Volkswagen Changing perceptions and positioning - Stretching a brand Volkswagen (VW) is a famous international brand name that has

traditionally been associated with the mass market, its most famous model being the Beetle. Indeed, it is currently exploiting nostalgia with the new Beetle retro-model. However, not content with sticking to the categories where it enjoys success, the company is also attempting to move into the prestige- and luxury-car segments dominated by established brands like Mercedes and BMW. Its first venture into this market segment is with the new Passat V6 Syncro, which is out of the price range of the typical VW buyer. Evidently, other models are planned at higher level segments and prices. Even though VW owns Audi, Bentley, and Lamborghini, amongst other brands, many people are skeptical that it can stretch its own brand upwards, when consumer perceptions still associate the VW-branded cars with smaller and less prestigious vehicles. Its "badge value" (brand associations) would not appeal to customers of BMW, Mercedes, or even Audi. Additional problems arise when consideration is given to the fact that other brands such as Volvo and Toyota's Lexus are also shifting their position to target the prestige market that demands performance, luxury, and marque. VW acknowledges the issues but says it will give customers more product. But is product what the luxury car owners are really buying? More likely, according to research, it is status, prestige and selfexpression that determines their decision, and VW will need to do a considerable amount of consumer perception management and distributor education to successfully bring any of its VW branded models into that league.

Getting the bugs out - Volswagen's new beetle

Volkswagen's new Beetle may become a sales hit. But it's already a pr home run for a brand that, until recently, could have sued its owners for non-support. Attention retailers. This is a problem you want to have: Mike Sullivan, owner of Santa Monica Volkswagen in California, claims the so-called New Beetle is such a traffic magnet that he has to remove it from his display window every afternoon at 2 p.m. to discourage gawkers and let his salespeople focus on serious prospects. When Sullivan takes it out of the showroom and onto the road, the results are similar. "You can't change lanes," he said. "People drive up beside you to look." The media hype over the new Beetle (VWcalls it the "New Beetle") has been staggering, but the car's appeal appears to be transcending its stereotyped core demographic of Woodstock-recovered baby boomers. Despite the deviations from original Bug features that made it such a lovable, dysfunctional friend, such as rust-prone floorboards and a windshield that was literally in your face, new Beetles will sell for two reasons. First, the introduction comes smack in the middle of a plague of nostalgia in the U.S. More importantly, VW has for the past two years managed to unfreeze its brand from the 20-year cryogenic coma induced by both North American and German executives who understood product development, but were somewhat clueless when it came to comprehending the depth of the VW brand. Where three years ago it may have needed the Beetle to be its savior, the company, with agency Arnold Communications of Boston, has already

redefined VW as simply a rejuvenating tool, ownership of which offers the consumer access to greater personal freedom. And that has effectively laid the groundwork for the Beetle to capture as many hearts as the pundits seem to think it will. "This car breaks all the marketing rules," Liz Vanzura, VW director of marketing and advertising, said at a recent press conference to unveil the Bug's launch campaign. "it cuts across age, education, income and gender."

Amid the period of turmoil, VW had lost focus on the most basic tool required for its re-engineering: brand strategy. For a intents and purposes, it had none. As it struggled to keep its dealers alive, and its customers interested, its message became confused and fragmented. "When you look back at our communications in all apertures," Wilhite said, "you'd have to think, `Did these guys really know where they were going? Were they even talking to each other?"' For more than three decades, Volkswagen's advertising had been handled by Doyle Dane Bernbach, the agency that put the car on the map in the 1960s with brilliant work that revolutionized the ad industry. By the early 1990s, the agency, now called DDB Needham, had come under fire from dealers irate over lagging sales. In the late 1980s, VW's U.S. advertising shifted from "German engineering, the Volkswagen way," to the tongue-twisting and much-lampooned "Fahrvergnugen." In 1993, VW's ads featured a spiritual soundtrack by the Irish-music group Clannad. Needham spun out a subagency--Berlin, Wright, Cameron--just to save the account, but the resulting '94 campaign again merely flailed for some piece of ground that it thought VW could own: "The most loved cars in the world." At the cusp of the marketing malaise, new management demanded a clean break with the past, which meant choosing a new ad agency. After reviewing 29 agencies for the $ 100 million account, the assignment went to Arnold Communications. "They nailed our buyer," said Santa Monica dealer Sullivan. He was particularly impressed when, during an important segment of Arnold's pitch, the power went out on the presentation and Kristin Volk, director of customer insights at the agency, simply turned to the group and continued her argument, unflappable in the face of a potentially disastrous situation. Volk's poise convinced Sullivan that the agency could handle any unexpected blowouts.

