VW tries branding to stem slide

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Volkswagen of america's Volkswagen brand, trying to recover from a sales slide, has no major product launches this year. Although the marketer will introduce derivatives of existing models in 2004, those cars won't get big ad blitzes due to their low volume.

VW merely dabbled in the incentives game last year, which is one reason its vehicle sales slid by 10% in 2003. To stem that ebbing tide, VW started advertising more competitive lease and financing programs March 1 under a new branding umbrella themed "Drive it. You'll get it."

The campaign aims to explain "what makes a Volkswagen a Volkswagen," says Zafar Brooks, general marketing manager. The national TV spots from Havas' Arnold Worldwide, Boston, are also being tagged with retail messages for regional dealer ad groups. The theme is integrated in ads in other media, plus events' signage, direct mail and point of purchase including trading cards. Mr. Brooks wants to sell 300,000 vehicles this year in the U.S. VW sold 302,686 units here last year, according to Automotive News, and in first quarter 2004, sales are down 25.2% from a year ago, to 49,943.

humor stays

The new ads more effectively communicate VW's special driving experience in the brand's humorous way and cut through the plethora of auto ad clutter, Mr. Brooks says. He adds that the advertising also paves the road for 2005, when VW will launch the next generation of its bread-and-butter car, the Jetta, as well as the redone Golf and Passat, also high-volume models.

Rather than launch all three together, as VW did back in 1998 when these models were last redone, the marketer will stagger the three debuts in 2005 for more effective reach and awareness.

Mr. Brooks attributes VW's declining sales to aging models, quality issues and low incentives. VW upped incentives last month after meetings with dealers that started in January. A spokesman says they now average roughly $2,000 per vehicle from about $1,200 last year.

The automaker's German parent, Volkswagen AG, has been criticized for a move upmarket at the expense of its popular models and keeping them fresh. VW late last year launched its most expensive U.S. model, the Phaeton sedan. The six-cylinder version starts at $64,600.

"VW has lost its way," says Todd Turner, president of auto consultancy CarConcepts. The translation of Volkswagen is "People's Car," he notes, "so every product should carry that as its mission."

The Jetta, VW's best-selling model in the U.S., is nearly 6 years old. "Sacrificing products that make your brand" for the Phaeton was a misguided move by Germany, Mr. Turner says. VW AG's brass were going after DaimlerChrysler AG's Mercedes-Benz for its move into VW's territory with its small A Class vehicle in Europe, he adds.

Mr. Brooks contends the Phaeton will keep VW buyers from leaving the brand, as will its first sport-utility vehicle, the Touareg, which arrived last fall. VW wants to sell 3,000 Phaetons this year here and 35,000 of the SUVs. "Our buyers can afford more," Mr. Brooks says of VW owners.

Despite the carmaker's problems, many buyers are still shopping the brand. According to CNW Marketing Research, the percentage of shoppers who put VW on their list and then bought one was 64.2% in 2003 vs. 31.2% in 1997. But last year's rate is down from 2002, when it reached an annual high of 66.6% vs. each of the years from 1997 to 2003.

VW spent $345 million in measured media last year, down 5.5% from 2002, according to TNS Media Intelligence/CMR. Mr. Brooks says his 2004 ad budget is about the same as last year, declining to be more specific.

For the first time, the automaker has preplanned a trio of sales events for 2004, the first of which started April 1. All will be called "The Volkswagen Sales Drive." In the past, each region handled sales events on their own, with no coordination from VW on timing, ads or offers.

Also new for VW this year: a road trip. Since dealers' sales closings double when people test-drive VWs, the marketer is staging drive programs it calls "At Work & At Play." In the past, VW always had added-value displays at events but not driving programs. A total of 26 "At Play" test drive events will be held this year. The first "At Play" event was in Utah at the Sundance Film Festival in January; the next is in Austin, Texas, at a wine festival in May.

The "At Work" tour is for employees of VW's marketing partners, and Mr. Brooks plans about 12 of them. VW has done one on Apple Computer's corporate campus. VW joined with Apple last summer, offering buyers of its Beetle hardtop a free Apple iPod digital music player and vehicle connector, worth roughly $600.

The smaller-volume vehicles in 2004 include the first Jetta GLi performance model, due next month. VW also has new diesel versions, dubbed TDI or turbo diesel injection, for the Jetta, Passat and Touareg.

double sales after gas hike

Mr. Brooks says sales of VW's diesel-engine models virtually double overnight after a gas price hike. Diesel models account for roughly 8% of all VW sales and are available on every model but the Phaeton.

The automaker should toot its own horn more for diesels, especially as gas prices soar, says Jim Sanfilippo, exec VP of Omnicom Group's AMCI consultancy. "VW has the best diesels in the U.S. now in their segments, and they are undermarketed," he says.

He speculates VW's "corporate memory" may be concerned about a rerun of the 1970s, when it dominated the U.S. diesel market until the bottom fell out and VW abandoned that niche.

VW is working with Arnold on new TV spots touting its diesels under the "Drive it" theme. Though diesels have been available in VWs here since the 1990s,it advertised them just once nationally in 2002.

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