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A Case Study on

The New Beetle

Submitted To: Dr. D.D.Swain

Submitted By: Yashraj Behera

1. Introduction 2. Identification of Problem(s) 3. Analysis of Environment 4. Development of Alternative Solution 5. Analysis of Alternative solution 6. Selection and Implementation of Alternatives

The Volkswagen beetle was born in the mid-1930s in Germany by Ferdinand Porsche. It was initially known as the peoples car. Americans first had a glimpse of the beetle in 1949 when it entered the US market with its first model name-Type 1-Volkswagen for the beetle. It had a distinctive round shape, face-like front end and low price. Above all, it stood out from the overpriced and oversized domestic cars. It was popular with budget-minded students as well as drivers who sought to express their individuality. Volkswagen sales in the United States took a huge dip from 500,000 in 1973 to 50,000 in 1993. Volkswagen is re-launching its brand in America and is looking for ways to position the new beetle with one foot in the past and the other on the accelerator heading to the future. With its design work complete and initial positive reaction from the market, VW is now faced with the task of turning the excitement surrounding the car into actual sales. It has to have full knowledge about the current market forces, dynamics, consumer behavior and the market segments available.

Identification of problem(s):
Volkswagen is unclear of their target market. It has two segments of target audience; the baby boomers and Gen-X. Knowing they have the potential to attract both the baby boomers and Generation X, Volkswagen will need to evaluate both target markets preferences and lifestyles in order to come up with ways to promote the beetle. The product/brands should be designed to conform to the taste and preferences of the target market they choose. Baby Boomers More financially equipped especially if VW decides to go with premium pricing Already have a strong relationship with the previous beetle Associate the new beetle with memorable image of previous beetle. They also have nostalgia with cars for instance it was their first car they used it for their wedding, honeymoon. They viewed the beetle as the peoples car then.

Generation X (18-34)

Associate the beetle as being a fun car with unique designs like circular shapes which represent human forms, such as eyes, faces and heads that are eye catching and suite their style. Most young people like to be the center of attention, thus the new beetle with its features and colors would be appropriate for them If VW decides to go with premium pricing, it might expensive for Generation X Enjoy driving on changing and winding roads without observing speed limits so beetle may be one of the safest cars to drive.

Analysis of Environment:
SWOT ANALYSIS Strengths Volkswagen has various car designs that are built to suit different customer needs. It is also perceived as the German engineering vehicle with affordable price. For the new beetle, the distinctive shape with curves and smiley face makes it stand apart from the other cars on the road. It makes the driver feel different and gives a unique fun and pleasurable driving experience. It is also one of the safest cars; the 1998 model of the new beetle is the safest small car that has been tested by the Insurance Institute for Highway Safety. The beetle looked appealing due to affordability in cost and gas economy Weakness For VW brand, the limited distribution channels and weak relationship with dealers create the barrier to get to customers. In the past, VW seems to have weak marketing strategy that it has the lowest brand awareness and percentage of ads recall compared to other competitors. This may result from the insufficient advertisement, wrong communication channels to communicate with its target customers or unattractive advertisements. In addition, its limited budget at present is the constraint for VW to increase its brand awareness and promote its product. For the new Beetle, the past consumers bad experience about the old Beetle model may create the customers unfavourable emotion about the new Beetle model. For example, the old Beetle was perceived as having poor brake and inconvenience aircooled engine. Moreover, comparing to other competitors in the small car segment, New Beetles prices are considered one of the most expensive cars in this segment. Inability to keep in step with the American consumers ever changing demand led

to weak sales and loss of confidence from the dealers. It was also viewed as a tired and old product compared to new generation of car brands. Opportunities Since baby boomers are one of the target groups of New Beetles, this segment has high purchasing power creating the opportunity to increase sales. Technology also creates opportunity to develop the more efficient energy cars. Also, low labour cost in developing countries allows car manufacturers to expand the production base and reduce production costs. There is also an opportunity for growth internationally especially in Asian market since the design of New Beetles has global appeal. Plus, since Beetles was once very popular in the past, baby boomers loved their groovy cars as young adults and todays young adults are looking to rediscover the age that passed. The new Beetle can compete in favourably with the other car brands as it has one foot on the past and another on the accelerator, providing for the two segments. Threats There is an increased competition from both Japanese and US car manufacturers. Moreover, the trend of American people towards purchasing rather than the conventional sedan or small car makes it more difficult for New Beetles to enter the market. From the survey in1999, it showed that 51% of people planning on purchasing within the next year are more likely to purchase an SUV. This creates the risk for sales of New Beetles. Another threat is the preference of American customers. The preference for American vehicles is more than three times higher than that of European vehicles. Moreover, there is the risk of duplicating products from low cost manufacturers like Chinese manufacturers

Development and Analysis of Alternative Solution(s):

Recommendations VW should target both the baby boomers and generation X. It is very critical to customize communication message to ensure that it appeals to each target group given the differences in their needs. Moreover, communication channels / media must be carefully selected to reach both groups effectively considering the differences in their lifestyles. However, one common tone of communication is to demonstrate fun-loving, 'young' attitude in the new Beetles.

For Baby Boomers The communication focuses on creating a sentimental connection. It represents the group's affections of the past with happy personal memories and associations with the old Beetles. It is now a chance for them to act and feel young again with the new Beetles. For Gen-X The communication message emphasizes the benefit of the new Beetles as being the symbol of fun, happiness, and uniqueness. It will address their needs by representing their unique personalities, preferences, and life styles which allows them to stand out from the crowd.

Pricing would be a very important factor for the consumers to make the purchase decision, because in the old days, the original Beetle represented high performance price ration. If Volkswagen priced the new Beetle too high, people would easily to switch to another higher priced segment of cars. But if the price was too low, the consumers wouldnt consider the car as the way to express themselves. And on the other hand, the price would also be a factor for the dealers to put time and effort to introduce the cars to the consumers. They would definitely try harder if they could get higher margin from the new Beetle. VW should price the base model at around $15,200 to appeal to the Gen-X while the baby boomers price should remain at $17,000 to $18,000 with extra features like sunroof and larger engines. One drawback that could appear in the US after the launch of the New Beetle could be that some male buyers would dislike the product because they would not want to be associated with a feminine car. To tackle this issue, we suggest stressing the car's driving qualities, technical superiority, and displaying it in colours such as black / grey to target male customers. To attract American customers, details such as cup holders and sunroofs should be included among options. Taking into account the brand's new offer to attract creative, adventurous, and unique styles, it is preferable to launch the New Beetle in the American market initially, since it is less conservative than the European market. The American consumers ever changing behaviour demands should be kept under watch.