the beetle case

7/30/2019 The Beetle Case

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The new BEETLE

Case study analysis on

The new BEETLE

SUBMITTED TO: - SUBMITTED BY:-

Dr. D.D Swain Ajay Pratap SinghProfessor (Marketing) PGDM 2012-2014


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The new BEETLE

Introduction

Abs trac t and Ana ly si s:

Beginning in the 1950s Volkswagen cars had verysuccessful run in the American roads. Beetle was

a very popular model those daysand had almost like a cult status among American consumers. But

starting 1975 VWstarted losing its market to new Japanese entrants. By early 1990w VW sales hadfallen

to 20% of its 1970 peak. In 1979, the Beetle run in America came to anabrupt end because of VWs

inability to meet the requirements of two legislations The national highway safety act, and Clean

Air act. This forced VW stop sellingBeetle in American market.By 1993 with low sales, even the trade

magazines began reporting of VW pull-outfrom US market.With all time low sales in the year 1993, VW

began relooking into its marketingstrategy. Then in 1994 it hired a new advertising firm called

ArnoldCommunications. The idea of engaging a new advertising firm was to revamp thebrand image.

The points that need to be taken into consideration while deciding themarket segments:-

VW consumers were younger, slightly more affluent and more educated thanaverage 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, moreadventurous, creative,

confident and experimenters.

Rebirth of Beetle:

More than 10 years after the last beetle was sold in America,the car designers job was to keep Shape

and the aesthetics of the Original Beetleand 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

AmericanInternational Auto show. The response was overwhelming; the outpouring of emotion and

positive response from press, dealers, and general public was reallyencouraging. 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 becenter of attention. Interviews with both


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The new BEETLE

sets of consumers highlighted the fact thatAmericans had cherished the memories of the Original

Beetle. Baby boomers

shared their recollections of the car while the younger generation did not have pastexperiences to draw

from, the cars strong heritage enabled them to have anemotional connection with the new Beetle.

Pricing and Competitors:

VW team had to assess the New Beetles pricing andcompetitive place in the market. Prices for small car

segment ranged from $11035to $17239. With base price of $15200, most New Beetles would probably

list out inthe $17000- $18000 price range. This would make it one of the more expensivecars in the small

size segment. The VW team realized that a premium price strategycould 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, thecar might not be attractive to dealers due to lower margins and thus short

of companys profit.

Dealers:

In 1998 there were 600 VW dealers in US, 10% of them exclusive. Overthe 1980s and 1990s these

dealers have seen the boom and bust cycle of VWbrand, while several had dropped the VW line, most

dealers had added other brandsand correspondingly reduced resources towards VW brand.With the

success of New Passat and the Drivers Wanted campaign many dealerswere 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 thesegment of the market to focus on

and decide on the medium of communication foradvertising.

The Launch:

To connect with the journalists and thus to people, in December1997, a select group of journalists were

flown to Wolfsburg to meet with themanagement and have a preview of the New Beetle. Back in

America journalist hadbeen given an opportunity to drive the New Beetle for at least one day and

onenight in order to have a firsthand experience of the car.


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Targeting and Advertising:

For Arnold communications the problem before handis to identify the target segment of customers and

how to communicate the valueproposition.

Analysis of Environment:

SWOT ANALYSIS

Strengths

Volkswagen has various car designs that are built to suit different customer needs. It is also perceived as

the German engineering vehicle with affordable price. For the new beetle, the distinctive shape with

curves and smiley face makes it stand apart from the other cars on the road. It makes the driver feel

different and gives a unique fun and pleasurable driving experience. It is also one of the safest cars; the

1998 model of the new beetle is the safest small car that has been tested by the Insurance Institute for

Highway Safety. The beetle looked appealing due to affordability in cost and gas economy

Weakness

For VW brand, the limited distribution channels and weak relationship with dealers create the barrier to

get to customers. In the past, VW seems to have weak marketing strategy that it has the lowest brand

awareness and percentage of ads recall compared to other competitors. This may result from the

insufficient advertisement, wrong communication channels to communicate with its target customers or


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The new BEETLE

unattractive advertisements. In addition, its limited budget at present is the constraint for VW to

increase its brand awareness and promote its product.

For the new Beetle, the past consumers bad experience about the old Beetle model may create the

customers unfavourable emotion about the new Beetle model. For example, the old Beetle was

perceived as having poor brake and inconvenience air-cooled engine. Moreover, comparing to other

competitors in the small car segment, New Beetles prices are considered one of the most expensive

cars in this segment. Inability to keep in step with the American consumers ever changing demand led

to weak sales and loss of confidence from the dealers. It was also viewed as a tired and old product

compared to new generation of car brands.

Opportunities

Since baby boomers are one of the target groups of New Beetles, this segment has high purchasing

power creating the opportunity to increase sales. Technology also creates opportunity to develop the

more efficient energy cars. Also, low labour cost in developing countries allows car manufacturers to

expand the production base and reduce production costs. There is also an opportunity for growth

internationally especially in Asian market since the design of New Beetles has global appeal. Plus, since

Beetles was once very popular in the past, baby boomers loved their groovy cars as young adults and

todays young adults are looking to rediscover the age that passed. The new Beetle can compete in

favourably with the other car brands as it has one foot on the past and another on the accelerator,

providing for the two segments.

Threats

There is an increased competition from both Japanese and US car manufacturers.

Moreover, the trend of American people towards purchasing rather than the conventional sedan or

small car makes it more difficult for New Beetles to enter the market. From the survey in1999, it showed

that 51% of people planning on purchasing within the next year are more likely to purchase an SUV. This

creates the risk for sales of New Beetles. Another threat is the preference of American customers. The

preference for American vehicles is more than three times higher than that of European vehicles.

Moreover, there is the risk of duplicating products from low cost manufacturers like Chinese

manufacturers


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Development and Analysis of Alternative

Solution(s):

Recommendations

VW should target both the baby boomers and generation X. It is very critical to customize

communication message to ensure that it appeals to each target group given the differences in their

needs. Moreover, communication channels / media must be carefully selected to reach both groups

effectively considering the differences in their lifestyles. However, one common tone of communication

is to demonstrate fun-loving, 'young' attitude in the new Beetles.

For Baby Boomers The communication focuses on creating a sentimental connection. Itrepresents the group's affections of the past with happy personal memories and associations

with the old Beetles. It is now a chance for them to act and feel young again with the new

Beetles.

For Gen-X The communication message emphasizes the benefit of the new Beetles as beingthe symbol of fun, happiness, and uniqueness. It will address their needs by representing their

unique personalities, preferences, and life styles which allows them to stand out from the

crowd.

Pricing would be a very important factor for the consumers to make the purchase decision, because in

the old days, the original Beetle represented high performance price ration. If Volkswagen priced the

new Beetle too high, people would easily to switch to another higher priced segment of cars. But if the

price was too low, the consumers wouldnt consider the car as the way to express themselves. And on

the other hand, the price would also be a factor for the dealers to put time and effort to introduce the

cars to the consumers. They would definitely try harder if they could get higher margin from the new

Beetle. VW should price the base model at around $15,200 to appeal to the Gen-X while the baby

boomers price should remain at $17,000 to $18,000 with extra features like sunroof and larger engines.


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The new BEETLE

One drawback that could appear in the US after the launch of the New Beetle 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

colours such as black / grey to target male customers.

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. The American consumers ever changing behaviour demands should be kept

under watch.

the beetle case

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