NZ MARKETING MAGAZINE MARKETING AWARDS : The Promised Land; Finding good customers and holding...

The year to March 2007 was absolutely pivotal for Honda New Zealand (HNZ). With just four volume models - Jazz, Civic, CRV, Accord Euro - and distinct gaps in the portfolio (no small or medium hatch, large rear-wheel drive sedan or large SUV, which account for 50 percent of the total market), the

objective of claiming, for the first time, the covetted number-one spot in private vehicle sales was a big call to say the least. Of course anyone can simply buy share, but to achieve that objective against a backdrop of vicious industry-wide discounting with a strict no-discount "Our Price Promise" policy and still maintain one of the highest EBITs of all major marques in New Zealand is a remarkable marketing feat.

More remarkable is the culture of independent thinking at Honda that has delivered innovative strategies which challenge fundamental conventions in the category to produce remarkable results.

Aside from annual attitudinal tracking, HNZ places great emphasis on regular communication with, and polling of, the customer and prospect database via H.I.S, the only industry database in New Zealand that captures each and every contact point at dealer and service level and at the centralised call centre (Honda Care).

Combined with non-sales tracking via yearly research, this highly customer-centric structure has helped glean some real human truths behind the volatile local market.

There is consumer fear and loathing over the purchase process involved in buying a new car. This has been caused by a number of factors including the massive impact Japanese used cars have had on the trust factor and expectations of specifications in new cars; and historical perceptions of crippling depreciation on new cars in the New Zealand market.

These, plus the increasingly powerful drivers of behaviour, such as prices at the pump and concern with emissions, have resulted in a stressed buying environment.

With product innovation and supply largely dictated by Japan, it is these consumer insights that highlighted the three key strengths HNZ could leverage to beat out Toyota, Ford and Holden to get to number one in the private market.

Those strengths are: "Our Price Promise" (the same fair price for everyone) selling model, which remains a huge point of difference in a rabidly discount-driven market; HNZ's genuine leadership in environmental issues and emissions reduction (a previously untold story); and a unique agent structure, where the stock and database is owned by HNZ and not the traditional dealers. The latter provided a huge opportunity to control and consistently differentiate the purchase and ownership experience.

Rather than a 'big bang' tactical initiative, it was clear that hitting the goal of being numero uno, would be all about an integrated strategy; getting the combined strengths to work in concert.

To that end three key objectives were set:

1. To bring "Our Price Promise" (OPP) to more prospects and assuage cynicism surrounding this world-leading innovation. The primary success metric would be leads and sales versus marketing spend in the four-month period of activity (with additional, but less quantifiable ROI expected from prospects who have been exposed to HNZ's message, but are not yet ready to buy).

2. To leverage Honda's environmental credentials in a market much more receptive to environmental issues - eg, Honda's leading role in emissions reduction (nitrous oxide and hydrocarbons have reduced 86%); class-leading fuel efficiency (improved 30% when comparing 1995 to 2005 levels); and the unique TreeFund initiative.

3. To convert, and most importantly, keep these prospects via a purchase experience completely different from the standard car dealer experience (measured via purchase experience tracking nationwide) and a HondaCare ownership experience without rival (also tracked via customer loyalty rates in the February quant research).

The private market comprises around 30,000 vehicles per annum with the historical number-one position held by Toyota at around 4300 units (14.3% share). With static new car sales overall, the challenge was to grow Honda volume.

At the core, a national "Our Price Promise" campaign explained its rationale and benefits to the consumer. Unique in the world, OPP is made possible by a radically altered channel structure (an agent rather than reseller model where all stock ownership is pulled back to the national distributor) and selling method with no pressure and no haggling.

With a pool of stock available for every agent at one fair price, the network can cut out wasteful and distracting activity, such as constant "run out" sales and spurious discount structures, and concentrate on what's really important. That is, helping customers enjoy the process of finding the right car at the lowest, fairest price, first time.

But it goes further than that. Because the basic respect that's accorded the individual under the OPP philosophy (why should you subsidise the price a corporate pays for the same car?) means the buyer won't suffer the double whammy of a higher entry price and immediate depreciation down to the lowest price someone else in the market paid.

In fact, the total cost of ownership has been reduced (entry price less exit price on resale) and because the distortionary impact of discounting has been removed the buyer can now enjoy a new car at the same straight line depreciation rate as a used car - normal, fair depreciation based on time and daily wear and tear.

