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Synopsis:

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.

Porters Industrial Analysis


Competitive rivalry among the existing firms: US market offered a variety of cars depending on the need and demand of the customers such as Ford, Saturn, and Chevrolet etc. Japanese cars like Honda, Nissan, Toyota etc were also making their way in the American market. The presence of large number of car manufacturers makes the industry highly competitive. Threat of new entrant: Car industry is a capital intensive industry. It requires very high capital to enter into this industry. In addition to this, the current market of car is almost saturated as there are large numbers of car manufacturers. Due to these reasons, the number of entrants will be low hence decreasing the threat of new entrants.

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

baby boomers will fall into the non-price sensitive category.

Furthermore, the more affluent

younger generation is likely to be less price sensitive than most other households their age.

Success of Drivers Wanted campaign


To switch advertising agencies from DDB Needham to Arnold Communications (AC) was a critical decision made by the company. After all, AC was the one who came up with the "Drivers Wanted" campaign. As stated in the case study, when they hired AC they gave the task of making the VW brand important again. So, they did some in-depth research on consumer and dealer perceptions of Volkswagen. AC conducted consumer interview, visited 95 out of top 100 dealers, drove VX for over 50000 miles to experience the cars for themselves. The demographic profile shows that VW consumers are younger, slightly more affluent, and more educated than the average car purchaser. Beside it psychographic profile showed that Volkswagen owners are creative, confident and adventurous individuals who enjoy a more active role in driving; and Volkswagen was perceived as its namesake, the "people's car." Other important information was also taken into consideration; including the rational benefit of Volkswagen i.e. it was the only brand that offered German engineering at an affordable price. The emotional benefit of Volkswagen was that it represented a different way of driving (more connected to the road) and living (more connected to the world). With this information, AC began to craft an ad campaign that played to these strengths (consumer influences). The "Drivers Wanted" campaign was successful because its message which was based on AC's in-depth research clearly targeted the previously mentioned segment and took advantage of how these consumers both thought and felt about the Volkswagen brand. The tag line "On the road of life there are passengers and there are drivers. Drivers wanted" captured the rational and emotional spirit VW wanted to convey to its consumers. Also, another important positioning made by VW was that it tried the consumers to be clear on not only what they stand for but also being clear what they do not stand for. The ad agency positioned the product to be invitational and approachable rather than exclusionary. Also, they wanted to sell the consumers a unique driving experience rather than just travelling distances, faster and cheaper.

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.

New Beetles Positioning Impact: Baby bloomer Vs Youth


Arnold groups research reveals that the target market for the new Beetle took in both Baby Boomers and the younger 18 to 34 year olds. This includes a very diverse group of people, but their research also showed that potential drivers shared some common characteristics like confidence, individualism and a desire to be the center of attention. Vanzura and her team have to make selection of any one of the target market for the positioning of its product. This leaves them with three options. Option 1: Target Gen-X These group of people falls under the age group of 18 to 34 years. They did not have past experience to make decision. Rather strong heritage of car enabled them to have emotional connection with new Beetle. Positioning the product to this target group can help VW continue with its unique appealing design of the car which attracts many young generations. The circular shapes and its unique design makes the car individual, human and personable. Also, promotions like Trek/K2 best fit the need of this group of audience. However, this segment of generation is generally from the less earning segment of an economy who cant easily afford the car pricing $15000 and above. This keeps the care out of the
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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.

Conclusion and Recommendations


Proper positioning of new product is very vital decision for Liz Vazura and her team. After going thoroughly through the case, the following recommendations can be made for VWs team:
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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.