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DHL's $150M campaign challenges shipping giants

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Global shipping giant DHL last month launched an ambitious $150 million advertising campaign to re-establish the company in the U.S. In the process, Brussels, Belgium-based DHL has picked a fight with two of the world’s most powerful brands: FedEx Corp. and United Parcel Service.

"We’re the challenger brand," said Dick Metzler, DHL America’s exec VP-marketing.

"It’s going to be tough," said Jim Gregory, CEO of branding consultancy CoreBrand. "FedEx and UPS are so strong."

DHL may have picked a fortuitous time, though, to launch its rebranding, as both UPS and FedEx are currently focusing marketing efforts on brand extensions outside their core shipping business.

FedEx this month debuted ads for FedEx Kinko’s, the office services business it acquired in February. Similarly, UPS is transforming its own office services acquisition, Mail Boxes Etc., into the UPS Store. It is also marketing itself as a logistics company with the tagline, "Synchronizing the world of commerce."

"They are vulnerable," Al Ries, chairman of branding consulting firm Ries & Ries, said of the two U.S.-based shipping giants. But he cautioned, "It’s one thing for an also-ran like DHL to take on a big guy, but to take on two big guys at the same time: That’s a stretch."

Poised to gain market share?

DHL, which is now owned by Deutsche Post World Net, was founded in the U.S. in 1969 to shuttle goods between San Francisco and Honolulu. Today, DHL has more than 170,000 employees worldwide, but it is comparatively unknown in the U.S., where it hasn’t run a consistent ad campaign since its flying truck TV spots more than a decade ago.

But with its purchase of Airborne Express last year, DHL is poised to fight for market share in the U.S. "The real goal," Metzler said, "is simply to provide a strong alternative to the duopoly that FedEx and UPS have in the expedited express and ground parcel market."

With that goal in mind, the company embarked last month on a wide-ranging, aggressive marketing campaign. Part of the effort was the sponsorship of a NASCAR Nextel Cup Series race, the DHL 400, held last month at Michigan International Speedway.

The centerpiece of the campaign is a series of TV spots created by a team at Ogilvy & Mather, New York, led by co-creative head David Apicella. In the debut spot, a UPS and FedEx driver acknowledge each other while stopped at a railroad crossing. When a train carrying DHL trucks rumbles past, one of the drivers remarks, "I didn’t see that coming."

In a more recent spot, a FedEx employee goes on vacation, where he encounters DHL trucks, planes and personnel everywhere. Even when he’s parasailing, he glides past a freighter full of DHL containers. The tagline is, "Competition. Bad for them. Great for you."

"It’s a lot of fun being the challenger brand," said Metzler, who worked 15 years at FedEx in both marketing and logistics. "This is the type of marketing I’ve always really wanted to do."

Taking on his old employer and UPS is a tall order. Metzler estimated that DHL has about 6% to 9% market share in the U.S. and has relationships with 20% of the Fortune 500. With the exception of each other, UPS and FedEx likely have contracts with nearly every single company in the Fortune 1,000.

In CoreBrand’s brand power ratings, which combine a company’s familiarity and favorability ratings, UPS has a 78 rating, FedEx a 77, Airborne Express a 45 (even though it has been absorbed into DHL) and DHL an 18.

"It will take several years of consistent effort to grow the brand to anywhere near the FedEx and UPS levels," said Brad Puckey, CoreBrand’s associate director-brand intelligence.

As powerful as they are, both FedEx and UPS feel comfortable focusing on brand extensions.

Over the past two years, UPS has marketed itself as much more than a shipper. It revamped its logo, removing the box tied with a bow. It has extended its brand to what has become The UPS Store. It has also marketed itself as a logistics consultant to big, medium and small businesses. As an example of how far beyond delivering packages UPS’ business has extended, the company handles repairs of laptop computers for Toshiba America.

Although some marketing experts eschew brand extensions, the strategy appears to be working for UPS. The company’s revenue jumped 11.3% to $8.92 billion in the second quarter compared with the same period last year.

Steve Holmes, manager-public relations at UPS, said the company’s advertising doesn’t show a diluted brand but rather a powerful one. "If you look at the advertising in the marketplace, it paints a very clear picture about where companies are in their evolution," he said. "Clearly, UPS is out front in offering expanded capabilities that go deeper into our customers’ businesses and providing them services much more than just shipping."

FedEx’s latest campaign, which was created by its agency of record, BBDO, promotes the rebranding of Kinko’s as FedEx Kinko’s. Employing typical, business-oriented FedEx humor, one of the ads shows a business traveler gathering his office equipment—including a giant copier that tumbles from the luggage carousel—after a flight. The point, of course, is that FedEx Kinko’s provides an "office on the road."

"We think it’s classic FedEx advertising," said Steve Pacheco, director-advertising at FedEx. "If it ain’t broke, don’t fix it."

He also took a swipe at DHL’s advertising, pointing out that the ads do little more than announce the company’s presence. "They lack a strong value proposition," he said. "The other question is: How good is their service?"

Like UPS, FedEx—with its acquisition of Kinko’s and its foray into ground delivery—is extending its brand. John Osborn, president-CEO of BBDO, said that extending the brand doesn’t necessarily dilute it. For example, another BBDO client, General Electric Co., has built its business on brand extensions.

"The best is when you have an understanding of how the DNA of the brand is but you can apply that DNA across a wide range of products and services," he said. "And you’re only able to do that if you’re able to come from a position of strength."

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