Key Relationship That Volkswagen Should Develop Marketing Essay

Key Relationship That Volkswagen Should Develop Marketing Essay

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Introduction

Volkswagen entered the Indian market in 2001 by setting up a subsidiary Volkswagen India Group which focussed on the manufacturing and sales of Volkswagen branded cars in India. Therefore the presence of Volkswagen Group had been in India since 2001 with the launching of Skoda, and later on Audi which were well known brands. However, despite being in the market for 2 years since the launch of Volkswagen Passat in September 2007, the Volkswagen brand was not recognised prompting the company to launch an integrated marketing campaign in November 2009 to build the brand image. And with the launch of its iconic model 'the Beetle', Volkswagen India hoped that with its brand building exercise it will increase its sales and capture a significant market share in the Indian car market.

Volkswagen had a low presence in a high market segment as a result of initial passive marketing strategy. However, considering the growth potential of India's automobile market which was expected to sell 2 million vehicles in 2014 and 3 million vehicles by 2018 as compared to 1.1 million vehicles in 2009, Volkswagen India started laying special emphasis on marketing its products. This led to a launch for the first time of an integrated 360 degree communication campaign using the print, electronic, digital and out of home media in November 2009. Before this the company had been using mainly the print media to promote its brands the Volkswagen Passat and Jetta.

On 4th December 2009, Volkswagen India ventured into the SUV (sports utility vehicle) segment with the launch of the Touareg. On 12th December the production of Volkswagen Polo started at its Chakan plant near Pune, Maharashtra. And India being a small-car market, some analysts believe that Volkswagen India market share in India would largely depend on the success of Polo. And to further improve on its presence in India, Volkswagen India planned to roll out a low priced car called UP by the fiscal year 2010-2011. And with the launches of all its 3 brands, Volkswagen India aimed to capture an 8% market share of the Indian car market by 2013-2014.

Role of Branding

Loyalty

Consumer wants relationship with a company, and the reassurance that a trustworthy organisation stands behind any brand they buy (Randall G, 1998). Any business needs to be memorable in the minds of the consumer if it wants to be successful and this truth becomes a more pressing need when a company starts to offer multiple products for example the various models of Volkswagen. And furthermore it makes the customer feel comfortable and familiar with you and, most importantly, remember you after every transaction. Therefore the main role of branding in this case was not about getting the target market to choose Volkswagen over the competitor, but it is about getting prospective customers to see Volkswagen as the only car manufacturer that could provide a solution to their problem.

Credibility

Most customers desire consumption of products that they trust, and therefore anyone purchasing a product or hiring out a service wants to know they can trust whatever they're getting. And in that respect customers find it is easy to be loyal to the people they know are reliable and delivers high quality products. Consistency with branding strategies allows people to recognize those companies they've come to identify and trust and therefore using mediocre, non-descript and constantly-evolving logo makes it harder for consumer to recall and recognize ones brand. And that is the reason it is important to have distinctive brand name and logo elegantly coloured, printed and sharp on every product you provide such as Volkswagen.

Buyer Motivation

It is no longer economically possible to sustain individual brands. This argument is common in internationalised companies which need to develop a coherent part of the total business strategy and therefore branding of products may have slight variation from region to region depending on the market in which they are operating in. However by using the same brand name, it is easier to create awareness of your product in an economical manner as Volkswagen India did in 2009 through its integrated marketing campaign which started in November as Volkswagen needed a marketing strategy tailored specifically to the Indian market without losing its international image, hence their aim of breaking away from the communication clutter by being innovative and refreshing in the way they narrate their brand story to the consumer.

Delivers the Message

This is because a strong brand is invaluable as the battle for customers intensifies day by day. And as a result of the research carried out in 2008 which showed that Volkswagen was not known in India and which was reflected in sale of only 1,172 cars between April and October 2009. And therefore Volkswagen India took advantage of the roadblock created by Times of India (TOI) to advertise across its 16 editions and 9 pages. This was so crucial in terms of creating awareness and for disseminating a lot of information about the brand. This is because print especially in a country like India gives a far bigger spread in passing the message across and talking about the technical specifications.