"The same is true of our work since Arnold took on the account," he said. "`Speed Racer,' `Sunday Afternoon,' the new Beetle work--the art direction, the look goes in a lot of different directions, but from an attitudinal standpoint, from a brand character standpoint, there is only one car company that could produce those spots. `Drivers Wanted: that's what we're about; is that what you're about?' We're not telling you we're the best, the fastest, the cheapest, the sexiest or the most loved. This is who we are, and we're inviting you in to join us." The results of VW's new marketing "platform" have been encouraging, if not spectacular. During the review, Arnold promised a sales turnaround that would more than double the 1994 sales figures of 97,000, to 200,000 by the end of 1997. Instead, sales jumped to 115,114 for 1995, then up to 135,907 for 1996. In 1997, sales grew only 1.5% to 137,885. But despite the modest sales increase for 1997, last year was much healthier for VW of America than previous years. Much of the sales growth of 1994-96 had been fueled by an aggressive leasing program that got customers into the driver's seat of a new Volkswagen Golf or Jetta for $199 down and $199 per month. VW also offered Trek mountain bikes or K2 skis with new purchases for added value and added attitude. The leasing and outdoor sports cross-promotions helped sales, but cut into margins. Less aggressive promotions resulted in Volkswagen claiming its first North American profit in several years. But to focus too intently on profit margins is to miss the bigger game being played byVolkswagen. The launch of the new Beetle marks the beginning of an engineering transformation underway at the company. Last fall, with considerably less fanfare, VW introduced the new Passat. The new Beetle is intended not simply to be a hit in its own right, but to draw potential buyers into VW showrooms, where next year, they'll see the new, improved models of Golfs and Jettas.

Bolstered by the Beetle, Volkswagen sales could reach 200,000 in 1998. And if the Golfs and Jettas due in 1999 also reflect the exacting engineering standards Dr. Piech set at Audi, Volkswagen executives could set their sights on an ambitious goal that would have seemed laughable just a few years ago: 300,000 vehicles in North America. The endgame already underway in Wolfsburg, and demonstrated by concept cars at recent international auto shows, is to attack not the Japanese, but the German luxury brands, Mercedes and BMW. Plans are afoot to develop a sports coupe modeled on the old Scirocco, and a luxury touring sedan. There is even discussion under way to develop a Passat-based sport utility vehicle. But it remains to be seen how high up the price ladder the company can go and still remain true to the classic brand image of Volkswagen as reliable-but-affordable. "If we are really true to our brand character and values, and continue to build cars from this base of core values in our European driving and engineering experience," said Wilhite, "there's tremendous opportunity to move our brand upscale into higher price points, into different segments of the market that we currently don't occupy." He's not alone in seeing broader potential for the VW brand. "The market is ripe for these things," said J.D. Power's Merrihew. "Volkswagen has a lot of fresh product in existing and new segments. When you stack European brands up against Japanese brands head to head, and when the price/quality equation is comparable, most American consumers prefer European cars because of the heritage and romance associated with their names. Japanese brands can't compete on romance and heritage." That preference for a European nameplate, as well as a strong economy, are helping VW considerably. The new Beetle will only propel Volkswagen further ahead, Merrihew said. "It's a rolling bill board for Volkswagen," he said. "People are paying to drive a rolling billboard."

Advertising like that can't be beat. As to Arnold's advertising, and its relentless focus on the young, active consumers, VW dealers agree that it's helping. It may not be as important as the turnaround in product quality and the ability to offer the cars at attractive prices, but it's an important component of the company's current success and a key to future growth. "This is a brand turnaround," said Arnold's Kelly. "You can't underestimate the role of the New Beetle in this turnaround. Volkswagen has built the foundation. [The Beetle] has been in their mind since the beginning. They've rebuilt awareness, they've rebuilt sales and they've made people like Volkswagen again. "It's a well thought-out, inspirational rebuilding of a brand. The New Beetle is breathing life into and electrifying the brand. It's not just an end point: now it's a magnet for the brand." J.D. Power and Associates recently issued its evaluation of brand franchises and how good an investment they will be over the next five years for dealers. The rating takes into account the company's management, existing products, products in the pipeline and other factors. VW scored 3 , better than Nissan, Ford, Chrysler-Plymouth, Chevy and even Acura. That's a long way from having to pay dealers to keep their doors open. COPYRIGHT 1998 BPI Communications, Inc. COPYRIGHT 2000 Gale Group

Beetle: The Birth, Growth, Death and Revival of a Cult Brand

Abstract:
The case narrates the story of the German automobile company Volkswagen and its Beetle brand of passenger cars. Beetle's emergence as a successful, cult brand between the late 1950s and early 1970s is examined in detail. The case discusses the brand positioning, advertising and promotional strategies adopted for the Beetle brand in the US during the above time period. It also studies the problems faced by Beetle after the mid-1970s, which forced Volkswagen to stop the production of Beetles worldwide in 1979. The reasons for the relaunch of the Beetle in the late 1990s have also been discussed. The case critically examines the success of New Beetle in the early 21st century and discusses its future prospects.

