Hyundai's Bold Path Continues Post-Ewanick

Automaker's Guaranteed Trade-in Program Aims to Improve Perception of Its Vehicles

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Just two days after its new VP-Marketing Steve Shannon took office, Hyundai Motor America launched a program that sets a guaranteed trade-in value toward the purchase of a new Hyundai vehicle between 24 and 48 months of ownership. The move, which comes during its best sales month in March, is the latest in a series of aggressive marketing campaigns from the automaker aimed at combating a lingering perception among consumers that its cars don't hold their value.

Our quality and resale values have been increasing steadily over time, but customers don't perceive that," said Trea Reedy, Hyundai's national manager, dealer marketing and resource management.

Under the program, if the assessed current market value of the car is higher than the guaranteed value, the customer can apply that to the new car purchase. If it's lower, the customer is guaranteed the initial value. To be eligible, all vehicles must be maintained at Hyundai dealerships. Guaranteeing a specific value within two to four years will alleviate customer worries, Mr. Reedy said: "We're saying we have their back." He's confident this will overcome a crucial remaining barrier to the purchase of Hyundai vehicles.

The program demonstrates that Hyundai remains committed to building its customer base, despite the fact that it's selling at full capacity, Mr. Reedy said. Sales were at an all-time high in March, up 32% compared to the same period last year. "This is not designed to sell cars now" but instead to "increase loyalty and drive sales down the road for us," he noted. Stating in ads that the cars have a high residual value isn't as effective as giving them a guaranteed trade-in value, he said. Some upcoming ads will include the phrase, "More car for your money and more money for your car."

The trade-in program follows two successful marketing attempts by Hyundai, the first that provides a 10-year, 100,000-mile power-train warranty, and another, which ran from January 2009 until last month, the brainchild of former marketing VP Joel Ewanick, that allowed those who lost income from a job loss to return their car. Mr. Reedy said this latest program is an indication that the company remains committed to the innovative thinking and aggressive marketing spearheaded by Mr. Ewanick. Hyundai will also continue its "big voices in big places" campaign, advertising through major venues like the Super Bowl and the Academy Awards.

This should "help give consumers confidence that their cars will retain their value," said Michael Omotoso, senior manager, global powertrain, automotive forecasting for J.D. Power & Associates. In this competitive market, companies are worried about consumers jumping from one manufacturer to another. "This will help Hyundai keep their customers," he said. It could also help to keep the sales momentum going and allow the company to continue growing their market share, even if it releases fewer new products, he said.

This could prove to be a clever way to retain and increase market share, since it's less expensive to keep current customers loyal to their brand than to bring in new ones, said Jonathan Linkov, managing editor-autos, for Consumer Reports.

He pointed out that the plan only applies to those who finance through Hyundai credit, so not everyone may be eligible, but he said it could certainly draw in some buyers, especially those who own gas guzzlers, which will have a lower resale value if fuel prices continue climbing.

Mr. Linkov is unsure whether this ultimately will benefit consumers, since it's more costly to service a vehicle at a dealership than to take it to an independent repair shop. Also, dealer technicians "suggest things you may not need at the time of service," he said. Consequently, the extra money spent at the dealership could offset some of the benefits from a guaranteed resale price.

Overall, however, he applauded Hyundai's idea. "This is a new way for them to compete and stand out. It's a new way of bringing people in the door."

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