The New Beetle

Name of Case: The New Beetle Decision Maker:

Name: Liz Vanzura, Charlie Waterhouse, Steven Keyes

Position: marketing director, director of product development, director of public relations

Key Issues/Problems:

(1) Manufacturing: supply problems need to be minimized

(Problem Urgency = II)

(2) Competition has low prices, reliability and established brands

(Problem Urgency = II)

(3) Pricing high for small car segment and younger market

(Problem Urgency = IV)

(4) Target market: do not want to alienate younger or older segment

(Problem Urgency = IV)

What is the #1 most important issue/problem, and WHY?

Target Market  positioning the new beetle correctly will effect pricing, the allocation of the advertising budget and use of advertising mediums (i.e. is there enough money to reach a broad market effectively), the dealers' efforts to sell/promote the car, of course product placement/promotion decisions, and finally it will effect the perception of the entire VW organization

Current Marketing Situation: Key Points  Implications for #1 Issue

(1) Industry, Market, Environment

* VW image and sales rebound from 1993 to 1998 - image still strong from new passat, drivers wanted campaign and North American International Auto Show

* Small car segment - second largest market, high competition

* Consumers are highly anticipating the new beetle - however, this is a different vehicle than its predecessor with a new group of potential buyers

(2) Company

* Dealers - while only 10% exclusive, recent success (i.e. drivers wanted, passat) has given the dealers a new incentive to sell, and the recent dealers conference at VW headquarters has tried to instill franchise loyalty and a total brand experience

* Good manufacturing  positioned well to distribute and produce in North America, however competition may also have the same capabilities (missing information)

* Supply Problems - Sales remained strong, however issue must be resolved in order to remain as competitive as possible

(3) Competition

* Japanese and American  typically cheaper products on the market (i.e. higher dealer margins and incentives)

* Japanese brands - reliable while not exciting, hold 15% market share

* Advertising budget - competition spending $100 million plus on a single car, yet the Beetle already has significant presence and nostalgia attached to it

(4) Customer

* Segments:

o Baby boomers

o Young life enthusiasts/drivers/students

* Image

o Baby boomers: nostalgic ties to iconic vehicle, affordable. Yet consumer preference is towards larger Sedans and SUV's, and consumers with families may find the beetle impractical as well as unprofessional for their work

o Young life enthusiasts/drivers/students: icon still has meaning to younger generation, drivers wanted campaign has successfully associated fun driving and liberal/hip lifestyle with the VW brand.

* Price

o Baby boomers: Affordable

o Young life enthusiasts/drivers/students: Price may discourage segment of college students and any other young drivers with a tight budget.

* Initial Response

o Baby boomers: emotional attachment still strong, so the desire for the car is high, however other aspects of the consumers life (i.e. kids or their type of work) may warrant a different vehicle

o Young life enthusiasts/drivers/students: find it fun and unique, almost an icon for escaping the daily grind

Decision Criteria/Objectives

(1) Maintain the Beetle as a symbol of counterculture and escapism

(2) Meet sales quota (55,000 vehicles) and increase profits annually

(3) Increase overall brand recognition (i.e. VW don't want to be a one car brand and they don't want the Beetle to be just a fad)

IDENTIFICATION of Alternatives:

(1) Go Retro (target baby boomers)

(2) Go Cool/Liberal/Unique (target new, younger drivers)

(3) Go Cool and Classic (two targets simultaneously, play off both perceptions in a complimentary way)

(4) Go Drivers Wanted (i.e. stick to umbrella promotional campaign, leave room for promotion of single products)

EVALUATION of Alternatives:

Criteria 1: Maintain the Beetle as a symbol of counterculture and