Volkswagen New Beetle

1- Problem Statement

a) Defining the Problem. Volkswagen's core problem is to decide whom to target and how to communicate the New Beetle's benefits and characteristics, utilizing a launching campaign with a limited budget, which implies deciding which aspects of the product to emphasize, media to use, price to determine, and positioning to use, consistent with the new brand message the company wants to transmit its customers.

b) Effects and Consequences. A research conducted showed mixed reviews and opinions about the car. The target market encompassed Volkswagen's core audience of 18 - 34 years olds and baby boomers. Buyer's characteristics were identified as confident, individualistic, and a desire to be the center of attention. In addition, Volkswagen felt it could leverage the nostalgia surrounding the car. However, appealing to young adventurous individuals and nostalgic baby boomers seems to be contradictory. If the company is not able to target the market appropriately, the brand will be inconsistent, misleading customers. Volkswagen is aiming to make its brand relevant. To achieve this, they have to align with market conditions and trends. An improper segmentation would result in an inadequate association of characteristics of the car, with the target market destroying brand equity. In addition, the company has to decide the media required to publicize the car. Utilizing TV campaigns they will certainly reach a broader customer base. Utilizing print advertising they will reach more specific and demographic segmented customers. The issue is to adequately balance the media channels to be used to target the right market. On the other hand, price will be one of the most important variables that will determine segmentation used. If the company overprices the New Beetle, the young segment of customers associated with the car would be discarded because they would not afford it, but if they underprice it, uniqueness characteristics would be deteriorated, and dealers would not push sales due to the low margins (refer to SWOT analysis, annex # 1).

2- Alternative Solutions

Taking into consideration that the Volkswagen brand requires revitalization, it is important to coordinate brand promise with a consistent message. In 1998, Volkswagen was trying to reinvigorate its brand associating its image with an invitational approach to adventurous, creative, confident, self sufficient drivers who wanted to take an active role in driving. Hence, the alternatives we are going to propose are aligned with the brand image that Volkswagen wants to establish.

Alternative 1: Target the New Beetle to baby boomers seeking a "nostalgia" experience with a value proposition. If this option is pursued, Volkswagen should emphasize the emotional qualities of the New Beetle. Retro aspects such as its distinctive round shape, and tail lamps should be stressed. Potential buyers could be seduced by utilizing the "nostalgia" factor. A different advertising campaign from the "Drivers Wanted Campaign" should be pursued since this last one, is aimed at a younger generation of drivers. It would make no sense targeting baby boomers with the same campaign used to target a younger generation. One advantage of this alternative is that baby boomers can afford higher prices than a younger audience. Additionally, it is possible to attract them emotionally by creating associations with previous experiences and memories of attachment. This segment is definitely above the 34 years old. However, it is possible that it also fits the brand image of young, adventurous, creative, and confident individuals. Nevertheless, market trends also show that baby boomers are buying larger cars in the US 17,000 + range such as SUVs. Despite its high price, dealers exhibited mixed feelings about the New Beetle which evidence their mistrust in the product which is critical since they are directly in touch with consumers (refer to annex # 1 SWOT analysis, Prices and Media to use annex # 5 and # 3). In this alternative, a strategy of print advertising should be combined with a TV campaign since it targets a niche market with big potential.

Alternative 2: Target the New Beetle to a younger population ranging from 18 to 34 years old, not excluding baby boomers. If this alternative is pursued, Volkswagen would reach a larger audience in line with the company's image to reach a new generation of drivers. The target audience would mainly be younger people although, baby boomers would not be excluded, since some of them would probably like to be associated with characteristics such as youthful, adventurous, creative, and confident. The advertising should focus more on the playful, youthful, fun, and unique aspects. The driving experience which is an asset of the brand should be highlighted. If price in this segment is determined in the range of US $14,000 - $16,000 (refer to SWOT analysis annex # 1), some young customers would be excluded. In addition, the high comparative price with other brands will oppose to the message of affordability desired by the brand, notwithstanding dealers would be inclined to sell the car due to high margins. An advantage with this strategy is that female customers with high incomes are growing fast as a consumer segment in the U.S. Soft Characteristics of the car would appeal more to the female segment, as a result, print advertising directed