Hollywood icon Judy Garland once posed the question, “If I’m such a legend, why am I so lonely?” German automaker, Volkswagen, is experiencing a similar dilemma these days.
On one hand, there’s the automaker’s iconic status. On the other hand, Volkswagen sales continue to be sluggish. Stefan Jacoby, CEO of Volkswagen of America, summed it up in a recent interview. Jacoby says, “You have California, the hippies, Woodstock and all the great memories Americans have for VW.” Nostalgia, however, isn’t enough to close the deal.
Wes Brown is an analyst with Los Angeles-based Iceology, a market research firm specializing in the auto industry. According to Brown, the problem is one of branding. Somewhere along the way, he says, consumers have become confused about what the Volkswagen brand stands for.
Brown is attempting to remake the way Americans think and feel about the Volkswagen brand which has suffered from a succession of halfhearted attempts over the past three decades. It’s a delicate balancing act, as Volkswagen seeks to build on its past rather than abandon it.
A key part of the effort is Volkswagen’s new production plant, located in Chattanooga, Tennessee. The new facilities will offer Americans a midsize, Made-in-America alternative to other domestic and Japanese imports. There is speculation that the vehicles will be released under the highly successful Jetta nameplate. The plant is projected to begin producing autos in 2011.
Volkswagen continues to dominate European markets with compact vehicles including the Golf and Polo, but research conducted in the U.S. indicates that these small vehicles are too small for American consumers.
This may seem counter-intuitive considering that Detroit’s Big Three have been criticized for not responding to American consumer’s desire for smaller, lighter, more fuel efficient vehicles, but Volkswagen is banking heavily on the new strategy.
According to Jacoby, “Americans need more space than in Europe. The United States will not turn into a place with only compact vehicles even if fuel prices go up.” He insists that, although Americans will demand better fuel efficiency from their vehicles, they will not sacrifice space in order to achieve it.
Volkswagen is re-engineering models that have sold well in Europe to accommodate the tastes of American consumers and is also revamping its U.S. dealer network. The automaker is also investing heavily in an ad campaign titled, “Das Auto” which it launched last year.
Volkswagen currently claims a meager 2 percent market share in the U.S. but that figure is up by .6 percent since the rebranding effort began.
Volkswagen’s current model lineup includes the Routan which is a minivan produced in partnership with domestic automaker, Chrysler. The Routan has not sold well, but the Tiguan, Volkswagen’s small SUV, has fared better with American consumers. The Jetta has been a very successful model, and future versions will include a mixture of European styling and practicality to appeal to the American market.
One example is the redesign of the seat recliner dials which are large and somewhat bulky on European release models. Research conducted in the U.S. found that American women dislike the devices because they tend to “break their fingernails or scratch their hands.”
Volkswagen is also keeping a tighter rein on its U.S. dealer network. U.S. buyers have long complained about the poor service-after-the-sale they have received from many of VW’s domestic dealerships.
Volkswagen has invested $3 billion in recent years and now has direct control over about 50 percent of its 580 U.S. dealerships. According to Jacoby, another 30 – 35 percent of those dealers will be controlled directly by the automaker and Volkswagen’s internal research indicates that quality issues are improving.
To drive Volkswagen’s rebranding efforts home with American consumers, the automaker has introduced the “Das Auto” campaign. The campaign features a black 1964 model Volkswagen Beetle named “Max”. Max is designed to connect with an older audience but will play an increasingly minimal role in future commercials as the automaker introduces new models and the audience, hopefully, begins to see Volkswagen as a more contemporary and mainstream choice.
The tagline for the advertisements is, “It’s what the people want”, which harkens back to the automaker’s populist past (the name Volkswagen means “the people’s car” in German) and serves as a subtle admission that, for some time now, VW has not been giving Americans what they want.
Jacoby says, “We still have to be Volkswagen, but we have to get back into the hearts of American consumers.”