The New Beetle Case
The New Beetle Case
The New Beetle Case
Volkswagen (VW), a German- based company was one of the popular names in automobile industry in US. Due to the unique size and look of its product, it had gained huge market in US in its early stage only. There were around 550000 unit of sales recorded for VW in the late 60s. However, things changed later and the sales of VW sharply declined to only 49000 units in 1993. It was now the responsibility of a marketing director of VW named Liz Vanzura and her team to re-establish the brand in the US market. The company ended its long relationship with DDB Nedham and hired a small advertising agency named Arnold Communications The firm conducted various researches and identified the target market, and recommended ways for segmentation and positioning of VW. And it even launched first advertising under Drivers Wanted Campaign which proved to be successful and sales rebounded as 1995 and 1996 both experienced an annual 16% increase compared to the previous year. And by the end of 1997, VW was selling 137885 cars, a 178% increase from its 1993 sales but there still were questions on its sustainability And it was on 1998, Liz Vanzura, marketing director of VW along with Waterhouse (director of product development) and Keyes (director of public relations) had to finalize the marketing plans for the New Beetle.
Threat of Substitute products: Substitutes for car can be bicycle, bus, taxi, train and other means of public transportations. If the consumers start using these means for transportation the car business will suffer in a significant manner. Bargaining power of the Suppliers: A lot of raw materials have to be assembled together to make a single car such as iron, windscreens, windows, leather, spring, forms etc. There are a number of manufacturers in the market demanding for these materials while the number of suppliers is comparatively low. Due to this reason, the bargaining power of the suppliers is huge over the manufacturers. Bargaining power of the Buyers: The number of manufacturers is very high in the US market. All the manufacturers are offering more or less similar type of cars which has given the buyers the power of choice. Since the buyers have number of cars to choose from, the buyers are more powerful and their bargaining power is very high. From the industry analysis, we can conclude that the market is highly competitive. To survive and to grow in this industry, manufacturers should be able to either differentiate its product or sell at lower price than its customers. In case of Volkswagen Beetle, it has considered both of these aspects by offering the benefits of German engineering at affordable price.
SWOT Analysis
Strength: The manufacturer of Beetles, Volkswagen, is a highly renowned and reputed car manufacturing company. Beetles offer a combination of German engineering and affordability which has made it the most popular and top to the mind small single design car. In addition to this, the unique, round and stylish appearance of beetles was capable of getting attention and admiration of people who were adventurous and were not shy to be noticed.
Weakness: The round unique shape of the Beetles which gave it a toy like look was not appealing to the whole population. The cute features and the smiley car looked more like a toy rather than a drivable car for some people as they questioned its quality and reliability. Beetles also lack penetration in the emerging economics. Opportunity: The beetles have given Volkswagen an opportunity to expand its automobile market. If it could maintain sustainability, there is a huge scope for VW to increase its sales to the same top level where it once was or even higher as their advertisement under Drivers Wanted campaign launched by Arnold was a success. Threats: The increase in fuel prices and the intense competition from other automobile manufacturers has posed as a serious threat to the success of Beetles in the market. In addition to this, the impending recession can also cause a severe impact on the automobile industry resulting in decrease of transactions in the automobile industry.
Market Segmentation
The points that need to be taken into consideration while deciding the market segments:1. VW consumers were younger, slightly more affluent and more educated than average car purchaser. 2. VW owners enjoyed a more active role while driving. 3. They enjoyed driving from place to place. 4. These people had a unique attitude towards life. They were well informed, more adventurous, creative, confident and experimenters. It seems that in this case we should segment our market based on households; specifically, those that are in the market for a small vehicle and those that are not. This market should further be segmented into households that are price sensitive and those that are not. It is likely that the
younger generation is likely to be less price sensitive than most other households their age.
This campaign was proved to be successful leading to the 20% sales rise from 49953 units in 1993 to 137885 units in 1997. The campaign provided VW with the clear view of target market and the precise view of the products benefits and features to the target customers. To include the new generations of consumer VW made co branding with Trek/K2 and introduced Jetta Trek. By doing this, VW were able to expand the brands consumer base and invite in a younger audience of drivers. With all these campaigns, VW was able to create a unique brand image in the mind of its consumers. It was positioned as a car with an affordable German engineering that would provide a unique driving experience for consumers with special attitude who has different perception for driving as well as for life.
affordability zone. Also, by positioning the product for younger generation VW would ignore the existing nostalgia among the baby boomers for new beetle. This part of the consumers may feel neglected which may lead to negative consequences in the market. Option 2: Target the Baby Boomers Baby boomers represent the people born between the years of 1946 and 1964 i.e. after the Second World War. This segment of people had already a good brand image for VW cars. The nostalgia of this segment for Beetle can be helpful in positioning new Beetle for this segment. Also, they are the one who can afford the cars above $15000 allowing more profit- margin for the dealers. Also, the main feature i.e. affordable German engine best fits to this segment of consumers. This will also reduce the cost of advertising since the best fitted advertising media for these segments of consumers is print media which is the cheapest one. However, targeting this segment of consumer only can have some negative consequences over the other probable consumers of VW. Also, this would continue to enhance its image as a toy car which will have negative consequences on the successful Driver Wanted campaign. The recent survey has also shown that most of the baby boomers have shifted their preferences to large cars such as sedans, SUVs, and pick-ups. Option 3: Target both Gen-X and Baby Boomers The third option for the team can be targeting both Gen- X and Baby Boomers. There can be the broader market available for the product if both the segments of market are included. This will potentially increase the market share of VW. However, doing this would create lots of challenges to VW. They cant provide same message in their positioning for two different segments of population. Also, providing separate message to each segment is also neither possible nor feasible for the company. Thus, with current marketing campaign and positioning strategy VW can focus in only one segment of the population.
1) Currently VW is more concerned with the demographic segmentation by concerning on the demographic characteristics of its consumers. The research had shown that the consumer of Beetle share common features of attitude such as confidence, individualism, and desire to be a centre of attraction. There must be a marketing strategy that would cash from these similarities of two different segments of consumers. 2) VW should develop a single message that would fit the attitude and needs of both the segments providing better market share and better brand value in the market. Both the segments can be targeted at once by finding out various common attributes they share and how those attributes can be used in positioning for the New Beetle. 3) Basic cheap models should be targeted to the young generation who are more pricesensitive. 4) VW should properly position the enhanced model such as New Passat targeting the baby boomer who can afford the car pricing $20000. The nostalgia of baby boomers can be used as a tool to enhance emotional attachment with the product along with some added features that provides motivation to buy the cars. 5) Though the Drivers Wanted campaign was a huge success, still the brand image and preference for VW is far behind than those of competitors. VW must be more focused on its positioning and should make proper use of advertisement and media to increase success of marketing. Thus we can conclude that if positioned properly and identified the target segment well VW can undoubtedly be one of the leading company in automobile industry. And also we have known that proper segmentation, positioning and targeting (STP) of the products and consumers are very essential marketing strategy. The success and failure of a product is highly affected by decision made during STP phase of marketing for a product.