Brand Strategy

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In order to achieve your marketing objectives you need to have a strategy that includes different elements - the various parts of the marketing mix. The above mentioned four P's are the parameters that a marketing manager can control, subject to the internal and external constraints of the marketing environment. The goal is to make decisions that center the four P's on the customer in the target market in order to create perceived value and generate a positive response. And therefore according (Ind N, 1997) communication strategies of the brand should be consistent, long lasting and distinctive meaning it the strategy should be based on organisational reality and relevance to the stakeholders otherwise when differentiation lacks substance the consumer can easily ignore it.

Products

By late 2009, Volkswagen Group India was marketing 3 different brands including Audi, Skoda and Volkswagen comprising 15 different models. The marketing strategy for Volkswagen was to promote the brand as a whole instead of specific cars. And the main message being relayed by the company was that Volkswagen brand was not only of sound German engineering but also about democratization of innovation hence the first TVC advertisement ended with the words 'DAS AUTO' which in German meant 'the car' and the tagline 'German engineering, made in India'. Furthermore Bobby Pawar the Chief creative officer DDB Mudra Group after the first television commercial (TVC) promotion observed that Volkswagen India had different cars for different people at different stages of their life that is from university student to chief executives.

Price

Volkswagen Group India mainly catered for the luxury segment of the Indian car market. Skoda India had 4 models from which 3 (Octavia, New Laura & New Superb) were luxury models with prices ranging from Rs 490,043 - Rs 2,576,383 and Fabia model was a mid segment. Audi India had 7 luxury models with prices ranging from Rs 2,900,000 - Rs 12,000,000 while Volkswagen had 4 models which were available in the price range of Rs 1,240,379 - Rs 5,185,000. And therefore the main focus of Volkswagen Group India was to establish a luxury brand image as illustrated by their price range.

Promotion

As part of their marketing strategy Volkswagen Group India primarily used the print media whenever it launched a new product, and sometimes it also used print advertising campaigns. Part of this is because print media in a developing country like India is able to reach a wider audience than electronic media and furthermore print advertisement was used to communicate the benefits of the vehicle and to disseminate a lot of information about the brand and the technical specification of the car. However later on they later on (in 2005) started using television commercial (TVC) to promote their models, and in 2009 they launched their first 360 integrated communication campaign encompassing all aspect of advertisement to promote the Volkswagen brand.

Place (Distribution)

Volkswagen Group India had built a widespread distribution network for its 3 brands across India. As of 2009, Skoda, Audi and Volkswagen each had presence in India through their separate distribution channels. Skoda Auto had a strong presence in the Indian luxury car market through its 62 dealership covering 62 cities in India. On the other hand Audi India had 14 dealerships across India including cities like Delhi, Gurgaon, Chandigarh, Mumbai, Pune and so on. Meanwhile Volkswagen India is planning to increase its dealership from 25 to 40 by the end of 2009. The expansion would involve opening new outlets in cities like Indore, Bhopal etc in response to the growing luxury segment of the India's automobile market.

Brand Positioning

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It is important to note that all products just like human beings have a life cyle as illustrated by the diagram above. They are introduced (launched) , grow, mature, decline and eventually die. However, the most important aspect of product life-cycles is the period of their existence bacause in most markets the majority of the major brands have lasted for two decades before eventually fading out. The dominant product life-cycle, that of the brand leaders which almost monopolize many markets, is therefore one of continuity.

Introduction Stage

At the introduction stage the firm seeks to build product awareness and develop a market for the product. And therefore product branding and quality level is established for instance Volkswagen was positioned as a reliable piece of German engineering, but since the consumers were unaware of it, it was launched using an intensive integrated 360 degree communication campaign which was to cost Rs 400 million in order to build a brand image and reach its target market.

The distribution of the product at this stage is selective until consumers show acceptance of the product, but promotion is aimed at innovators and early adopters. Marketing communication seeks to build awareness and to educate potential consumers as illustrated by the Volkswagen Group India policy of using print media whenever it launched a new product as this allows them to disseminate a lot of information while at the same time it gives a far bigger spread while consumer also discuss the technical specification.

