THE NEW BEETLE

MARKETING MANAGEMENT CASE STUDY 3

SUBMITTED TO: ASST. PROF. RUPESH KRISHNA SHRESTHA

SUBMITTED BY: 13524 - PARISKRIT SHRESTHA (GROUP LEADER) 13512 - PRABHUSHAN PRADHAN 13513 - MANISH PRATAP 13530 - NABIN SUBEDI

DATE OF SUBMISSION: July 8, 2013

MARKETING MANAGEMENT

THE NEW BEETLE

JULY 8, 2013

Table of Contents
Synopsis ........................................................................................................................................................ 3 Core Issues .................................................................................................................................................... 3 Background ................................................................................................................................................... 3 SWOT analysis ............................................................................................................................................. 4 Marketing Strategy Analysis ......................................................................................................................... 5 Success of Old Beetle ............................................................................................................................... 5 Target Customers for New Beetle ............................................................................................................. 5 Challenges in Positioning New Beetle ...................................................................................................... 6 Recommendation .......................................................................................................................................... 7

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Synopsis
The case explains the story of Volkswagen - a German automobile company and the rebirth of its old model car Beetle. The revised model has been named as New Beetle. The case discusses about the brand positioning, advertising as well as the promotional strategies adopted by the company for Beetle brand in America. Since the inception of Beetle, Volkswagen had sold over 21 million cars and made a number of Americans loyal to the brand. The case further examines the emergence of Beetle as a successful car between late 1950s and 1970s. The past drivers of Beetle were all emotionally connected to the car. At present, Liz Vanzura - the marketing manager of Volkswagen is planning to develop a new marketing strategy for New Beetle. Her strategy team has been working together to take some major decision about how to make New Beetle. The team attends Detroit Auto Show where they display the brand New Beetle and start with effort to make the car successful in the market. Moreover,the team realized that making the car successful in the market will not be easy based on reaction of their dealers and the amount of data from their customers. The team is trying to reinvent the future of New Beetle by using the past of old Beetle and by improving on the features of old Beetle and adding additional luxuries which let the customers customize their cars. The team was facing challenges to bring back the most loved car by Americans on the road and maximize companys revenue by earning loyalty of customers.

Core Issues
Volkswagen is planning to reintroduce Beetle in the market to increase its sinking market share. With the success of Beetle in the past, and the current scenario of car market in 1998, positioning of the brand is the key issue that Marketing Manager at Volkswagen Vanzura is facing. She is facing the difficulties in deciding the target market, positioning and developing an innovative advertising & media campaign for New Beetle..

Background
Volkswagen (VW) has always provided their customers with choices of affordable cars and amazing driving experience. The company introduces Beetle in 1949 in America which soon becomes Peoples car. The affordability, different shape and designs helped VW to sell 21 million units of Beetle as the car appealed to a huge range of customers and became a truly American Icon. Everyone wanted to own a Beetle during 1950s. However, success did not last for long and company went on the way of downfall due to a number of incidents including recession, drop in oil price, stiff competition and declining popularity of hatchbacks. As a result, by the end of mid-1980s, VWs sales had fallen down to 20% of their peak time and company was slowly losing its loyalty in customers eyes. In 1994, VW decides to re-launch New Beetle. The company ends its 35-years relationship with DDB Needham one of Madison Avenues most prominent advertising agencies and hires a new
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advertising agency, Arnold Communications. This advertising agency is given the task to rebuild the image of Beetle in customers eyes. Arnold uses psychographic segmentation to concentrate on the type of customers that the advertising campaign should be targeting. Since, VW had seen the downfall in loyal customers and dealers; Arnold decides to focus on dealer/customer perception of VW and thus conducts customer interviews and visits dealers. They even drive VW cars up on reaching the dealers to experience the features of VW cars in reality. This way, the agency is able to understand the lifestyle and personality of VW customers and also what customers think of VW as a car brand. During the interview, Arnold comes to know that most of the customers are confident and adventurous who like to actively participate in driving and not just drive the car for the sake of driving. To create brand essence and positioning of New Beetle in the market, Arnold uses all the information collected during interviews. The information helps Arnold to find out two potential target markets for New Beetle: Baby Boomers who liked to be connected to their past and new Audience in the age group of 18 to 34 who are younger generation. Practicing all these, Arnold comes up with campaign called Drivers Wanted to market the New Beetle.

