Magazine article Marketing

Mark Ritson on Branding: DHL Is Struggling to Deliver in the US

Magazine article Marketing

Mark Ritson on Branding: DHL Is Struggling to Deliver in the US

Article excerpt

DHL is a wildly successful brand - on the surface, at least: it is the biggest express carrier in both Europe and Asia, with a 40% share in each market.

In the US, however, it has a paltry 7% market share. The delivery market there is dominated by UPS and FedEx, which enjoy a combined 78% market share.

To most marketers, the strength, scale and incumbent power of UPS and FedEx would make the US just about the least attractive target market imaginable. But two strategic factors peculiar to the global delivery business mean that DHL must succeed there.

First, the business is, by definition, international. Any self-respecting global delivery brand wants to be, well, global, and a weak spot in the world's biggest market is, to say the least, problematic. Second, the vast majority of costs in the delivery business are fixed rather than variable. Whether DHL delivers one letter next year or 1bn of them, it will still need a massive infrastructure to allow it to operate. High fixed costs and a relatively small market share are very unhappy bedfellows.

In 2004, for example, DHL lost an eye-watering dollars 500m in the US.

The company has to make it in the US, and make it big. Hence the dollars 1bn acquisition of US delivery company Airborne in 2003, followed by a dollars 1.2bn investment in its US infrastructure. It has also spent dollars 40m on a complete rebranding of 17,000 staff, 18,000 vehicles and more than 3000 locations.

Finally, there was a dollars 110m advertising campaign created by Ogilvy & Mather.

The campaign was big in every sense of the word. Beginning in June 2004 and including heavy rotation during the Olympic Games, the campaign introduced the US to DHL with the message: 'Competition. Bad for them, Great for you.' Print ads proclaimed that, like the Roman and British empires before them, the FedEx empire was about to fall. Meanwhile, TV ads featured UPS and FedEx delivery staff battling it out for most of a 30-second spot only to discover that both had been beaten to their destination by a DHL courier. Another dollars 50m was poured into a second campaign in which customer service became the focus. Once again, no expense was spared, as major US cities were peppered with DHL outdoor advertising, while prime-time TV spots continued the theme.

'Very soon DHL will be as familiar a presence in the US as we are in more than 200 other countries,' declared the company's US marketing chief, Dick Metzler. …

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