Honda upends marketing to retool its cool

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When a Honda owner unveiled a souped-up Civic at a tuner event last year, he got a stunning reception: The crowd booed.

The negative reaction to American Honda Motor Co.'s bread-and-butter model demonstrates how far Civic, once the most popular car with young tuners, has fallen out of favor. But it's not just tuners turning away from once-hallowed Honda.

drop in loyalty

J.D. Powers & Associates' most recent "Apeal" study, measuring owners' delight with new vehicle's design, content, layout and performance, rates Honda 21st industry-wide last year, down from 15th in 2003. Loyalty fell to 55.2% last year from 57.1% in 2003, another Powers study found, and the brand also ranked below industry average in 2003 and 2004 in owners' satisfaction with the new-vehicle purchase experience at dealerships. Honda's baby-boom loyalists are dragging its median age to 45 in 2004 from 43 a year earlier, according to consultant Strategic Vision.

Once known for its engineering excellence, Honda's slow slide in recent years comes in part from strong competition from Nissan North America and Mazda North American Operations' fun-to-drive, hot-looking models. "Honda has to fight on more fronts than before," said Doug Scott, VP at consultant NOP World Automotive. By contrast, Honda has underestimated the youthful buyer; its vehicle styling and marketing reflect what one former insider calls "the painfully conservative culture" of the automaker. "Honda makes dynamically marvelous cars that are aesthetically boring style-wise" and advertising-wise, said the insider. "Nothing ever grabs you."

It's "definitely lost its mojo," said Todd Turner, president of consultant CarConcepts.

John Mendel, the automaker's newest executive and senior VP, admits his top priority is "making Honda cool again." Mr. Mendel, who joined late last year from Mazda, oversees product planning, advertising, marketing, distribution and public relations for both Honda and Acura. He's succeeding Thomas Elliott, exec VP-automotive operations, when he retires this year after 35 years at the company. It will be up to Mr. Mendel, working side-by-side with Dick Colliver, exec VP-sales, to restore that cool.

the fickle young buyer

"We are not struggling," said a Honda spokesman, and in fact, sales aren't falling off a cliff. The brand did hit its ninth straight year of higher annual sales in 2004-but only with an aggressive sales event in December did it manage to eke out a 1.1% gain in annual sales to 1.19 million units.

And its progress will rely heavily on whether it can draw and retain the fickle young buyer. Honda struck out with its boxy Element sport utility, introduced in 2002 and aimed at males under 25. "The demographic for the Element didn't hit what it was supposed to," said Rom Theis, a Honda dealer in Oregon. "For us, it's more popular with 40-to-60-year-olds."

Honda erred in that the base model didn't come with a radio, he said; the thinking was that younger buyers would add their own anyway. Honda has since stopped making the base model.

That failure to understand the young buyer has plagued Honda. Tuners are shunning the current-generation Civic because its suspension made it harder for them to customize the car. Mr. Mendel conceded "we lost that kind of emotional click" with the Civic, but vowed to recapture it with the next-generation of the model coming this fall.

Tuners, he added, should be "quite pleased" with the Si two-door version of Civic, which he said "promises to be the fastest, most powerful and fun-to-drive" version since the car bowed in 1986. Mr. Mendel unveiled a concept version of that two-door coupe at the Chicago Auto Show on Feb. 10, and Honda this fall will be a featured manufacturer at the tuner's haven, the Specialty Equipment Market Association show.

Today's Civic buyers are now in their late 30s or early 40s, when years ago when they were in their late 20s or early 30s, said Art Spinella, president of consultancy CNW Marketing Research, partly because Honda products have gotten "really expensive." Yet they'll get pricier. Honda announced Feb. 14 it was increasing prices by an average of $150 for 2005 models except the Element, Civic LX SE coupe and Insight hybrid. It cited higher operating costs, rising steel and currency-exchange-rate factors.

Honda has been reluctant to discount in an incentive-crazed industry. The brand's highest monthly offer since January 2002 was $1,017 per vehicle in May 2002, when the industry average was $1,926, according to automotive-information site In January 2005, Honda's average incentive was $551 per unit vs. the industry average of $2,412.

A big challenge for Mr. Mendel will be to cut loose with Honda's marketing. "We have always probably been a little too humble," said Eric Conn, assistant VP-advertising on Honda and Acura. "We're not really screamers. We need to crank it up a little." He pointed to the two TV spots that broke during the Super Bowl as a signpost for where Honda creative is going. The commercials for the Ridgeline pickup, Honda's first, are straightforward and all about the product. There are no characters or humor in the spots, from independent RPA, Santa Monica, Calif.

CarConcepts' Mr. Turner maintained Honda's decades of success created complacency in recent years, and called the current TV spot for the new hybrid Accord "understated. Honda feels that it doesn't need to sell itself."

Indeed, "You've never seen Honda blow our own horn," said the spokesman. Maybe now you will.

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