How clever marketing enabled Volkswagen to bounce back

Monday 08th, February 2016

Reading the news that Volkswagen has launched a new campaign ought not to come as a surprise. This was a company that was caught just a few months ago fudging the emission levels from its cars.

There was worldwide outrage that the levels were nearly 40 times higher than reported. In the US, where the study was done nearly half a million cars have been equipped with the defeat device. Europe being Volkswagen’s home market accounts for about 2.8 million cars. China, the world’s second largest automotive market accounts for just about 2000 cars largely because it prefers petrol-driven cars.

Differences in cultures

There has been a negative backlash against Volkswagen in the US and Europe, where sales clearly showed a dip in the months following the outbreak of the scandal. Customers in such countries are more aware of the effects of environmental pollution and are willing to take a principled stance.

The scale of the outrage was perhaps proportional to the relationship that Volkswagen has shared with its customers in these markets. The brand has been around for five decades or longer and is a part of people’s lives.

In contrast, there was barely a ripple in Asian markets such as China and India. These are markets where car ownership has grown over the last two to three decades only. Volkswagen’s presence in an Asian market like India is barely a decade old; in China, a little longer.

The environment – does it really matter to customers?

It is also worth noting that customers in Asian countries are more forgiving of environmental issues than their Western counterparts. Typical ownership concerns relate to cost of ownership, maintenance and service costs etc rather than emission levels.

There is also a complete absence of any guidelines from Governmental testing institutions. Unlike the US Environmental Protection Agency’s guidelines which are mandated to form a part of advertising communication, Asian markets tend to be a lot more lax.

Volkswagen’s brand remains strong

Volkswagen has produced some of the most iconic advertising campaigns in history. The goodwill and favourable brand perceptions that have accumulated over the years enabled the company to ride out the storm.

It’s interesting to see that the new campaign references this history with an emotional touch. The reference to ‘Then. Now. Always’ is meant to provide the right connect for customers who have grown up with the brand and are familiar with its reputation.

Public memory is short

It is a fact that the public at large rarely has a memory of momentous events beyond the first few weeks after its occurrence.

So, Volkswagen read the tea leaves correctly. It judged correctly that this was an issue that would blow over and would not impact it significantly in the long run.

In a sense, it is also a validation of the value that an investment in brand-building over the years helps brands. However, Volkswagen cannot afford to be complacent. The company has innovated diesel technologies but continues to have a European mindset.

Customers in the US and very likely elsewhere are increasingly turning to electric cars. The success of a brand like Tesla should prompt old established automotive giants like Volkswagen to step up their research and development efforts to come up with new products for a new generation of customers.

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