Volkswagen's New Beetle: Problems and Solutions

1- Problem Statement a) Defining the Problem. Volkswagen's core problem is to decide whom to target and how to communicate the New Beetle's benefits and characteristics, utilizing a launching campaign with a limited budget, which implies deciding which aspects of the product to emphasize, media to use, price to determine, and positioning to use, consistent with the new brand message the company wants to transmit its customers. b) Effects and Consequences. A research conducted showed mixed reviews and opinions about the car.

The target market encompassed Volkswagen's core audience of 18 - 34 years olds and baby boomers. Buyer's characteristics were identified as confident, individualistic, and a desire to be the center of attention. In addition, Volkswagen felt it could leverage the nostalgia surrounding the car. However, appealing to young adventurous individuals and nostalgic baby boomers seems to be contradictory. If the company is not able to target the market appropriately, the brand will be inconsistent, misleading customers. Volkswagen is aiming to make its brand relevant.

To achieve this, they have to align with market conditions and trends. An improper segmentation would result in an inadequate association of characteristics of the car, with the target market destroying brand equity. In addition, the company has to decide the media required to publicize the car. Utilizing TV campaigns they will certainly reach a broader customer base. Utilizing print advertising they will reach more specific and demographic segmented customers.

The issue is to adequately balance the media channels to be used to target the right market. On the other hand, price will be one of the most important variables that will determine segmentation used. If the company overprices the New Beetle, the young segment of customers associated with the car would be discarded because they would not afford it, but if they underprice it, uniqueness characteristics would be deteriorated, and dealers would not push sales due to the low margins (refer to SWOT analysis, annex # 1). 2- Alternative Solutions

Taking into consideration that the Volkswagen brand requires revitalization, it is important to coordinate brand promise with a consistent message. In 1998, Volkswagen was trying to reinvigorate its brand associating its image with an invitational approach to adventurous, creative, confident, self sufficient drivers who wanted to take an active role in driving. Hence, the alternatives we are going to propose are aligned with the brand image that Volkswagen wants to establish.

Alternative 1: Target the New Beetle to baby boomers seeking a "nostalgia" experience with a value proposition. If this option is pursued, Volkswagen should emphasize the emotional qualities of the New Beetle. Retro aspects such as its distinctive round shape, and tail lamps should be stressed. Potential buyers could be seduced by utilizing the "nostalgia" factor.

A different advertising campaign from the "Drivers Wanted Campaign" should be pursued since this last one, is aimed at a younger generation of drivers. It would make no sense targeting baby boomers with the same campaign used to target a younger generation. One advantage of this alternative is that baby boomers can afford higher prices than a younger audience. Additionally, it is possible to attract them emotionally by creating associations with previous experiences and memories of attachment. This segment is definitely above the 34 years old. However, it is possible that it also fits the brand image of young, adventurous, creative, and confident individuals.

Nevertheless, market trends also show that baby boomers are buying larger cars in the US 17,000 + range such as SUVs. Despite its high price, dealers exhibited mixed feelings about the New Beetle which evidence their mistrust in the product which is critical since they are directly in touch with consumers (refer to annex # 1 SWOT analysis, Prices and Media to use annex # 5 and # 3). In this alternative, a strategy of print advertising should be combined with a TV campaign since it targets a niche market with big potential.

Alternative 2: Target the New Beetle to a younger population ranging from 18 to 34 years old, not excluding baby boomers. If this alternative is pursued, Volkswagen would reach a larger audience in line with the company's image to reach a new generation of drivers. The target audience would mainly be younger people although, baby boomers would not be excluded, since some of them would probably like to be associated with characteristics such as youthful, adventurous, creative, and confident. The advertising should focus more on the playful, youthful, fun, and unique aspects.

The driving experience which is an asset of the brand should be highlighted. If price in this segment is determined in the range of US $14,000 - $16,000 (refer to SWOT analysis annex # 1), some young customers would be excluded. In addition, the high comparative price with other brands will oppose to the message of affordability desired by the brand, notwithstanding dealers would be inclined to sell the car due to high margins. An advantage with this strategy is that female customers with high incomes are growing fast as a consumer segment in the U.S. Soft Characteristics of the car would appeal more to the female segment, as a result, print advertising directed to these consumers should be used more actively than only TV advertisement. 3- Recommendation

Taking into account the New Beetle's characteristics (refer to annex # 2, Characteristics) and segmentation variables which define potential customers (refer to annex # 4 Segmentation Variables), we recommend pursuing Alternative 2. Concentrating selling efforts on the demographic group ranging 18 - 34 year old, particularly targeting female buyers with a young, adventurous, creative, and confident psychographic lifestyle.

Nevertheless, targeting baby boomers is important. The strategy should combine an appealing proposition to both groups. Brand qualities such as adventurous, creative, confident, and unique should be emphasized. The price should be above the US$14,000 range at launch, since competition in the range of US $11,000 – $14,000 is directed to other type of products like sedan cars with four doors and the New Beetle would target a different customer (refer to annex # 5 Price Competition).

This alternative would guarantee dealers pushing sales more aggressively. Media budget should be divided between TV. and print advertisements. Since we assume that the car would appeal to more females, our suggestion is advertising in magazines such as Architectural Digest, Life, Vogue, and Glamour (refer to annex # 3 Media to Use).

Regarding the "Drivers Wanted" campaign, the New Beetle should be included in it, only if this campaign is going to be the proposal of the whole brand. Nevertheless, we suggest changing the Drivers Wanted campaign because it sends mixed feelings and is perceived as a "begging" to obtain customers. We suggest releasing the New Beetle, considering demographics, first in the United States and later in Europe, because characteristics such as uniqueness, creativeness, and sportiness are growing faster in American society as a pattern to emulate.

Moreover, if it proves a success, additional features and different engine sizes should be included in a proposal to target sub segments within the main segment such as convertibles, two liter engines, etc. Furthermore, the nostalgia message could associate the best characteristics of the old car with the new one. We suggest not disregarding baby boomers since they can afford the premium price and could be critical for the launch but stressing a subtle message. 4- Action Plan

One drawback that could appear in the US after the launch of the products, could be that some male buyers would dislike the product because they would not want to be associated with a feminine car. To tackle this issue, we suggest stressing the car's, driving qualities, technical superiority, and displaying it in colors such as black / grey to target male customers. In addition, engines with better performance ranging between 2,000-2,500 cc should be included. To attract American customers, details such as cup holders and sunroofs should be included among options.

Taking into account the brand's new offer to attract creative, adventurous, and unique styles, it is preferable to launch the New Beetle in the American market initially, since it is less conservative than the European market. Another issue is a trend to purchase larger cars such as SUVs and four door sedans by high income baby boomers. In consequence, the leverage effect of the nostalgia buyers would be reduced and overestimated. A solution to this problem is positioning the New Beetle as a cult, exclusive car, for fun rather than a car for daily use, increasing the appeal to high income customers from both genders.