Growth Stage

In the growth stage the firm seeks to build brand preference and increase its market share through maintenance of product quality or additional features and support services maybe added. Pricing is maintained however distribution channels are added as demand increases for example Volkswagen India is aiming to increase its dealers from 25 to 40 by the end of 2009. This expansion is spreading into new cities across India to supplement the existing dealership in major cities.

Key Relationship That Volkswagen Should Develop

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Competition

The central aspect of this model is to highlight the competitive rivalry within an industry. There are 2 main types of competitors internal and external. The internal competition refers to the direct pre-existing competition of a brand in the same product class while external competition includes suppliers and customers of an organisation. At the same time we have potential competition which includes competition from intruders and substitutes

The internal competition forms the pivot of the model of five competitive forces. Therefore different models of the Volkswagen brand can distinguish themselves on the price dimension and differentiation meaning by answering to the needs and desires of the consumers.

On the other hand in regards to external competitors such as suppliers, Volkswagen should develop and maintain a good working relation with suppliers such Bosch (a supplier of many electronic parts for different car brands) not only for good bargain of car parts in terms of cost but also to prevent suppliers making a forward vertical integration and encroaching the manufactures field and turning into competitors.

Threat of new entry

The threat of new of entrants is usually based on the market entry barriers. The most common forms of entry barriers include investment cost, legal obstacles and distribution channels. And the motor industry being an expensive industry, the chances of new entrants is significantly reduced unless an existing player within the industry comes up with a new product which might provide challenge to Volkswagen small car market.

According to (Riezebos et al - 2003). Brands with a large and stable market share form a barrier to the establishment of other manufacturers in that market. This barrier exists because successful brands have loyal customers whose buying habits cannot be easily changed. And even though there is still competition within certain segment of the market, differentiated and valuable brands as per the consumers' perception have little to fear from competing brands. Barriers to entry for potential competition will therefore in all probability be raised sooner if a brand owner exploits two or more brands in the same product class for example Volkswagen can use Golf and UP to exploit the small car segment in India.

The threat of substitute

The threat that substitute products pose to an industry's profitability depends on the types of products or services to which customers can turn to satisfying the same basic need for example the main challenger or substitute to the small car segment should be the scooter or motorcycle especially in a heavily populated country like India.

In that respect Volkswagen India should exploit several brands in that segment to ensure it stays relevant for example launch Polo and Up through price differentiation, and a well balanced brand portfolio will therefore raise barrier to entry.

Bargaining power of customers - Relevance to labour market

Buyer power is the one of the two horizontal forces that influences the appropriation of the value created by the industry. The most important determinants of buyer power are size and the concentration of customers, and to some extent the degree of information available to the customer. In a motor industry the vehicle dealers and distributors fall in the category of customer. And by offering favourable prices, quality relationships which act as an incentive for them to achieve their forecasted target goal and reach the ultimate consumers.

Furthermore most research has shown that people prefer to work for companies with a strong corporate brand or strong product brand. And therefore where a company is known by its product brand, it may use its brand name to profile corporate name on the labour market. Reichheld (1996) reports that companies that focus more on superior customer value tend to attract more employees than companies whose main focus is profits. In fact a strong corporate name acts as a magnet for attracting the best potential employees.

One of the advantages of corporate brand strategy may thus be found in better positioning on the labour market as well as mutual relationship between manufacturer and dealers or distributors as this provides a sense of ownership or belonging to the target market region like India.

The degree of rivalry

The intensity of rivalry vary from one industry to another, however helps determine the extent to which the value created by an industry through the competition.

The most valuable contribution of porter's five forces framework in this issue maybe its suggestion that rivalry, while important , is only one of the several forces that determine industry attractiveness. And to some extent the degree of rivalry has resulted in some very astounding innovations. For example the rivalry between Volkswagen and other vehicle manufacturing companies for small car market segment has played a significant role in the growth of motor industry in India. And therefore rivalry within the industry should not be viewed from a negative perspective rather it should be considered a driving force in innovation within the motor industry for example Volkswagen were contemplating launching the UP to compliment the Polo in the small car market segment.