SWOT analysis
Strength 1. Iconic image 2. Good Performance 3. Sporty design 4. Distinct features to appeal youngsters 5. Brand image of Volkswagen 6. German Engineering used in cars 7. Pleasurable driving Experience 8. Affordability of cars Opportunities 1. Proper execution of New Passat model 2. Growing automobile market 3. Youngsters diversion for sporty cars 4. Target female buyers Weakness 1. Peoples perception of VW as poor quality and reliability 2. Less budget for promotions 3. Sinking brand image

Threats 1. Introduction of New Passat just 5 months prior to New Beetle 2. Recession 3. Competitors emerging in the market 4. People preferences for SUV and big cars

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Marketing Strategy Analysis

Success of Old Beetle
Old Beetle was very much successful model of Volkswagen as the company sold almost 21 million units of Old Beetle during that time. The huge sale made the Beetle second bestselling car of the history. The car was biggest hit in the US market. The reasons behind the success of old Beetle was: 1. First reason for success of Beetle was companys ability to maintain a profitable relationship with its dealers. Beetle was launched in the era of counterculture that believed small cars are better. This car was designed keeping the culture of Americans in mind as they were fun-lovers, believed in uniqueness and individuality. Beetle had distinct features and very different shape. While seeing the car from front it looked like the car is smiling. It also had friendly appeal and many families in America considered the car as one of their family members. Moreover, Beetle was first car for a majority of people in America that time. 2. Second reason was the pricing policy of Volkswagen for Beetle. During the time when Beetle was launched in US, people in US were not so keen on buying cars from foreign country due to shortage of parts and costly repairs. But the pricing strategy of VW made the company bring a unique European car at much affordable price into the market of US. The affordability of Beetle was one of the core competencies of VW as the tagline of the car also claimed it to be peoples car. Company also marketed the car as a way of investment by giving the message Buy Low Sell High as the car didnt lose its value much with time. 3. Third reason behind the success was German Engineering technology. Despite of bad image of Germany during Second World War, the German Engineering technology was still the most sought-after in the automobile industry. Customers trusted the German technology and the affordability, uniqueness and technology advancement combined paid to the success of Beetle in US market.

Target Customers for New Beetle

Volkswagen has come up with a new car New Beetle which has the basic shape and features of old Beetle model that had been popular among American customers once. On top of old design and features of Old Beetle, New Beetle also has the modern detailing and latest technology incorporated into it. The car model is based on the latest Golf platform. Vanzura is facing a challenge to define the target audience of New Beetle, but she has very limited budget unlike her competitors. The company decides to create the brand importance and relevancy to buyers of 1990s. We found following shortcomings after analyzing the target audience of New Beetle:

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1. Company fails to target the audiences of different groups. Rather, it targets the customers with common personality traits. A majority of customers of New Beetle are confident, adventurous, creative and unusual. They are very much concerned about the features and look of their car. 2. New Beetle has two distinct groups of buyers: Baby Boomers and Generation X. Baby boomers are people who have experienced old Beetle and those who like to relive their memories of Old Beetle by buying New Beetle. Whereas, Generation X targets the young generation with the age group of 18-34 of the country. Audiences who belonged to Baby Boomers group are well educated, and more rich compared to average car buyers. 3. Although, Baby Boomers are emotionally attached to Old Beetle, they show rising preferences in buying SUVs and other big cars. Despite of emotional attachment with Beetle, this target group is doubtful about buying New Beetle. 4. On the other hand, Generation X audiences are more likely to buy New Beetle and show more loyalty to Volkswagen. They are keener on driving unique cars that drive attention of public. This group is also more appropriate to the established image of VW as they fit the campaign of "Drivers Wanted". Thus, Generation X group should be the target audience for the New Beetle. 5. Company should also make use of the common attributes of both the groups with its marketing practices to reach a larger set of audiences.

Challenges in Positioning New Beetle

1. As New Beetle is identified as more of a toy car, the company should aim to position New Beetle in such a way that it should make the car appear as real and drivable among its buyers. 2. The important characteristics of New Beetle are its uniqueness and affordability. Although, this model doesnt come under the cheaper cars of small cars segment, it is still affordable to a larger number of audiences. Company should focus more on these attributes in its advertising campaigns and other promotional campaigns. 3. The size of New Beetle defines its segment as small cars. There are already a number of competitors for VW in this segment, with Japanese giving tough competition to VW. 4. Pricing of New Beetle is also an issue for VW as the high pricing might break companys image as provider of affordable cars and lower price might fail to drag the attention of buyers. On the negative side, Volkswagen need to overcome these challenges through its marketing campaign for New Beetle and other models too. On the positive side, the advertising agency has used all the information collected during interviews in order to decide the target audience and position New Beetle in the existing automobile market. They came up with their first advertising campaign Drivers Wanted. The success of this campaign lied in the tagline itself that was more

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strategically segmented. The tagline Drivers Wanted itself invited people to be a part of VW world and experience the car.

Recommendation
1. As VW has chosen Generation X as their target audience for New Beetle, the marketing campaign should give messages to attract young drivers. Company should come up with some more enthusiastic and triggering advertisements. 2. American and Japanese cars are strong competitors for New Beetle as the car belongs to small car segment. The marketing campaign should be designed in such a way that it should focus more on the uniqueness of New Beetle to attract more of youths and young drivers. This will help the company gain the preferences of people over Beetle than on efficient Japanese and big American cars. 3. Company should clearly explain the uniqueness of New Beetle to its target audiences. This also includes conveying the pricing of the car to the customers. Something like unique with less price. 4. Creative advertisements on television and magazines are important as youngsters are more involved in watching television than other age groups. 5. The marketing campaign should also continue companys initial tagline Drivers Wanted as it sounds to be so appealing among Generation X audiences.

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