A DRIFTING VOLKSWAGEN SEEKS SOLID GROUND

Critical $50 Million SUV Campaign Hopes to Reverse Sales Slump

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DETROIT (AdAge.com) -- Volkswagen of America was the comeback star of the 1990s. Now, once again losing ground to rivals, it's trying to regain
Ad shows new Volkeswagen SUV's ability to drive through 22 inches of water.
momentum beginning with the introduction of its first sport utility vehicle, Touareg.

'Touareg' name
The estimated $50 million launch is marked by VW's wry humor, poking fun at the Touareg name and touting it as "the VW that does what other VWs don't." In a run-up to the effort breaking July 1, teaser TV spots from Havas' Arnold Worldwide, Boston, spoof a casting call for a fictional SUV spot. The commercials end with a few seconds of footage of the SUV's front end and the words "The Volkswagen Touareg. Coming soon."

To illustrate the premise that Touareg does "what other VWs don't," one spot in the full campaign shows a Beetle stranded after attempting to ford a flooded roadway. Then the Touareg is seen in the same situation but it simply bulldozes its way through 22 inches of water to continue on the road beyond.

Largest 2003 ad spend item
The push marks the largest spending for a 2003 VW model, said Karen Marderosian, the brand's advertising director, who declined to be specific. But the effort is expected to be sizable to support Touareg, which Frank Maguire, vice president of sales and marketing at the automaker, called "our most important launch ever." He said it's hoped the SUV will not only bring back former VW owners who left the brand because it had no SUV, but also attract buyers who have never considered VW.

A lot is riding on Touareg. In 2002, both Hyundai Motor America and Mitsubishi Motors North America surpassed VW in total unit sales, and last week VW said its May sales were 27,941 units, down 13% from a year ago. In the first five months of 2003, the carmaker sold 120,150 cars vs. 137,360 a year ago.

New and updated products
Analyst Wes Brown, a partner at consultant Iceology, said VW's core products, such as the Jetta and Golf, are nearing the end of their lifecycles and compete in crowded segments with newer entries. To rectify that, VW has a number of new and updated products in the pipeline and plans to expand its five-car lineup to 12 in the next five years, Mr. McGuire said.

Moreover, German management also plans to give VW in the U.S. more input into model planning Mr. Maguire said.

Risky strategy
In what some view as a risky strategy, VW is marching upmarket with Touareg, ranging in price from under $35,000 to $45,000, and late this year will introduce the super-luxury Phaeton sedan, expected to carry a sticker in the $60,000 range. Many experts have criticized VW's plan, saying it will step on its sibling Audi.

Ms. Marderosian, however, said VW buyers don't cross-shop Audi, adding that the brand will continue to stand for German-engineered, quality models that offer value.

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