Case: The New Beetle

Group Members:

Name Roll Number

Arvind Gupta ePGP-03-103

Gautam Sethi eMEP-10-044

Mukesh Manghnani ePGP-03-133

Sanjay Malla ePGP-03-163

Sanjeev Sharma ePGP-03-164

Shanti Bhushan Chowdury ePGP-03-165

Abstract and Analysis: Beginning in the 1950’s Volkswagen cars had very
successful run in the American roads. Beetle was a very popular model those days
and had almost like a cult status among American consumers. But starting 1975 VW
started losing its market to new Japanese entrants. By early 1990w VW sales had
fallen to 20% of its 1970 peak. In 1979, the Beetle run in America came to an
abrupt end because of VW’s inability to meet the requirements of two legislations –
The national highway safety act, and Clean Air act. This forced VW stop selling
Beetle in American market.
By 1993 with low sales, even the trade magazines began reporting of VW pull-out
from US market.
With all time low sales in the year 1993, VW began relooking into its marketing
strategy. Then in 1994 it hired a new advertising firm called Arnold
Communications. The idea of engaging a new advertising firm was to revamp the
brand image. The points that need to be taken into consideration while deciding the
market segments:-
• VW consumers were younger, slightly more affluent and more educated than
average car purchaser.
• VW owners enjoyed a more active role while driving
• They enjoy driving from place to place
• These people had unique attitude towards life. They are well informed, more
adventurous, creative, confident and experimenters.

Rebirth of Beetle: More than 10 years after the last beetle was sold in America,
the car designer’s job was to keep Shape and the aesthetics of the Original Beetle
and adding the cutting edge technology. Work started and a prototype was created.
The car was displayed for the first time in public in the 1994 North American
International Auto show. The response was overwhelming; the outpouring of
emotion and positive response from press, dealers, and general public was really
encouraging. Everyone wanted this car out in the market.

Research showed that the New Beetle fans had a varied consumer background-
across all ages and gender. In particular the core audience fell in the age group of
18-34 years and Baby Boomers. They are confident individuals and desire to be
center of attention. Interviews with both sets of consumers highlighted the fact that
Americans had cherished the memories of the Original Beetle. Baby boomers
shared their recollections of the car while the younger generation did not have past
experiences to draw from, the cars strong heritage enabled them to have an
emotional connection with the new Beetle.

Pricing and Competitors: VW team had to assess the New Beetle’s pricing and
competitive place in the market. Prices for small car segment ranged from $11035
to $17239. With base price of $15200, most New Beetles would probably list out in
the $17000- $18000 price range. This would make it one of the more expensive
cars in the small size segment. The VW team realized that a premium price strategy
could be a potential issue for the success of this car. If the car was priced too high,
consumers might trade up into a higher segment of cars. If it is priced too low, the
car might not be attractive to dealers due to lower margins and thus short of
company’s profit.

Dealers: In 1998 there were 600 VW dealers in US, 10% of them exclusive. Over
the 1980s and 1990s these dealers have seen the boom and bust cycle of VW
brand, while several had dropped the VW line, most dealers had added other brands
and correspondingly reduced resources towards VW brand.
With the success of New Passat and the Drivers Wanted campaign many dealers
were encouraged; the company still needs to prove the true value of the franchise.
To improve the relationships with its dealers, VW in 1997 had flown in entire base of
dealers to its company headquarters in Wolfsburg, Germany.

For the advertising agency now the big task before hand is to decide on the
segment of the market to focus on and decide on the medium of communication for
advertising.

The Launch: To connect with the journalists and thus to people, in December
1997, a select group of journalists were flown to Wolfsburg to meet with the
management and have a preview of the New Beetle. Back in America journalist had
been given an opportunity to drive the New Beetle for at least one day and one
night in order to have a firsthand experience of the car.

Targeting and Advertising: For Arnold communications the problem before hand
is to identify the target segment of customers and how to communicate the value
proposition.