PROJECT

CASE STUDY OF THE VOLKSWAGEN NEW BEETLE

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MKTG
Principles of Marketing

TABLE OF CONTENTS

Abstract

Introduction

Product concept

Development of the Volkswagen New Beetle

New Beetle adoption

Marketing throughout the product life cycle

Beetle brand

Findings

Conclusions

Reference list

Abstract

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“The Beetle is different, it makes you feel different. It is like a magnet”, -
Volkswagen Chairman, Ferdinand Piech
(Keith Naughton and Bill Vlasic, 1998)

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The present paper is the case study of the Volkswagen New Beetle from the marketing perspective. The thesis will analyze the product concept, and examine the New Beetle in terms of the concept in question.

The purpose of the paper is to identify the issues in the application of theory with regard to the New Beetle as a product, describe the function and operation of this element of the marketing mix in Volkswagen, as well as to review the status of the identified issues in the reviewed company. The paper will consider the introduction of the New Beetle to the market and examine the respective phases of the product development.

The thesis will also examine the adoption of the New Beetle as a product, overview the product lifecycle and the issues with regard to the Beetle brand.

Overall, New Beetle is unique from other cars and can be the good example of the successful product development and adoption. The Beetle Brand is a successful brand that enjoys customer’s loyalty, perceived quality and brand name awareness.

Introduction

The Volkswagen New Beetle is a newly developed version of the original Volkswagen Beetle that was on the market between 1938-1975. The New Beetle was successfully launched into the market in 1998 and was successfully adopted from the very beginning. The United States and Japanese market are considered to be the largest New Beetle markets for the last decades.

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We begin the paper with the general overview of the Volkswagen Group. We further review the product concept, and examine the New Beetle in terms of the analyzed concept. We continue with the review of the introduction of the Volkswagen New Beetle to the market and examine the respective phases of the product development. We further examine the adoption of the New Beetle as a product and overview the product lifecycle. In the last section of the paper we analyze the Beetle brand.

We conclude that New Beetle is a unique car that exemplifies successful product development and adoption. The Beetle Brand is a successful brand that enjoys customer’s loyalty, and brand name awareness.

Volkswagen Group

The Volkswagen Group is one of the world’s leading automobile manufacturers and the largest carmaker in Europe that sells its vehicles in 153 countries. The number of vehicles delivered by the Group to customers in 2010 is 7.203 million, that corresponds to a 11.4 percent share of the world passenger car market. In Western Europe every fifth new car (21.0 percent) comes from the Volkswagen Group. The Group consists of nine brands from seven European countries: Volkswagen, Audi, SEAT, Skoda, Volkswagen Commercial Vehicles, Bentley, Bugatti, Lamborghini and Scania (Volkswagen, 2011).

The Group operates 62 production plants in fifteen European countries and seven countries in the Americas, Asia and Africa. Approximately 400,000 employees around the world produce 30,000 vehicles each day.

The Company developed the New Beetle in response to the enormous demand of the USA market for the car with retro – look, and introduced the New Beetle to the market in 1998. After more than twelve years of the existence of the New Beetle on the market, in May, 2010, Volkswagen announced that production of the current New Beetle will cease in 2011.

The history of the New Beetle car dates back to the early 1930 s, when Ferdinand Porsche designed the first prototype of the Beetle, followed by developing the vehicle in accordance with Hitler order. The old Beetle was the biggest-selling car design in history (Meredith, 1998).

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The original Beetle produced in 1938 had a price of USD 1800. The price of the Volkswagen New Beetle today ranges from USD 15,000 to USD 22,000.

Product Concept

According to the Solomon et al (2011, p. 183), product is everything beneficial that a customer receives in an exchange.

In accordance with general classification of products the Volkswagen New Beetle shall be considered as consumer, durable, specialty product (Solomon et al, 2011, p. 185).

New Beetle, as a core product provides for the transportation benefits. As regards, to the second level of the product, the actual product, the New Beetle shall be considered as metal engine with the following characteristics not limited to:

- Body style: 2 door convertible o shooting brake;

- Transmission: 5-speed, 6 –speed manual, 4-speed automatic,6-speed automatic, tiptronic;

- Class: small family car.

