Getting the bugs out - Volswagen's new beetle

Brandweek, April 6, 1998 by Greg Farrell

Volkswagen's new Beetle may become a sales hit. But it's already a pr home run for a brand that, until recently, could have sued its owners for non-support.

Attention retailers. This is a problem you want to have: Mike Sullivan, owner of Santa Monica Volkswagen in California, claims the so-called New Beetle is such a traffic magnet that he has to remove it from his display window every afternoon at 2 p.m. to discourage gawkers and let his salespeople focus on serious prospects. When Sullivan takes it out of the showroom and onto the road, the results are similar. "You can't change lanes," he said. "People drive up beside you to look."

The media hype over the new Beetle (VW calls it the "New Beetle") has been staggering, but the car's appeal appears to be transcending its stereotyped core demographic of Woodstock-recovered baby boomers. Despite the deviations from original Bug features that made it such a lovable, dysfunctional friend, such as rust-prone floorboards and a windshield that was literally in your face, new Beetles will sell for two reasons. First, the introduction comes smack in the middle of a plague of nostalgia in the U.S. More importantly, VW has for the past two years managed to unfreeze its brand from the 20-year cryogenic coma induced by both North American and German executives who understood product development, but were somewhat clueless when it came to comprehending the depth of the VW brand. Where three years ago it may have needed the Beetle to be its savior, the company, with agency Arnold Communications of Boston, has already redefined VW as simply a rejuvenating tool, ownership of which offers the consumer access to greater personal freedom. And that has effectively laid the groundwork for the Beetle to capture as many hearts as the pundits seem to think it will.

"This car breaks all the marketing rules," Liz Vanzura, VW director of marketing and advertising, said at a recent press conference to unveil the Bug's launch campaign. "it cuts across age, education, income and gender."

Such breathy enthusiasm isn't all just hot air. With a limited production run of some 50,000 vehicles this year, and a trunk full of rave reviews from the automotive press, the new Beetle is a can't-miss product for 1998. The unanswerable question, though, is whether the new Beetle will become a linchpin of VW's global strategy to overtake General Motors in the 21st century, or will it simply be remembered as a nod to a late 1990s commercial culture hot button labeled "retro."

Dealers, at least, think the car has staying power. At Camp bell-Nelson Volkswagen in Edmonds, Wash., Bob Campbell is getting only 45 to 50 of the new Beetles, and his backlog is already up to four months. A hot property, no doubt, but Camp bell, a VW dealer since 1968, thinks the car will outlast any fad. "I was a little worried that the new Beetle would be just a flash in the pan," he said. "But once you drive it, you really fall in love. "

The new Beetle's introduction is truly remarkable, not just because of its initial success, but because it happened at all. A decade ago, as VW went into a slide in this country, Japanese marques were ascendant and Euro brands like Peugeot and Fiat cut their losses and bailed out of the U.S. altogether. Selling cars in a wide-open market like the U.S. isn't just about price, it's about product and, especially, brand image. But executives at Volkswagen seemed oblivious to the symbiotic relationship between brand and product; that a clearly defined and understood brand goes a long way toward developing the right products and the messages that sell them. A strong sense of brand also helps keep the revolving door of marketing stewards from making egregious errors.

In spite of the huge beachhead the Type 1 Beetle gained VW in the U.S. during the 1960s and '70s, success proved to be a lousy teacher. After it discontinued the Bug, it cast about looking for the next big hit. Instead, it ended up like the Big Three against which it had played itself off so cleverly: the victim of a concerted Japanese effort to provide better quality at lower prices. VW even put a Big Three manufacturing veteran in charge of the U.S. company, and moved its headquarters from northern New Jersey to the culturally insular environs of Auburn Hills, Mich.

After years of poor planning, manufacturing snafus and wretched luck, the company had lost a lot of its confidence. So, before VW could even dream of launching the new Beetle, it would have to undergo a transformation at all levels of the organization: in management, manufacturing and marketing.

"The market is now ready for Volkswagen and Volkswagen is ready for the market," said Lincoln Merrihew, director of product tracking at J.D. Power & Associates, Agoura Hills, Calif. "The only advantage to stumbling is that, when you come back, it's outstanding."

To say that VW "stumbled" is to be kind. Between 1990 and 1993, VW of America was in free fall. First, the recession of 1990-91 hit VW harder than most. Then, in 1992 and '93, just as the economy had moved into recovery, VW set out to introduce its new Golf and Jetta, which were to be built in VW's plant in Puebla, Mexico. But the changeover problems in Puebla were enormous. The glitches stemming from an old plant and a culture clash between German managers and Mexican workers I resulted in poor quality cars that had to be extensively fine-tuned (at considerable cost) at U.S. ports of entry.