Karizma sets tone for Hero branding strategy

The sports bike is a product of Hero Honda Motors Ltd, a joint venture of India’s Hero group and Japan’s Honda Motor Co. Ltd.

Under wraps: Promos for the new Karizma ZMR motorcycle from the Hero Group’s stable at the Feroz Shah Kotla Stadium in New Delhi, one of the venues for the ongoing cricket World Cup.

Hero and Honda are parting ways, and the Karizma promos are the first of the Indian group’s new branding strategy as it prepares to go to the market alone after a 26-year partnership.

“This is a part of our long-term strategy,” said Sunil Kant Munjal, chairman of Hero Corporate Services Ltd and a member on the Hero Honda board, when asked about the Karizma ZMR advertisements at the sidelines of a conference on 28 February. “We are not rushing into it.”

Hero Corporate Services is a part of the Hero group.

There is no mention of the company’s name in the Karizma advertisements on billboards or on cricket grounds where the World Cup matches are being played.

The Hero group has previously said it would evolve its own brand after the split and enter overseas markets such as Latin America, Africa and West Asia with a new logo.

“In the new export markets, the Hero brand will be taken forward. We are free to export any model under our brand name,” Anil Dua, senior vice-president (marketing and sales), had said during a conference call with analysts and investors days after the break-up in December. Dua did not answer calls on Wednesday.

Hero Honda, with a line-up of high-selling motorcycles including the Splendour and the Passion, is the top motorcycle maker in the country by sales.

“Gone are the days when your products used to sell just because you had a strong brand. Once Honda goes away from Hero, they will have to keep in mind that it is because of the product that a strong brand is established,” said Abdul Majeed, auto partner, at consulting firm PricewaterhouseCoopers. “In my view, the brand is not Hero Honda but Splendor and Passion; and these will not suffer in the immediate term.”

On Tuesday, the $4-billion Hero Group said it is acquiring Honda’s entire 26% stake in the joint venture at Rs739.97 a share, at a near 50% discount to the day’s closing stock price and translating into a deal size of around $851 million (Rs3,829.5 crore).

The steep discount had experts raising questions over whether Honda would demand a higher royalty or model fee to make up for the loss.

The stake has a market value of nearly $2 billion.

The two companies have signed a fresh licensing agreement that runs through 2014 and covers current models and new launches. The agreement also allows Hero to launch models that will not carry the Honda brand.

Hero group has briefed advertising firms JWT, DraftUlka and Percept H to work on its new brand strategy. “We have been asked by the company to come back with thoughts on the new strategy,” said a top executive with one of these firms, asking not to be identified. Executives at the other two firms confirmed the development.

Mint reported on 17 December that the Hero group had started working on a new corporate identity and brand logo.

“We have been in talks with many firms for such association,” Munjal said.

The advertising executive quoted above said Hero group has been trying to promote its sub-brands for some time now and the Karizma campaign could be its first attempt on a large platform.

An executive with a consultancy firm said Hero group may not follow the same strategy abroad.

“Export plans are very critical,” the consultant said, requesting anonymity. “Since the company will be venturing out aggressively, they will have to figure out the right way.”

He added that while bikes such as Splendor and Passion have become “iconic” in India, there was a risk quotient involved in markets “where people don’t know the brand and they may not be able to evoke the same excitement”.

Hero group’s strategy to promote its sub-brands is similar to that of its main rival Bajaj Auto Ltd, which intensely focuses on its sub-brands in the country but sells its motorcycles abroad under Bajaj brand.

“An effective strategy is finally about strong brand positioning at the front-end keeping the customer connection in mind, while keeping things simpler at the back-end comprising design, manufacturing and development,” said an executive at Bajaj Auto. “It is a long-term process. We really want to see what Hero does about it.”