The list of the supporting feature of the New Beetle, such as warranties, after-sales service, known as augmented product differs from dealer to dealer. When buying a car, a durable good, consumers spend a lot of time and efforts during the decision making process (Solomon et al, 2011, p.186). Volkswagen marketers, when launching the New Beetle to the market, understood the importance of warranties, service and customer support, and in order to ease the process of the respective information searching, they have launched a special web site, which is subject to our further review in the section dedicated to the adoption of the product.

Development of the Volkswagen New Beetle

The development of Volkswagen New Beetle passed through the several phases, such as
Idea generation, Product concept development and screening, Marketing strategy development, Business analysis, Technical development, Test marketing, and Commercialization. Due to the fairly narrow scope of the thesis we will further analyze in detail the Marketing strategy development, Technical development and Commercialization of the New Beetle.

Marketing strategy development

The marketing strategy is used to introduce the product to the market. The strategy requires the marketers inter alia to identify the target market, to plan the pricing, to identify promotion strategies for introducing the new-product (Solomon et al, 2011, p.191). At the stage of the marketing development Volkswagen marketers decided to proceed with the strategy, that later turned out to be very successful and effective. In order to make consumers aware of the New Beetle it was decided to launch the special web site www. turbonium.com, showcasing new vehicle and advertising campaign. We will examine the launching of the web site in question as one of the effective mass media advertising Volkswagen campaign, in the section dedicated to the adoption of the product.

Technical development

In discussing the technical development step, Solomon et al (2011, p.191) indicates that during that stage the company’s engineers along with the marketers refine the design and the production process. As a rule at this step of development the prototype of the product is created in order to be evaluated by the prospective customers. Volkswagen had launched the prototype of the New Beetle – “ the Concept 1” at the 1994 at the North American International Auto Show. Strong positive public reaction to the Concept 1 vehicle convinced Volkswagen to develop a production version of the vehicle which was launched as the New Beetle in 1998.

Commercialization

The last step in the product development is commercialization. Launching the New Beetle into the market was very successful for Volkswagen. In the first months after introducing the new car, the demand exceeded the supply of the New Beetle, and the customers had to order the cars without the driving test.

Continuous innovation

According to Solomon et al (2011, p. 192), from marketing perspective, a product that consumers perceive to be new and different from existing products is determined as innovation. In accordance with existing classification of innovation the launching of the New Beetle car in 1998 shall be considered as continuous innovation, i.e. modification of an existing product that can set one brand apart from its competitors (Solomon et al. 2011. p. 193).

New Beetle adoption

The New Beetle was successfully adopted, partly due to the effective marketing strategy of Volkswagen. The company spent over $560 million on the advertising campaign for the New Beetle. The Portland Business Journal (1999) reports that the advertisement, and the work of the advertisement agency behind it, changed the very nature of advertising— from the way it’s created to what the consumer can see today. In order to make consumers aware of the New Beetle Volkswagen also launched the special web site www. turbonium.com, showcasing new vehicle and advertising campaign.

"We're living in a marketing environment where entertainment is critical," said Arnold Communications Creative Director, Alan Pafenbach. "For our consumers to connect today, we have to expand on and enhance the TV experience. With turbonium.com, the TV experience is just the tip of the iceberg." (Eric, 1999).

Promotion of the New Beetle through the web site campaign, have been really successful. The advertisement campaign launched by Volkswagen for the New Beetle has had one of the greatest advertisement campaigns in history. Therefore, mass-media advertising of the New Beetle, executed by Volkswagen marketers shall be considered as the good example of the awareness stage, in the adoption process of the new product.

Marketing throughout the product life cycle:

According to Solomon et al (2011, p.202) every product has a life cycle and depending on the stage of the product life cycle, the marketing strategy should vary to meet the changing conditions. Also the marketing mix (the product, promotion, price, and place) should be adjusted in order to maintain in the market.

Introduction Stage

Introduction Stage is the first stage in the every product life cycle, as shown in Figure1.1, sales and profits are in an early stage. In the introduction stage, the product's innovation and lack of competition dominate the marketing strategy. The costumers are not aware of the product and do not know what benefits it offers them. Product strategy is focused on introducing one model.

