and Acura respectively. Toyota knew that people would not pay $100,000 for a luxury Toyota, but they would spend that much on a Lexus.
Korean companies have run into this issue before. Do you remember Goldstar? They made electronics. Most of us will remember them as cheap electronics. Growing up in the 80’s I had a Goldstar VCR, which broke. When Goldstar merged with several other companies in the mid-90’s it became clear that in order to start selling higher quality goods (even luxury goods), which they were capable of doing, they would have to reposition the whole company.
Today Goldstar is called LG a company that is the 2nd largest producer of TVs and the 3rd largest producer of mobile phones. Today LG can sell $1,500 washing machines and $2,700 refrigerators. Can you imagine ever buying a $2,700 Goldstar refrigerator? Of course not, Goldstar had a firm price position in your mind – not a luxury or value position.
Some might say that Hyundai needs to launch a luxury brand, akin to Acura or Lexus, in order to move the Equus and its smaller sibling Hyundai Genesis. But that is a move that Hyundai does not appear to be making. In fact, they have further confused matters by not putting Hyundai logos on the either car. I’m thinking they did that on purpose, but for what purpose?
If you were Hyundai, what would you do? Personally, I would launch a luxury brand; however, maybe Hyundai can show us something revolutionary. Perhaps they will do something that will fly in the face of the brand extension paradigm. Keep your eyes on this one.
