Last updated : September 25, 2014 04:04 PM
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.
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."
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."
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."
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.
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."
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.
(Based on interviews with Tarun Chauhan, managing partner and senior vice-president, JWT; ideation consultant Vinay Kanchan; branding consultant, Cajetan Vaz; Harish Bijoor, Harish Bijoor Consults; Saji Abraham, vice- president, planning, Lowe Lintas; Nabankur Gupta, founder and chief executive officer, Nobby Brand Architects and Strategic Marketing; Jagdeep Kapoor, of Samsika Marketing Consultants; Rajeev Sharma. national brand planning director, Leo Burnett; Suman Srivastava, chief executive officer, Euro RSCG India; Kiran Khalap, co-founder, Chlorophyll brand and communications consultancy; Kaizad Pardiwalla, executive vice-president, Bates 141; Amit Akali, national creative director, Grey Worldwide; Arijit Ray, president, Mudra West; Naresh Gupta, director, national planning director, Cheil Communication; Ashish Chakravarty, creative chief, McCann Erickson; Satbir Singh, chief creative officer, Euro RSCG; Rahul Jauhari, national creative director, Pickle Lintas; Santosh Padhi, chief creative officer and co-founder, Taproot India; Vivek Dutta, business director and national planning head, Hakuhodo Percept; Sandhya Srinivasan, managing partner and chief strategy officer, Law and Kenneth; Ankur Khurana, associate vice-president, Orchard Advertising and Anand Varadarajan of Added Value)First Published : September 25, 2014 04:04 PM