Since the New Beetle car is new, persuading the market to buy the product is of secondary importance to informing the public that the product exists. It is the innovators who will begin to buy the car as a product, and they need to be informed. With only one company offering the unique characteristics for the new car, those innovators that decide to purchase the product have only Volkswagen Beetle from which they can purchase the new Beetle. Consequently, the promotion efforts concentrate on informing the public of the product benefits and the company producing the product. Persuasion to buy a particular brand is not needed in the introduction stage. Subsequently there are few purchasers in the introduction stage; the distribution does not need to be widespread. Moreover, the innovators are risk takers and desire to purchase something new and cars industry is the best example.

Growth Stage

Growth stage is the second stage in the life cycle of the product, and in this stage the early adopters, followed by the early majority, begin to consume the new product in growing numbers. According to Solomon’s Marketing 2 book, the increasing sales result in the emergence of profits rather than losses.

During the early part of the growth stage, Volkswagen Beetle can continue its product policy of offering one basic model. However, the new Beetle group was successful, and eventually competitors offered their own similar cars to compete in the new category, for example, the Mini Copper. At that point, the Volkswagen Beetle needed to offer more models with more extraordinary customisation. The models should be differentiated from one another so that the company can continue to attract the new customers coming into the market. Even with competition beginning to offer their cars in the new category, the Volkswagen Beetle Company still dominates the market. However, as the market leader rather than a monopoly, the Volkswagen Beetle Company will need to change its promotion policy of informing the public and their costumers about their new Beetle. Consequently, the Volkswagen Beetle must increase its product distribution to maintain its leadership in the car industry. Generally, sales in this stage will increase and will reach the peak, as it is shown in figure 1.1.

Maturity Stage

Maturity stage is the third and the longest stage in the life cycle of any product and with the large number of companies producing products, the competition for customers becomes quite intense, profits decline and sales peak (Solomon,Hughes,Chitty,Fripp,Marshall & Stuart,p.203_204) . The strategy for firms during the maturity stage becomes one of survival, as many competitors will eventually withdraw from the market. Moreover, with the intense competition, management keeps the price of the product to its lowest possible level. For example, the competition for entry the cars market has now shifted to offering the lowest price and all of the other cars companies in a mature market must now watch costs carefully.

Sometimes, the absence of a company's product in a particular location may result in lost sales during the maturity period. Widespread distribution is essential. For example, if the new Beetle is not in a particular location, one or more of the competitors' products are likely to be there and the company can not risk losing sales simply because there is lack of cars and that specific design was not available.

Decline Stage

Decline stage is the final stage in the product life cycle, during this stage, sales and profits begin an even sharper drop, and the number of competitors is reduced even further (Figure1.1). With costumers preference and needs change for the product, the decline stage continues until the company can not make a profit, and the product category dies. Products' prices are should be kept as low as possible during the decline stage. And just because a product's sales begin to decline does not mean that the product life cycle has reached the decline stage. However, if the company believes that the product is in a decline, the implementation of the decline stage strategies may lead to the death of the product long before its time. Before the strategies for declining products are tried, the company should definitely establish that the product is in decline. The company should first follow strategies to boost sales and not resign themselves to the cost-cutting strategies of the decline stage.

The product life cycle maintains that products and industries move through the stages of introduction, growth, maturity, and decline. By viewing a product from the perspective of its product-life cycle position, hopefully management can use the product life cycle as a valuable decision making tool. For the Volkswagen Beetle Company, new Beetle, the brand-loyal customers have to seek out the limited locations and wait for their cars then continue purchasing it. At the same time we can conclude that for some markets, for example Australia, the decline stage for the New Beetle have started several years ago (Carsales network, 2010).

Source: http://www-rohan.sdsu.edu/~renglish/370/notes/chapt11/index.htm

Beetle Brand

According to Solomon et al (2011, p. 205) brand is a name, term, symbol or any other unique element of a product that identifies one company’s products and sets them apart from the competition.

Volkswagen (VW) is a famous international brand name that has traditionally been associated with the frame market, its most famous model being the Beetle. Volkswagen managed to surprise it’s costumers when it reintroduced the Beetele brand in 1998.

The brand equity of the Beetle to the Volkswagen is really high, since the brand has a long history, dating back from 1938, as well as significant customer’s loyalty to a brand.

It should be mentioned that at the same time Brand loyalty was an issue to be considered by Volkswagen Group in the beginning of introduction the cars to the market, since, according to the statistics about 80 % of Americans would prefer to buy an American car rather than a foreign brand.

