DHL Holdings (USA), Inc.

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DHL Holdings (USA), Inc.

1200 S. Pine Island Rd., Ste. 600
Plantation, Florida 33324
USA
Telephone: (954) 888-7000
Fax: (954) 888-7310
Web site: www.dhl-usa.com

COMPETITION. BAD FOR THEM. GREAT FOR YOU. CAMPAIGN

OVERVIEW

In June 2004 Plantation, Florida-based DHL Holdings (USA), Inc., a subsidiary of DHL, which was headquartered in Belgium and was itself a subsidiary of the privately owned German postal service Deutsche Post World Net, ended a more-than-20-year absence from the U.S. television advertising market with a three-spot campaign that announced increased competition in the U.S. express and ground parcel market. The company, which had gone through a number of changes in the years just prior to the campaign, hired Ogilvy & Mather of New York to produce the campaign.

The campaign sported the tagline "Competition. Bad for them. Great for you." It consisted of television spots as well as print and online advertising and outdoor signage. In addition to the campaign proper, Ogilvy PR Worldwide conducted a public-relations campaign to assist in reintroducing the brand. The cost of the campaign was approximately $150 million.

The "Competition" campaign not only reintroduced DHL to United States customers but also introduced new colors for the company and made consumers aware of a fourth option (after UPS, FedEx, and the United States Postal Service) in the U.S. express shipping market. The campaign ended in February 2005, but DHL's two subsequent U.S. advertising campaigns followed up on what "Competition" had achieved and further cemented the company's presence in the U.S. market. B to B named it the best integrated campaign of 2004.

HISTORICAL CONTEXT

Founded in 1969 by Adrian Dalsey, Larry Hillblom, and Robert Lynn (whose surname initials gave the company its name), DHL was originally an express-courier service that carried documents such as bills of lading between San Francisco and Honolulu. During the next two decades DHL focused on international express delivery. In the 1970s DHL first initiated service to Pacific Rim countries (except China) and followed this up with service to Europe, Latin America, the Middle East, and Africa. In the 1980s the company began air-express service to Eastern Europe and the People's Republic of China. A television ad campaign of the early 1980s was memorable for its visuals of flying company vans. During this period DHL was content to relinquish the U.S. express market to rivals United Parcel Service (UPS) and Federal Express (now FedEx). That attitude changed in the early years of the twenty-first century.

The new approach toward the U.S. express-shipping market came with a new owner. In 2002 the German company Deutsche Post World Net completed its acquisition of DHL (the process had begun in 1998). The following year DHL, in an effort to expand its ground-delivery capabilities, made a $1.1 billion offer to buy the ground-delivery service of Seattle-based Airborne Express. Airborne, initially an air-delivery company, had only recently begun its ground-package service in 2001. The deal was held up for five months while the U.S. Department of Transportation examined it closely. The department's two concerns were reduced competition and—because of the climate of heightened security following the terrorist attacks of September 11, 2001—foreign ownership. Ultimately the acquisition went through: the Airborne ground service was merged with DHL Americas, while Airborne's air operations became part of a new independent company called ABX Air, which was owned by Airborne stockholders. In this way the issues of foreign ownership and reduced competition were bypassed.

TARGET MARKET

The target market for the "Competition" campaign was the combined group of owners of small- and medium-sized U.S. businesses. Theresa Howard wrote in USA Today, "Historically both DHL and Airborne courted larger companies, overlooking the smaller businesses that generate 75 percent of new jobs and 52 percent of the gross domestic product, according to Inc. magazine." It was by tapping into this overlooked market that DHL in 2004 hoped to expand upon its meager share of the U.S. ground-express market while not overlooking its core customer base of larger companies.

In addition the humor of the spots was designed to grab the attention of customers under age 40, whether or not they were business owners. In this way DHL laid the groundwork for its future customer base. Finally, as at least one media critic, Barbara Lippert of Adweek, recognized, the spots were also intended to boost morale among DHL employees and solidify the company's effort to expand its share of the express- and ground-delivery market.

