The New Beetle Case

Introduction At a time when American’s were sceptical about the purchase of imported cars, due to lack of availability of spare partes and costly repairs, heightening Germany’s existing image problem in the market, Volkswagen introduced the Beetle in 1949 which turned out to be a phenomenal success and envisaged a cult-following by the 60s. However due to factors, such as Deutsche Mark appreciation, declining hatchback popularity, new environmental legislations all led to a dramatic decline in the sales of the Volkswagen Beetle.

The sales after peaking in 1968, died out completely by 1981. Subsequently with a renewed focus to leverage a no. of value propositions from the old beetle such as strong heritage value, focus on unique driving experience and delivering German technology at an affordable value, the company decided to re-model the Beetle to incorporate design features such as –honest, reliable, simple and original to design the New Beetle. After meeting with success through its initial promotional campaigns, the company’s marketing manager Vanzura had decided to target the Baby bloomers with a proposition aimed at ‘indulging in nostalgia’.

While rival companies spent upwards of 100 million dollars towards promotional budget, Vanzura would have to content with 25% of the typical budget size, which would further shrink if Vanzura would have to allocate dollars towards promotional expense of the New Passat which had debuted just 5 months ago. With this constraint on its budgetary resources, the company marketing manager set out to decide the marketing strategy to be followed for the new Beetle. The fundamental problem came down to targeting a broad customer base by advertising in the televisions or to position itself to cater to a niche category by advertising in the print media.

The old Beetle •Beetle was the most successful car model of its time, more than 21 million Beetles were sold. It also was also a huge success in America and had become an true American icon. •The Beetle had a huge fan following in the new generation of Americans. It had become a symbol of individuality and personal style. •Beetle found a place in Disney movies as “Herbie the love bug”, and also in the lives of the common American as a member of his family.

A brief history of VW and Beetle After the launch of Beetle in America, which turned to be great success, VW of America was set up as a subsidiary to VW. A few car models were also launched like Rabit, Microbus and Karmann Gia sport coupe which were successful as well. However Beetle was still the leading car model for VW as it always contributed more than 65% sales (by volume) for VW till 1974.

However, due to strengthening of Deutsche Mark, competition from cheaper Japanese brands VW saw its sales declining in US during 1970s. Due to recession in 1982, declining popularity of hatchbacks and inability to comply with the environmental legislation Beetle was withdrawn from the US markets. VW also took a hit and sales dropped to less than 50000 by 1993. In 1994 a campaign was launched to revive VW and a plan for relaunching Beetle in 1998 was also considered.

Bring back the Beetle “What are you waiting for Doc? Bring back the Beetle. And hurry.” This was the the opening sentence of a letter to Dr Ferdinand Piech, Chairman Volkswagen AG Board of management, which appeared in Chicago Tribune. This reflected the enthusiasm and the anticipation prevailing in the market for the New Beetle. But there were some challenges which were to be addressed before the launch.

One of the major challenges was to remove the misconceptions about Beetle. Beetle was considered to be a “toy car”. This image of Beetle needed a repair to ensure the New Beetle is looked upon as a “Real, Driveable car”. The Beetle did have a segment of potential customers, ie the Baby Boomers, but for a sustained growth it also had to look beyond and exploit the appeal which Beetle had in other customer segments. Efforts to retain Baby Boomers were also required because the New Beetle was not a replica of the old Beetle. Thus positioning of Beetle was the key concern for VW.

Positioning of the new Beetle with the backdrop of old Beetle’s image & success coupled with a limited advertising budget was a challenging job and was considered as “Mission : Impossible” for a marketer.

New Beetle: SWOT analysis Strength: The new beetle enjoys an iconic heritage; it is the successor of a car which enjoyed cult following among the mass and the elite alike during its hay-days. The strong brand image of yesteryears associated with the TYPE I Beetle definitely acts as one of its strength. In addition the new Beetle in today’s age of technology leverages its strength of affordable German engineering to provide its users with the joy of a unique driving experience, which the owners can associate with it. And finally, its design principles – honest, simple, reliable and original, which reinforce its penchant to use classic elements and basic shapes with the help of cutting edge technology and modern detail is symbolic of its spirit and historical strength.

Weakness: One of the concerns which would keep the marketing unit busy at work would be the ‘toy car’ image which has been tagged to it in the market. However the case exclusively quotes that “While many people saw the car as more of a toy, the New Beetle had its fair share of fans.” Another weakness of the new Beetle was that it was one of the more expensive cars in the segment which was contrary to its customer’s perception of affordability that they attached to its predecessor. However the main concern for the new Beetle was the limited advertisement budget at its disposal and the consequently low ad recall that emanated from it.

Opportunities: Notwithstanding the above facts, there were several opportunities in the market for the new Beetle which it could take advantage of. The primary being the emergence of a new generation of fun loving consumers who wanted to express themselves by showing off to the world their car and the confidence associated with it. The nostalgia surrounding the car coupled with innovative promotions and attractive lease financing schemes all represent a favourable proposition for the marketing of the car. In addition, the new Beetle seeks to explore the revelation of people’s love for round shapes using this as an opportunity to promote its simple yet modern designs.

Threats: While the above discussion paints a rosy picture of the new Beetle, all isn’t well with the car and/or the market in general. A decrease of 5% in the small car segment might be indications of a contract market. This coupled with the propositions of competition from Japanese auto makers, in terms of price and volume represents a growing threat which the new Beetle must look to effectively counter. In addition the loss of exclusivity of dealers meant that the dealers were looking elsewhere to regain costs and were not optimistic about Beetles’ selling strengths.

While limited promotional budget represented a weakness in the new Beetles’ marketing campaign it might as well stand for a potent threat, the failure in increase of which might steam-roll the marketing campaign of the new Beetle.

New Beetle Value proposition (CCDS): The New Beetle creates substantial value for the customers because of its cutting edge German Technology and revamped stylish looks. The Car also emphasizes on safety with dual air bags and driving comfort. This was adequately communicated to the customers with new ad campaigns especially with the spearhead "Drivers Wanted. Again" campaign.

The Beetle was banking heavily on the nostalgia factor and was promoted with several ads highlighting this feature. The Beetle added perceived value in the customers mind with in built six speaker music systems, and in built air conditioning in the standard package. This coupled with zero maintenance left a very favourable impression in the customers view. The Beetle's extended warranty and dealership training programmes ensured that this created value was sustained over a long period.

New Beetle: A New Product The New Beetle could be considered as a new product which was being launched. Applying the Booz Allen Hamilton theory, we can see the following characteristics of in the New Beetle. 1.The new Beetle launched with an intention to have the same appeal as the old Beetle had and exploit the emotional attachment which people had with beetle. The new Beetle, however had a different design, better technical features and was “no replica” of the old Beetle.

2.The new Beetle was to be carefully positioned in the market so that it appeals all segments of customers. It was to be projected as a “real, driveable car”. This required a repositioning of Beetle in the market. These factors indicate that the New Beetle was a New product, however it did carry the emotions and design principles which the original Beetle had.

The Beetle Market Arnold Communications had done a lot of market research to understand the customer and dealer perceptions about Volkswagen. They found that most of the VW consumers were young, slightly affluent and more educated than an average car buyer. The enjoyed the unique driving experience provided by VW cars. VW was perceived to be affordable as well.

These notions, followed by the Drivers Wanted campaig set the stage for targeting a huge market for the New Beetle. As per the initial market research VW of America, the New Beetle appealed to a number of different consumer segments. The market included the Baby Boomers and also the new core audience of the 18-34 year olds.

Strategy: The target market segment for “The New Beetle” was demographically diverse though the potential customers embodied qualities such as confidence, individualism and a desire to be the centre of attention. They loved to drive the spirited design and gave more importance to the “driving experience”. The co-branding campaign with K2 and Trek was consistent with the target audience’s aspirations and desires. The “Drivers Wanted” was suitable for communicating the basic value proposition of “The New Beetle” also. Therefore, the company should continue with these two campaigns to utilize the brand awareness that was created.

The euphoria created in the market about the launch of new model should be utilized completely. A major section of the target audience is that of baby boomers who are nostalgic about the brand “beetle”. Hence, by sticking to the original campaign, this euphoria can be capitalized upon. The basic proposition of “offering German Engineering affordably” is somewhat violated as the price range of “The New Beetle” is one of the highest in the small car segment. This can be mitigated by helping customers to meet this higher price. The company did it successfully in the past by providing attractive lease financial deals. This strategy should be continued for this brand also.

Campaign: The launch has received a euphoric press reception and well orchestrated PR efforts had helped this cause. However, positive press coverage was not enough to sell the product. The company faces a paucity of advertising funds and the most economic and effective campaign would be a combination of TV and Print advertising. The TV campaign should be targeted at the younger generation customers with flashy jazz loving ads. This sub-segment is the main target audience of the “The New Beetle”.

This TV campaign will use the majority of the funds but will create awareness among a broader customer base. On the other hand, print advertising should be targeted at “the baby boomers” with the value proposition of “indulging in nostalgia”. A print media campaign in magazines like ‘Architectural Digest’ would be most useful. It has a high ‘Simmons Descriptor’ which indicates the that the readership is high among those people who are conventional and more likely to be associated with the ‘baby boomers’ section.