The meaning of Beetle brand for the customer has a high value and evokes nostalgia.The launched in 1998 New Beetle had all its old charm, with its tiny size, bold colours, and curvy shapes. Additionally, it had completely new high powered engine and new facilities such as air conditioning, stereo system, and air bags. It looked like the old Beetle, but had the power of the new. It brought back feelings of nostalgia, fun, and freedom.

For Volkswagen the brand equity in question consequently provides a competitive advantage. The fact that Volkswagen leverage Beetle brand’s equity with the brand extensions: launch the new car in 1998 with the same brand name, confirms strength of the Beetle brand equity.

Solomon et al (2011, p. 201) confirms, that because of the existing brand equity brand extension will attract customers immediately. That is has happened to the New Beetle car, when it was launched into the market in 1998. Particularly but not exclusively, due to the well-known brand the demand, exceeded the supply and expectations of Volkswagen Group in several times. Scott Heimer (1999) reports that in the first eight months, Volkswagen could not get enough cars and people who wanted a blue car would take the white just to get one.

Therefore, taking into account the above, we may conclude that Beetle Brand is a successful brand that enjoys customer’s loyalty, perceived quality and brand name awareness.

Findings

The provided analysis of the product concept, and examination of the New Beetle in terms of the concept in question allow to determine the following findings:

Volkswagen New Beetle is a consumer, durable, specialty product, and core product that provides for the transportation benefits.

Launching by Volkswagen the prototype of the New Beetle – “the Concept 1” at the 1994, is an example of the technical development stage, when Volkswagen engineers and marketers wanted to evaluate the attitude of the prospective customers.

Launching of the New Beetle car in 1998 is considered as continuous innovation, i.e. modification of an existing product.

Mass-media advertising of the New Beetle, executed by Volkswagen marketers shall be considered as the good example of the awareness stage, in the adoption process of the new product.

Beetle Brand is a successful brand that enjoys customer’s loyalty, perceived quality and brand name awareness.

Conclusion

Developing the New Beetle by Volkswagen, the world’s leading automobile manufacturer and the largest carmaker in Europe, in response to the enormous demand of the USA market for the car with retro – look, and introduction the New Beetle to the market in 1998 is a good example of the successful marketing product development in adoption.

The identification of the issues in the application of theory with regard to the New Beetle as a product, and review of the status of the identified issues in the Volkswagen Group confirmed that from marketing perspective New Beetle is a unique car in compare with other vehicle.

At present time the New Beetle is at the final stage of it’s product life cycle, where sales and profits begin to drop. After more than twelve years of the existence of the New Beetle on the market, Volkswagen announced that production of the current New Beetle will cease in 2011. At the same time, since the Beetle Brand is a successful brand that enjoys customer’s loyalty, the Company planning to leverage Beetle brand’s equity with the brand extensions: and launch the new car in the nearest future with the same brand name. This new car shall continue the Volkswagen Group successful line in the market along with the New Beetle and the original Beetle.

Reference list

Carsales network, Volkswagen announces end for New Beetle, viewed on May 02, 2010,
< http://www.carsales.com.au/news/2010/small-passenger/volkswagen/new-beetle/volkswagen-announces-end-for-new-beetle-19213>

Eric, W 1999 Volkswagen Launches Turbonium Web Site Showcasing New Beetle 1.8 Turbo and Advertising Campaign, viewed June 30, 1999,
< http://www.urlwire.com/news/063099.html>.

Heimer, S. 1999, ‘New Beetle My account for Much of 59 Percent Sales Increase at Volkswagen’, Philadelphia Daily News, March 11

Meredith, R 1998, ‘With New Beetle come wistful hints of old flame’, New York Times, January 4, 1998

Naughton, K and Vlasic, B 1998, ‘The Nostalgia Boom’, Business Week, 23 March 1998

Odgen, M 1999, ‘Top as campaign of century? VW Beetle, of course’, Portland Business Journal, 12 November 1999, v.16

Rohan, 2011 (n.d.)

Solomon, Michael R., Marshall, Greg W., Stuart, Elnora W., 2011, Marketing 2, Real People, Real Choices, 2nd edn, Pearson, Australia

Volkswagen, 2011, (n.d.)

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Figure 1.1: