beetle the birth

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\Beetle: The Birth, Growth, Death and

Revival of a Cult Brand"No other auto in history has changed so little and lasted so long. ..I

~Thomas Karig, Volkswagen Spokesperson, Puebla (Mexico), inJuly 2003."It is a certain type of person who drives a Beetle. All people who have Beetles arevery open (0 ideas; they love life. ,,2

~George Memetov, Founder of Classic Beetle Club in Minsk (Belarus), inJuly 2003.

"One thing is sure: the Beetle never will disappear from the roads of our planet and,above all, it never will disappear from the hearts of millions of people all over theworld. ,,]

~Mattia Zamana, an Italian Fan of Beetle, inJuly 2003.

T H E E N D O F ._ A _ N _ E _ R A _In July 2003, G erm any's autom obile m ajor V olksw agen unveiled the final, specialversion of its car 'B eetle' in M exico. V olksw agen revealed that th e 'retro edition'w ould be lim ited (to 3000 cars) and w ould be offered in tw o colors, beige and aquaticblue, the only colors in w hich the car w as available in its initial years. The com panyalso announced that it w ould stop producing the classic old Beetle from July 30 th atPuebla (M exico), the only plant in the world m aking the original Beetle in the 21,tcentury.Beetle, lovingly referred to as 'Bug;' 'Love Bug' and 'Beetle Bug' by custom ers,industry w atchers and analysts over the decades, w as undoubtedly one of the m ostpopular cars ever made in the world. By the end of the 1990s, m ore than 2 1 m il lio nBeetles had been sold. The car had earned the status of a cult brand" in the 1960s and1970s across the w orld, especially in the U S. B y the 21st c en tu ry , th e o rig in al B ee tl eha d been in production for nearly 70 years. N aturally, V olksw agen's decision to endits pro du ctio n d isa pp oin te d m an y B ee tle fa ns. A Businessli'eek w riter sum med up thefe el in gs o f m il lio ns o f s uc h p eo pl e, "I got a real tw inge w hen 1h ea rd th at Volk sw ag enju st p ro du ce d it s l as t B ug ." sH ow ev er, V olks wa ge n's d ec isio n w as n ot to ta lly u ne xp ec te d - ind ustry w atc he rs (a ndespecially the M exican people and m edia) had been aw are of this eventuality for quitesom e tim e. The car had been the vehicle of choice for m ost taxi drivers in MexicoC ity, w ith m ore than 80,000 B eetles on the roads in the city. D uring the early 2000s,m any cheaper foreign cars (such as Ford Fiesta, Fiat U no and C hevrolet Pop) begane atin g in to B ee tle 's m ark et in M ex ico . A ro un d the s ame time , Mexi co C ity a uth ori tie s

1 'Classic Rea r-Eng in e Beet le Will n o Long er be Buill, ' wwwjsonline.com, Ju ly 09 , 2003 .'I t's T ime to SayAd io s to VW Beet le ,' www.reuters.com, Ju ly 12,2003.'I t's T ime to SayAd io s to VW Beetle: www.reuters.com, July 12,2003. .4 C ult b ra nd s re fe r to th ose b ra nd s th at m ake d ee p, u niq ue emo tion al bo nd s w ith th eirc us tomers . P a tro ns o f th es e b ra nd s e xh ib it e xtreme lo ya lty tow ard s th em and e ve n a ct a sunofficialbrand ambassadors.Generally,these brands start small and achieve cu lt s ta tu s overa period o f t ime . Beside s Beet le , s ome o th er cul t b rand s a re Ha rl ey -Davidson , S ta r T rek,Apple,ScreamingE agle(wine)and Mazda's Miata,5 'Farewell. BelovedBug o f My Heart ,' Businessweek, August 01, 2003.

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decided to give taxi permits to only cars or cabs with four doors, to ensure passengersafety and convenience,This decision was nothing short of a death knell for Beetle, since it had only twodoors, The above two factors, severely eroded demand for the car. Sales in Mexicohad dropped to mere 5,000 by 2003, from over 98,000 a decade ago, Given thesecircumstances, Volkswagen seemed to have been left with littIe choice, Commentingon the company's decision, Jens Neumann (Neumann), Head, Volkswagen (NorthAmerica Unit), said, "True stars know when it is time to retire and tile public knows ittoo, This is what is happening to tile Beetle,,,6