Of course, explaining that complex story to a consumer rendered cynical after a lifetime of horse trading on the dealer forecourt is difficult, but was essential if HNZ was to lead by example and win both trust and custom.

Backing this up with environmental credentials was the third plank in the strategy. This was a three-pronged attack. Firstly, an all-out assault on the '06 AA Energywise Rally - Honda was the only brand to enter its full range for transparent assessment - to independently substantiate Honda's fuel efficiency claims. These claims which were then articulated on the website, at POS - New Zealand's first manufacturer to provide this information and label all cars - and in a nationwide campaign.

Secondly, a national campaign demonstrating emissions effects and Honda's long-term progress on reductions. And finally a nationwide campaign outlining the TreeFund offer and the contribution all Honda customers make.

At the front end, HNZ introduced better follow-up procedures of all direct marketing and campaign prospects by agents, plus intensive training and monitoring of agent performance in the the low-pressure, no-haggle forecourt experience that supports the Price Promise.

At the back end, extended HondaCare services - such as new unlimited kilometres warranties, new service-while-you-wait offerings and online service history for all customers - were initiated.

The communications support came with the core proposition, "The intelligent choice". Long copy national press, print, inserts, web and targeted direct mail was used to get across the price promise, questioning the status quo by highlighting post purchase dissonance experiences through demonstration of the implications of discounting on total cost of ownership (depreciation).

An environmental campaign in national press was used to confront Kiwis with startling emissions imagery such as Auckland smog - and kick-start a more informed discussion on carbon dioxide and nitrous oxide emissions. PR was also used to celebrate TreeFund plantings and successes on a regional basis.

Backing all this up was the outbound call centre support, regular direct mail, the company's quarterly magazine Eclipse and HondaCare online. All were used to reinforce the service offering and help customers make the most of the ownership experience.

The results have been eye-opening. Overall a seven percent year-on-year increase in private vehicle sales to achieve the coveted number-one spot in private vehicle sales with a total private volume of 4330 units and an increase of 2.5 percent market share to 16 percent was achieved against a backdrop of a 9.4 percent decrease in the total private vehicle market.

Within this, there was a remarkable 18 percent year-on-year increase in sales generated over the four month, May-to-August price promise campaign.

TreeFund participation surged past the 200,000 trees nationwide mark with a $1-million contribution from HNZ by December 2006. And "environmentally friendly" research attribute tracking now places Honda nearly 10 percent higher than nearest rival Toyota.

In terms of acquiring customers, the 06/07 activity delivered a 6.6 percent increase in test drives far more efficiently than before. Average cost per lead is down by 21 percent with a 10 percent conversion to test drive and reduction in media spend of 15.5 percent.

More importantly, in terms of keeping customers, at 72% Honda now has the single highest loyalty (repurchase) ratio of any marque in New Zealand. This compares with 52 percent for Toyota and 25 percent for Mazda.

What's most satisfying for the Honda New Zealand team hitting number one in private vehicle sales is that it's been about fresh, independent thinking, a commitment to a strategy and a great execution. On release, the "Our Price Promise" was deeply unpopular with private, corporate and rental car companies, which were used to discounting. It took perseverance to structure and train the sales channel to live up to this promise and in this pivotal year, a clearly articulated new message to cut through the cynicism, a demonstration of the fundamental fairness of the proposition and delivering the result to the bottom line.

Similarly, long before it was trendy, Honda's environmental commitment has always been best in class, but it hadn't previously been communicated clearly to the market.

Finally, where the rubber meets the road in terms of acquisition and retention, HNZ has managed to leverage the strength of its unique integrated database and agent structure by doing the hard yards of well-monitored direct marketing, good sales training, CRM and great service innovations. The result is not just finding good customers but hanging onto them, with the highest loyalty rate in the industry.

Fairfax Media Supreme Award

Winner: Honda New Zealand

What The Judges Said:

* Honda New Zealand epitomises the service-dominant logic of marketing.

* Honda is part of a group of leading-edge companies that are rewriting the rules for product marketers.

NZ Marketing Magazine Consumer Durables Award

Winner: Honda New Zealand

The People: Graeme Meyer

The Partners: * Sugar * Research International

What The Judges Said:

* This is a paradigm shift that is revolutionising the market.

Honda New Zealand has fought against the tide of the industry and reached number one in private sales.

* This is a long-term marketing strategy that has turned several years of focus and commitment into success.

Finalist: Environmental Air Care - RoboCan