Issues:
Understand the concept of cult brands and the role played by emotional bonding (with the product) in the success of such products.

The End of an Era

In July 2003, Germany's automobile major Volkswagen unveiled the final, special version of its car 'Beetle' in Mexico. Volkswagen revealed that the 'retro edition' would be limited (to 3000 cars) and would be offered in two colors, beige and aquatic blue, the only colors in which the car was available in its initial years. The company also announced that it would stop producing the classic old Beetle from July 30th at Puebla (Mexico), the only plant in the world making the original Beetle in the 21 st century. Beetle, lovingly referred to as 'Bug,' 'Love Bug' and 'Beetle Bug' by customers, industry watchers and analysts over the decades, was undoubtedly one of the most popular cars ever made in the world.

The End of an Era Contd...

By the end of the 1990s, more than 21 million Beetles had been sold. The car had earned the status of a cult brand4 in the 1960s and 1970s across the world, especially in the US. By the 21st century, the original Beetle had been in production for nearly 70 years. Naturally, Volkswagen's decision to end its production disappointed many Beetle fans. A BusinessWeek writer summed up the feelings of millions of such people, "I got a real twinge when I heard that Volkswagen just produced its last Bug."5However, Volkswagen's decision was not totally unexpected -industry watchers (and especially the Mexican people and media) had been aware of this eventuality for quite some time. The car had been the vehicle of choice for most taxi drivers in Mexico City, with more than 80,000 Beetles on the roads in the city. During the early 2000s, many cheaper foreign cars (such as Ford Fiesta, Fiat Uno and Chevrolet Pop) began eating into Beetle's market in Mexico. Around the same time, Mexico City authorities decided to give taxi permits to only cars or cabs with four doors, to ensure passenger safety and convenience. This decision was nothing short of a death knell for Beetle, since it had only two doors. The above two factors, severely eroded demand for the car. Sales in Mexico had dropped to mere 5,000 by 2003, from over 98,000 a decade ago. Given these circumstances, Volkswagen seemed to have been left with little choice...

The Volkswagen Story: The Beetle is Born

The history of Volkswagen and Beetle dates back to the early 1930s. Adolf Hitler (Hitler), the Nazi dictator, commissioned an automobile engineer, Ferdinard Porsche (Porsche), to design a Volkswagen, (German for 'a people's car') in 1933. Hitler wanted a durable, affordable car that could seat five people (parents and three children). His decision was reportedly prompted by the fact that during that period German car manufacturers largely offered luxury cars which were too expensive for the common man...

Beetle: Rise to Glory

Beetle was not an instant success in the US since the market there was dominated by technically superior luxury cars. With its unusual, round, bug-like shape, Beetle was not much of a match for the elegant looking cars such as Cadillac, Corsley, Packard, Hudson and La Salle available in the US during that period...

Beetle: Becoming a Phenomenon

The 1960s and 1970s were a period of glory for the Beetle. The car became the choice of the rebellious, freedom loving, post-war (World War II) generation in the US. In Europe, the car became a symbol of freedom from the tough social obligations and restrictions of that period. According to Beetle customers, owning Beetle also reflected their love for life. A businesswoman interviewed by 'Popular Mechanics' magazine during the 1960s regarded her Beetle as "the first major love affair of my life."...

Beetle Loses Ground

In the early 1970s, Beetle's sales began declining across the world. The decline was the most alarming in the car's largest market, the US. This was attributed largely to the increased competition in the small passenger car segment with the entry of foreign brands, mainly Japanese compact car brands, which were technologically more advanced in this segment. Volkswagen tried to recapture marketshare by introducing a new Beetle model, Super Beetle (1971)...

Time for Beetle Again!

Accepting that the Beetle was all but dead, Volkswagen began focusing on strengthening its product portfolio in the late 1970s. It decided to launch and acquire new brands to become a global leader in the automobile segment...

Reinventing the Beetle

Volkswagen adopted a cautious approach to the relaunch of Beetle as many company executives, including the R&D chief Ulrich Seiffert, opposed this idea...

The New Beetle Makes its Mark

The New Beetle, launched in March 1998, soon stole the hearts of customers across the world. As Volkswagen had hoped, the New Beetle struck an emotional chord in many Beetle lovers...

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