COMPETITION

While the United States Postal Service (USPS) competed with DHL, there was never any doubt about who the company was really focused on overtaking. UPS and FedEx held such larger percentages of the U.S. express-and ground-delivery market that DHL Americas CEO John Fellows referred to them as duopolists. In an article in South Florida CEO, Rochelle Broder-Singer quoted Fellows, who saw some advantage for the smaller DHL Americas. "Within the U.S., our competitors are very inflexible [because of their size] and often arrogant. We'll ensure that our brand is flexible." Flexible or not, UPS had effectively rebranded itself with its "What Can Brown Do for You?" campaign, which cost some $45 million. The campaign broke in February 2002, during the Winter Olympics. For its part FedEx responded in October 2003 with its $90 million, award-winning "Relax, it's FedEx" campaign.

That FedEx and UPS saw DHL as a potential threat was obvious from the roadblocks that they threw up when the company sought to take over Airborne Express. Still, compared to them DHL was a very small player in the U.S. market. According to SJ Consulting, a Pennsylvania-based transportation-industry consulting firm, in 2004 UPS held 51 percent of the U.S. parcel market, FedEx had a 27 percent share, and the USPS captured 13 percent of the market. DHL trailed with 7 to 8 percent.

MARKETING STRATEGY

The strategy for the advertising campaign was twofold: to reintroduce the brand to customers and to position DHL as a serious alternative to UPS and FedEx in the United States. DHL executives felt that increasing the company's share of the U.S. market was crucial to the company's global positioning. In her USA Today article, Howard quoted Richard Metzler, then executive vice president of marketing for DHL Americas, who said, "There can't be a strong DHL globally without a strong DHL in the U.S."

The campaign was DHL's first U.S. advertising in two decades, and it used simple humor to get the point across, never leaving any doubt that the company was taking on the giants in the U.S. express market. In one television spot UPS and FedEx trucks waited on opposite sides of a railroad crossing while a long line of flatcars passed, each carrying DHL trucks. Another spot showed a FedEx truck and a DHL truck racing through a city trying to arrive first at the same destination. The race ended in a two-way tie for second place: a DHL driver was walking out of the building just as they arrived. The spots featured the tagline "Competition. Bad for them. Great for you." The passing-train spot particularly reinforced the new DHL colors, red and yellow. Previously DHL trucks had been painted white. The spots aired early in the morning, on prime-time broadcast and cable programs, and during late-night talk shows.

Metzler, who had worked in FedEx's marketing department prior to coming to DHL, also discussed the spots in a B to B article by Mary Ellen Podmolik. "We had to nail it on creative, and we did," he said. Podmolik noted that because of the lengthy gap between DHL's ad campaigns, "Metzler considered it critical to refer to FedEx and UPS by name so as to define [DHL's] own abilities in the express delivery market to U.S. customers."

In addition to the television commercials, print ads were run in leading business publications, ads were placed online, and billboards were installed in strategic locations around the United States. One of DHL's most prominent, and telling, billboard ads was located at the Memphis, Tennessee, airport, across from the FedEx hub. (FedEx was headquartered in Memphis.) As further proof that the "Competition" campaign was the first salvo in DHL's plan to become a major shipper in the U.S. market, the company announced in September 2004 that it had leased space in Memphis for a new sorting center, the third of a planned seven new hubs. The Commercial Appeal, a Memphis daily, quoted two DHL officials on the subject. Steve White, at the time the head of DHL's hub and gateway operations, explained, "Memphis will allow us to expand our overnight delivery to parts of Arkansas, Tennessee, Mississippi, and Kentucky." Dan McDonald, then head of DHL network planning, had a more competitive take on the expansion into Memphis: "Memphis is geographically in the center of the country. FedEx found it works for them, and that we're in FedEx's backyard is just icing on the cake."

Ogilvy PR Worldwide complemented the ad campaign with a public-relations campaign that aimed, according to a June 2004 press release published in Business Wire, "to reintroduce the global express and logistics leader to core constituents and opinion leaders." In that same press release Metzler said, "Using a full 360-degree arsenal of marketing channels, we are showcasing the DHL brand's value message to current and potential customers across all points of contact."

DEUTSCHE POST WORLD NET

While technically tracing its roots back to 1490 and the founding of the modern postal system in what later became Germany, Deutsche Post World Net itself came about in 1995, after the unification of Germany and following the second postal reform. Originally the company was called Deutsche Post AG, with the government as a majority stockholder. The company went public in 2000 and became the largest IPO (initial public offering) of the year in Germany, raising 6.6 billion euros. By the time of its 2002 acquisition of DHL, which became a wholly owned subsidiary, the company was known as Deutsche Post World Net. Its headquarters were in Bonn, Germany. In addition to the express delivery and logistics (i.e., managing a customer's specific transportation and warehousing needs) services provided by DHL, the company retained its original mail service and also offered financial services through its Deutsche Postbank division.

