Hero Vs Honda: Hero scores 67, Honda gets 59

By Ashwini Gangal and Biprorshee Das, afaqs!, Mumbai, December 20, 2010
Section: News Category: Marketing

afaqs! conducted a quick poll to gain insight into the ramifications of the Hero
Honda break-up at the brand level. We quizzed over 20 professionals
belonging to the advertising and marketing fraternity to gain perspective
about the degree of erosion 'brand Hero' and 'brand Honda' will face
individually, in the absence of one another.

Now that Hero and Honda have decided to go their separate ways, what effect will the end of
this Indo-Japanese JV have on both groups, in terms of core brand value? afaqs! explores the
level of individual brand erosion and the consequent roadblocks for both brands in the years
ahead.

As a team, the Hero Group and Honda Motors brought different assets to the table. Therefore,
the path ahead is bound to challenge both companies in several ways. afaqs! asked industry
experts to rate the brand value of Hero and that of Honda, based on the premise that the value
of brand Hero Honda was 100. Brand Hero garnered a score of 67; while brand Honda pulled
in a score of 59. While on the surface, the meagre difference of 8 points might be marginal; a
qualitative analysis of the experts' opinions throws up several interesting points. Here's a peek
into the pot of mixed responses our professional predictors cooked up.

When Bajaj and Kawasaki decided to part ways, Bajaj, after an initial downtime, revived; and
today, the Pulsar enjoys a hefty share of the two-wheeler market. TVS, too, held its own after
its fallout with Suzuki. However, when Honda and Kinetic split up, Kinetic suffered and was
eventually bought over by Mahindra. Similarly, Rajdoot faded after Yamaha left the building.
Given this chequered history, what impact will the split with Honda have on Hero? Well,
only time will tell.

The overall feeling is that in the years ahead, Hero will continue ruling the mass markets;
while Honda will enjoy prominence in a more premium segment of the two-wheeler market.
The development is also seen as one that will open a lot of export options for the Indian
group.

Another strong sentiment is that the Hero Group would weather the storm, owing to its
powerful sub-brands -- Splendor, Passion, Karizma and CBZ -- as these will help the
company carry forward the emotional equity it already owns. Tarun Chauhan, managing
partner and senior vice-president, JWT says, "Consumers buy a Splendor, not a Hero Honda
Splendor; the sub-brand is more powerful than the umbrella."

Sandhya Srinivasan, managing partner and chief strategy officer, Law and Kenneth, says,
"The interesting thing about Hero Honda is that its sub-brands speak a lot about their
expertise or ability to capture the imagination of the Indian consumer. Besides, it's also about
the product specifics, creating concepts with the Indian consumer in mind, marketing it with a
real know how."
Hero's nemesis

Many an industry expert point out that technology and R&D would be a major challenge for
Hero. Its split with Honda is seen as a major dent on the technical front, as Hero is perceived
to be more of a manager of technical resources, rather than a provider. As Kaizad Pardiwalla,
executive vice-president, Bates 141 puts it, "Hero really needs to ramp up on the
technological front, as seemingly technically sound competition in the form of TVS and Bajaj
will pose a threat."

The belief that Honda is the sole technological backbone for Hero, of course, prevails mainly
at the mind-level; brand Honda apparently brought with it certain default imageries of
technical credibility that rubbed off on brand Hero. Harish Bijoor of Harish Bijoor Consults
underscores, "These are just very strong perceptions in the minds of consumers. But often, it
is these perceptions that drive respect towards a brand."

A few like Suman Srivastava, however, dispel this as a mere myth. "I haven't seen Honda
refresh its technology in a while now, anyway. Maybe that was the reason for the break-up!"
exclaims the chief executive officer of Euro RSCG India.

Extending this thought, Cajetan Vaz predicts that a few years down the line, Hero will come
up with its own line of indigenous technology. "Hero will also have to develop an aggressive
push strategy henceforth," offers the independent brand consultant.

Technology aside, another challenge that Hero is believed to face in the light of the split is
that of successfully retaining its aspirational stance, especially due to the strong presence of
Pulsar in the same space.

"Today, Hero has a commanding position in the Indian two-wheeler market, akin to Maruti in
the car market; but a year or two down the line, it'll have to play a smart game to stay
aspirational and relevant. In terms of market share, there won't be any change for the brand,
as consumers don't bother much about changes that don't impact them directly. But as it steps
off the aspirational platform, consumers may view it as a fuddy-duddy, old bike," warns Saji
Abraham, vice- president, planning, Lowe Lintas.

A third challenge that is expected to stare Hero in the face is that of carefully handling the
differentiation of its two baskets -- the Hero Cycles range and its motorbikes. The former has
a highly earthy, lower-end fragmentation, while the latter is in an entirely different space. As
Satbir Singh, CCO, Euro RSCG, says, "For a lot of Indians, Hero is still about its cycles;
while Honda is associated as the brand that has most of the equity in the two-wheeler space."

Nabankur Gupta, founder and chief executive officer, Nobby Brand Architects and Strategic
Marketing explains that this is precisely the reason why brand Maruti finds itself at the
forefront of the Maruti-Suzuki JV -- in the event of a split, the Indian brand won't suffer
much at the intangible brand level.

Besides, Rahul Jauhari, national creative director, Pickle Lintas, says, "Going ahead, Hero
has to manage the phase out of Honda effectively - there is ample time on hand."

Honda's challenges
While Honda appears to have unceremoniously packed off its technology and left Hero in a
prehistoric lurch, there is a flip side to the story. Hero has to its credit the reputation of being
a consumer empathetic company that understands the pulse of the Indian consumer. Honda,
on the other hand, is believed to lack this kind of deep understanding of the 'desi' rider.
Hence, it may run into trouble coming up with a mass product that drives volumes.

It will also have to work hard to get its pricing strategy right to develop a robust "commuter
bike" portfolio -- a challenge parallel to the one Hero would face if it plans to enter the
premium two-wheeler segment.

Moreover, Honda is also believed to lack a sound local distribution network and front-end
marketing initiatives. A related drawback is the perceived lack of after-sales services,
availability of spare parts, resale value, infrastructure and reliable relationships with dealers.
In sum, Honda's economies of scale are believed to have disappeared after the split with
Hero.

Kiran Khalap, co-founder, Chlorophyll brand and communications consultancy, explains how
the changing market scenario may pose a challenge for Honda. "Japanese brands, as a rule,
have been very patient in new markets. But the rules have changed now and competition has
risen. We don't know whether they have that kind of time in India today. Can the company
rapidly build a full-fledged network and service? We don't know."

Win-Win situation?

Then there are those who view the break-up as nothing short of a liberalising opportunity for
both parties. Jagdeep Kapoor of Samsika Marketing Consultants points out that the real
implications of the development will be felt only in 2014 -- the year in which brand Hero
Honda will actually dissolve.

"What has happened today is a mere financial decision, the marketing implications of which
will be felt later. After 2014, both brands will be at par, as they'll get three years to build their
individual identities," he explains, adding that both brands will thrive and pursue their own
dreams.

Similarly, ideation consultant, Vinay Kanchan sees this as a celebration of India's patriotism,
an opportunity for Hero to stand on its own without international support and a chance to
expand on an international scale in its own right.

Whether the split will turn out to be an ugly divorce with open wounds for both parties; or a
healthy break-up where the partners move on with valuable learnings; there's a third party
that stands to gain the most -- the consumer. Ultimately, the Indian buyer will benefit from
this development, in terms of potential new products/variants to choose from, both brands'
attempts to view the Indian market in fresh ways and both brands' inevitable efforts to fill in
the gaps left by their former partner.