2010

[NEW BEETLE CASE STUDY]

“Mission Impossible:  Launch  of the  New Beetle”

 1. INTRODUCTION
At a time when American’ were skeptical about the purchase of imported cars, due to lack of availability
of spare parts and costly repairs, heightening, Germany’s existing image problem in the market,
Volkswagen introduced the Beetle in 1949 which turned out to be a phenomenal success and
envisaged a cult following by the 60s. However due to factors, such as Deutsche Mark
appreciation, declining hatchback popularity, new environmental legislations all led to a dramatic decline
in the sales of the Volkswagen Beetle. The sales after peaking in 1968, died out completely by 1981.
Subsequently with a renewed focus to leverage a no. of value propositions from the old beetle such
as strong heritage value, focus on unique driving experience and delivering German technology at
an affordable value, the company decided to remodel the Beetle to incorporate design features such as –
honest, reliable, simple and original to design the New Beetle. After meeting with success through
its initial promotional campaigns, the company’s marketing manager Vanzura had decided to target the
Baby boomers with a proposition aimed at ‘indulging in nostalgia. While rival companies spent upwards
of 100 million dollars towards promotional budget, Vanzura would have to content with 25% of the typical
budget size, which would further shrink if Vanzura would have to allocate dollars towards
promotional expense of the New Passat which had debuted just 5 months ago. With this constraint on its
budgetary resources, the company marketing manager set out to decide the marketing strategy to be
followed for the new Beetle.

 To illustrate the development of target market segments

 To link the processes of market segmentation, market targeting & product positioning

2. PROBLEM IDENTIFICATION & ANALYSIS

The fundamental problem came down to targeting a broad customer base by advertising in the
televisions or to position itself to cater to a niche category by advertising in the print media.

The Old Beetle

 Beetle was the most successful car model of its time, more than 21 million Beetles were
sold. It was also a huge success in America and had become a true American icon.
 The Beetle had a huge fan following in the new generation of Americans. It had become
a symbol of individuality and personal style.
 Beetle found a place in Disney movies as “Herbie the love bug”, and also in the lives of
the common American as a member of his family.

A brief history of VW and Beetle

After the launch of Beetle in America, which turned to be great success, VW of America was set
up as a subsidiary to VW. A few car models were also launched like Rabit, Microbus and
Karmann Gia sport coupe which were successful as well. However Beetle was still the leading car
model for VW as it always contributed more than 65% sales (by volume) for VW till 1974.
However, due to strengthening of Deutsche Mark, competition from cheaper Japanese brands
VW saw its sales declining in US during 1970s. Due to recession in 1982, declining popularity of
hatchbacks and inability to comply with the environmental legislation Beetle was withdrawn from
the US markets. VW also took a hit and sales dropped to less than 50000 by 1993. In 1994 a
campaign was launched to revive VW and a plan for relaunching Beetle in 1998 was also
considered.

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 Bring back the Beetle “What are you waiting for Doc? Bring back the Beetle. And hurry.” This
was the opening sentence of a letter to Dr Ferdinand Piech, Chairman Volkswagen AGBoard of
management, which appeared in Chicago Tribune. This reflected the enthusiasm and the
anticipation prevailing in the market for the New Beetle. But there were some challenges which
were to be addressed before the launch. One of the major challenges was to remove the
misconceptions about Beetle. Beetle was considered to be a “toy car”. This image of Beetle
needed a repair to ensure the New Beetle is looked upon as a “Real, Driveable car”. The Beetle
did have a segment of potential customers, i.e. the Baby Boomers, but for a sustained growth it
also had to look beyond and exploit the appeal which Beetle had in other customer segments.
Efforts to retain Baby Boomers were also required because the New Beetle was not a replica of
the old Beetle. Thus positioning of Beetle was the key concern for VW. Positioning of the new
Beetle with the backdrop of old Beetle’s image & success coupled with a limited advertising
budget was a challenging job and was considered as “Mission : Impossible” for a marketer.

New Beetle: SWOT analysis

Strength: The new beetle enjoys an iconic heritage; it is the successor of a car which enjoyed
cult following among the mass and the elite alike during its heydays. The strong brand image of
yesteryears associated with the TYPE I Beetle definitely acts as one of its strength. In addition
the new Beetle in today’s age of technology leverages its strength of affordable German
engineering to provide its users with the joy of a unique driving experience, which the owners
can associate with it. And finally, its design principles – honest, simple, reliable and original,
which reinforce its penchant to use classic elements and basic shapes with the help of cutting
edge technology and modern detail is symbolic of its spirit and historical strength.

Weakness: One of the concerns which would keep the marketing unit busy at work would be the
‘toy car’ image which has been tagged to it in the market. However the case exclusively quotes
that “While many people saw the car as more of a toy, the New Beetle had its fair share of fans.”
Another weakness of the new Beetle was that it was one of the more expensive cars in the
segment which was contrary to its customer’s perception of affordability that they attached to
its predecessor. However the main concern for the new Beetle was the limited advertisement
budget at its disposal and the consequently low ad recall that emanated from it.

Opportunities: Notwithstanding the above facts, there were several opportunities in the market
for the new Beetle which it could take advantage of. The primary being the emergence of a
new generation of fun loving consumers who wanted to express themselves by showing off to
the world their car and the confidence associated with it. The nostalgia surrounding the car
coupled with innovative promotions and attractive lease financing schemes all represent a
favourable proposition for the marketing of the car. In addition, the new Beetle seeks to explore
the revelation of people’s love for round shapes using this as an opportunity to promote its simple
yet modern designs.

Threats: While the above discussion paints a rosy picture of the new Beetle, all isn’t well with the
car and/or the market in general. A decrease of 5% in the small car segment might be indications
of a contract market. This coupled with the propositions of competition from Japanese auto
makers, in terms of price and volume represents a growing threat which the new Beetle must
look to effectively counter. In addition the loss of exclusivity of dealers meant that the dealers….

3. PROPOSITION
Product positioning should ideally answers 3 questions:

a) Who are the customers?

Since Beetle itself has big target market comprising of the baby boomers & young drivers of age
group 18-34 years old with diversified demography. But they have common characteristics such

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as confidence, individualism and a desire to be centre of attraction. Also they love to drive
German engine.

b) What is the set of needs that the product fulfills?

Beetle fulfills the desire to express individuality, superior driving performance with German
technology and most important a people car with affordability and reliability

c) Why is the product the best option to satisfy those needs?

Seeing the history of Beetle and the legacy it has created there was no competitor in this
segment. It was neither a small segment car nor a mid size car but the looks of the car put it in
the small size car segment. No other brand was able to create the nostalgia that beetle has
created with its design.

Keeping the above factors the pricing needs to be kept in mind the affordability of the segment
being targeted and the similarly the media for covering the Beetle will be a mass media and some
extent of print media. If the car is positioned as the people’s car then the pricing and media to be
selected which will cater to the mass market. Since Beetle is falling in midsize segment the
pricing of the car in this segment varies from $11,000 to $17,300 for a sedan. The base pricing of
Beetle starts from $15,200 which can go upto $18,000 for the luxury model. Since this new Beetle
is conceptualized based keeping Beetle spirit and sense of history with the blend of modern
technology embedded in its features the recall of the new Beetle is immense.

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