DHL enhanced its ad campaign by signing a deal that made it the "Official Express Deliver and Logistics Provider" of the U.S. Olympic team for the 2004 Olympic Games, which were held in Athens. As such DHL also signed an exclusive U.S. broadcast agreement with NBC, the network that aired the Athens Olympics. The agreement locked out UPS and FedEx from national television advertising during the Olympics broadcast. This was not DHL's first sponsorships of a high-profile sporting event; in 2002 the company was one of the official sponsors of the British soccer team during the World Cup tournament.

OUTCOME

There was no doubt that the reintroduction of the DHL brand was successful, though, as expected, gaining a larger share of the market was less so. Nevertheless, in the USA Today weekly poll Ad Track, 23 percent of those familiar with the spots liked them "a lot." This was a slight increase over the Ad Track average of 21 percent. Among those polled in the 30-to-39 age group, 33 percent liked the spots "a lot," while 27 percent considered them "very effective." The Ad Track average for the latter was also 21 percent. Furthermore, as Howard noted in her November 2004 USA Today article, "tests of DHL's unaided consumer brand awareness show a 40-point climb." Because of the Airborne Express acquisition and the $1.2 billion expansion project, DHL's U.S. operations lost money in 2004 and 2005, though parent Deutsche Post World Net boasted that the company would reach the break-even point by 2006.

Being more or less the groundbreaker in the United States for the new DHL, the "Competition" campaign was bound to influence the company's subsequent campaigns. In early 2005 DHL launched a baseball-themed campaign as part of a sponsorship deal with Major League Baseball. DHL became the official delivery service for the league, the National Baseball Hall of Fame, the website MLB.com, and individual teams. One of the baseball spots featured Johnny Damon, who at the time was a star outfielder for the 2004 World Series champion team the Boston Red Sox. By associating the company with one of the touchstones of American culture, the baseball connection demonstrated DHL's commitment to increasing its share of the U.S. market. In September 2005 DHL introduced a new integrated campaign that emphasized customer service. "Last year we wanted people to understand that we were here and that we were a choice in … shipping," said Karen Jones, DHL vice president of brand, advertising, and promotions, in an Adweek article by Kenneth Hein. "Then the task was coming up with a unique and different message to tell the world why they should choose DHL."

FURTHER READING

Aufterbeck, Sigrid. "Airborne Express Shareholders Approve Sale to DHL." Seattle Times, August 15, 2003.

Broder-Singer, Rochelle. "Fighting the Duopoly." South Florida CEO, May, 2004.

Creamer, Matthew. "DHL Bets on Flexibility as It Moves on FedEx, UPS in U.S." Advertising Age, September 6, 2004.

"DHL Brings Competition and Choice to U.S. Delivery Business with New Campaign." Business Wire, June 14, 2004.

"DHL. Campaign Close-Up." Sales & Marketing Management, August 2004.

"DHL Joins U.S. Olympic Team." Brandweek, July 7, 2004.

"DHL Launches $150 Mil. Campaign." Adweek, June 21, 2004.

Gillie, John. "Seattle-Based Airborne Inc. in Talks to Sell Ground Delivery Unit." Tacoma (WA) News Tribune, March 25, 2003.

Hannon, David. "Small Package Market Changes Could Benefit Buyers." Purchasing Magazine Online, March 17, 2005. Available from 〈http://www.purchasing.com/article/CA510904.html?text=hannon〉

Hein, Kenneth. "'Service Is Back' in New DHL Spots." Adweek, September 12, 2005.

Howard, Theresa. "DHL Dispatches Its Message to USA." USA Today, November 11, 2004.

Maddox, Kate. "Karen Jones, VP-Advertising, Brand and Promotions, DHL Express USA." B to B, July 11, 2005.

Roberts, Jane. "FedEx Rival to Open Sorting Hub in Memphis, Tenn., 'Backyard.'" Memphis (TN) Commercial Appeal, September 17, 2004.

                                               Frank Caso

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DHL Holdings (USA), Inc.

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