Jochen Sengpiehl, global chief marketing officer for Volkswagen's namesake brand, surprised many people in the automotive and ad agency industries last week when announcing that VW would undertake a global creative agency review. Days later, Ford confirmed it was launching its own global creative review, putting WPP's long-running account at risk, meaning two coveted auto brands are up for grabs.
VW's review is a pretty big deal on its own: With 7 percent international market share, VW is the world's second-largest auto brand behind Toyota (9 percent share), according to IHS Markit. And while the brand is smaller in the U.S—at a 1.9 percent share—it has been a major cultural force with a history of groundbreaking ads dating back to the 1960s when Doyle Dane Bernbach won plaudits for an anti-establishment approach and classic copy lines like "Lemon" and "Think Small."
Today VW is handled by Interpublic's Deutsch, which will likely have to fend of a strong charge from Omnicom, whose DDB handles major portions of the VW business in Europe and Canada. Other holding companies will surely jump in here and across the globe.
Ford's review ocmplicates things for WPP. If the holding company jumps in on VW, it risks angering Ford; then again, it could also hedge its bets against losing Ford. Other holding companies would also have to deal with potential conflicts. Publicis, for instance, recently won the Mercedes-Benz account covering 40 markets worldwide, opening a dedicated group called Emil to handle it. As for VW, Sengpiehl says he is not concerned about conflicts. "We cannot expect from someone that they are only working 100% exclusively with us," he says. "We have very, very strict firewalls and requirements by procurement."
Ad Age recently caught up with him to learn more about what he is looking for and how he wants to evolve VW's marketing.
Who is invited?
This is a holding company level review. Sengpiehl wants to form a single agency hub in five regions: North America, Europe, Asia, South America and a catch-all that he described as "other markets." When asked who VW will reach out to, he rattled off major holding companies including Omnicom, WPP, Publicis, Interpublic, Havas and Dentsu. Global consultancy Roland Berger is assisting with the process, he says. Other agencies worth watching include MDC Partners-owned Anomaly and independent Wieden & Kennedy.
So only big agencies can play?
Not necessarily. Sengpiehl says he is not locked into picking one holding company per region. For instance, one holding company could hypothetically control 70 percent of the work, with outside shops handling the rest. He referred to this 30 percent as "local heros," which could signify an openness to involving smaller shops.
But Sengpiehl expects all the shops to work together—and even sit together—at a single hub, even if they are from competing agencies, with duties spanning creative, digital, PR and more. (Media, now handled by Omnicom's PhD, is not part of the review.)
"The idea is to bundle all creative services we need to develop and to execute excellent work and everything which you need to do that should be handled in this hub," Sengpiehl says. He pointed to Omnicom's dedicated McDonald's U.S. agency, We are Unlimited, as a model. The Chicago-based group uses Omnicom personnel for a lion's share of the account, but outside groups including The Marketing Store (which handles in-store marketing) and The New York Times' T Brand Studio all pitch in.
Is this yet another example of a marketer looking to cut agency costs?
That definitely seems to be one factor. Sengpiehl says VW is working with too many agencies across the globe. He pointed to Procter & Gamble as a model. P&G has slashed the the number of agencies it works with by 60 percent since fiscal 2015, Ad Age recently reported. "I think we are almost working with all the agencies around the planet," Sengpiehl jokes. "We want to reduce complexity and we want more consistency."
VW continues to mount a comeback after the emissions scandal that began in 2015. In case you forgot, that involved the brand duping regulators by installing software intended to evade emissions tests for its diesel vehicles. This came after the brand for years marketed its environmental credentials.
VW's new strategy includes a heavy investment in the development of electric cars. "We all love Tesla and Tesla is a great company but it's a niche company, a niche brand," Sengpiehl says. "We need to become a global market player in electrification. This requires a better and more sophisticated skill set."
What is Sengpiehl's background?
He has been overseeing the VW brand's global marketing since May of 2017, after serving as Hyundai Europe's marketing boss since 2014. It's his second tour at VW after holding the marketing post from 2006-2009. During that time he helped create the "Das Auto" tagline that VW later shelved after the emissions scandal. Das Auto, he says, was "very much focused on the car." Now, "we want to become 'Das E- Auto,' if you want. So we want to become 'the' electric car, but the car is not enough, it's also services," he says, referencing technologies like apps the help people find parking.
What does this mean for marketing?
For one, VW also plans to update its logo for the first time since 2012.
Sengpiehl envisions more branded content hosted on VW-owned channels that includes education about electric vehicles, which today control a tiny portion of the market. He cited several purchasing barriers with electric cars, including high price tags, fears about how far they can go and the availability of charging stations. "All these things need to be fixed and we will fix this," he says. In the U.S., VW has created a separate unit called Electrify America that pledges to invest $2 billion in Zero Emission Vehicle (ZEV) infrastructure and education programs over 1o years. Last week the unit pledged to install charging stations at more than 100 Walmart store locations in 34 states by June 2019.
Wait, didn't the government force VW to do some of this?
To a degree, yes. As part of its settlement agreement for the emissions scandal, the company in the U.S. agreed to invest $2 billion in Zero Emission Vehicle charging infrastructure over the next decade, including $800 million in California.
So, how is VW doing?
Pretty good. Globally, the VW brand reported that deliveries of passenger cars were up 4.2 percent last year. In the U.S., VW brand sales were up 10 percent in the first three months of the year. But there is new pressure on VW to become a bigger player in the states. It starts at the top: Herbert Diess, the former VW brand chief who was named Volkswagen Group CEO earlier this month, has put a priority on the U.S., where the company has not turned a profit in 15 years, according to Automotive News. Diess' goal: grow market share from 2 percent to 5 percent.
How realistic is this?
"It may be achievable," says Matt DeLorenzo, managing editor of Kelly Blue Book. "Why can't VW be at least as big as Subaru, if not bigger?" The Volkswagen brand sold 339,676 vehicles in the U.S. last year, compared with 647,956 for Subaru of America, according to Automotive News. Volkswagen of America, which includes other brands including Audi and Porsche, sold 625,068 vehicles last year.
DeLorenzo suggests VW's electric car strategy is more "corporate positioning as opposed to boots on the ground sales and marketing." He compared it to how VW's used to bolster its environmental credentials by marketing so-called "clean diesel" cars, even though the majority of cars it sold in the U.S. were not diesel. (Before the scandal, diesels accounted for about 25 percent of VW brand U.S. sales, according to Reuters.)
DeLorenzo says VW's recent moves to fill the pipeline with more SUVs will play a greater role than its electric vehicle plans. "If they are going to hit the levels that they want to, they have to look more like traditional automakers than this all-electric thing," he says. "There's a real dichotomy there between the message they are trying to send and the actual hardware that is going to bring them the success they seek."