THE VOLKSWAGEN STORY: THE BEETLE IS BORNThe history of Volkswagen and Beetle dates back to the early 1930s, Adolf Hitler(Hitler), the Nazi dictator, commissioned an automobile engineer, Ferdinard Porsche(Porsche), to design a Volkswagen, (German for 'a people's car') in 1933, Hitlerwanted a durable, affordable car that could seat five people (parents and threechildren), His decision was reportedly prompted by the fact that during that periodGerman car manufacturers largely offered luxury cars which were too expensive forthe common man,In 1934, Porsche submitted the design proposal for such a car to the Germangovernment and signed an agreement with Reichsverband der Automobilindusrie(RDA, theGennan Motor Industry Association) to manufacture the car once theprototype of it was ready, Porsche wanted to build a small car for the masses, whichwas reliable and economical. With these attributes in mind, Porsche focused mainlyon innovations in the chassis and engine. By October 1935, he had built the firstprototype of the car. Its full Steel body, space for five people, and impressiveperformance made it quite different from the other models available at that time.When no member of the RDA took up the task of manufacturing th e car in its factory,Porsche decided to do so himself and drew up the plans for the Volkswagen factory.With Hitler's help, he set up GeZuVor (Gesselschaft zur Vorbereitung desVolkswagen) and also established a workshop at Wolfsburg in May 1938, Later in theyear, GeZuVor was renamed Volkswagenwerk GmbH (Volkswagen). The first carwas made in 1938. A s its shape resembled a beetle (a type of a bug), it was namedBeetle. Due to the outbreak of World War IIin 1939, work on the construction ofVolkswagen's first factory at Fallersleben was halted.As the company began manufacturing vehicles and stationary engines for militarypurposes, car manufacturing took a back seat. TIle first batch of 42 Beetles was rolledout only in 1941 - that too for testing and publicity purposes. By 1943 however,production of the ca r picked up and the company produced 26,000 Beetles during theyear. In 1944, two-thirds of the factory was destroyed by bombing. When the warended in 1945, the Volkswagen factory was placed under th e custody of the British,TIle factory was rebuilt and used for making jeep engines and repairing British armyjeeps.During that period, the British motor industry was not very enthusiastic aboutpassenger cars. Moreover, the British saw little hope for Volkswagen's survival, andhence refused to invest in the company. In 1945, the British named the Volkswagen10\\11 'Wolfsburg' and the company as 'Wolfsburg Motor Works' (soon after, theoriginal name was restored). The factory was still repairing military vehicles andmanufacturing jeep engines. Then a major positive development took place in 1945 -tile factory received an order for 20,000 Beetles from tile British military.6 'Under Death Sentence, Old Beetle Takes Final Bow: http://biz,yahoo,com, July 10,2(0),

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Beetle: The Birth, Growth, Death and Revival of a Cult Brand

As a result. the factory was rebuilt and 10,000 Beetles were produced by October1946. Since the production was aimed at the armed forces, government divisions andservice organizations (such as the Red Cross), the Beetle remained out of the reach ofthe general public. Things changed drastically in 1947, when Volkswagen participatedin the Hanover export fair and introduced the Beetle in the market. The Volkswagenwas now available to the public, though in small numbers.In the same year (1947), the British appointed Heinrich Nordhoff (Nordhoff), aGerman engineer, as Volkswagen's managing director. According to analysts, thiswas a turning point in the company's history. Under Nordhoff's leadership, thecompany began growing quickly. Nordhoff's commitment, farsightedness andmanagement style (based on his philosophy of maintaining close contact with theworkforce) worked wonders for Volkswagen. Since workers were treated as partners,their commitment towards the job increased manifold, resulting in a major increase inproduction levels.Nordhoff also created an extensive sales and service network in Germany and Europewhich facilitated rapid growth of the company. By the late 1940s, Volkswagenemerged as the largest car manufacturer in Europe, exporting the Beetle to Denmark,Luxemberg, Sweden, Belgium and Switzerland. In 1948, Volkswagen was the marketleader in Germany, with a 63.5% market share. In 1949, the British handed overcontrol of the Volkswagen to Federal Government of Germany, In the same year,Beetle was exported to the US, where it lasted real success.

BEETLE: RISE TO GLORYBeetle was not an instant success in the US since the market there was dominated bytechnically superior luxury cars. With its unusual, round, bug-like shape, Beetle wasnot much of a match for the elegant looking cars such as Cadillac, Corsley, Packard,Hudson and La Salle available in the US during that period. Also, Beetle lackedfeatures such as synchromesh transmissions, exterior and interior chrome, and manyother options .common in cars those days. As a result, very few Beetles were soldinitially.In 1949, Volkswagen introduced the Beetle Cabriolet, a four-seater convertible, forthe export market. The car, developed with the help ofKarmann Company (a Germancoach manufacturing company based in Osnabruck, Germany) was available in colorssuch as Pastel, Bordeaux Red and Mid Brown instead of the standard' Beige andAquatic Blue Beetle colors, Beetle Cabriolet was given comparatively luxuriousinteriors as well. The Volkswagen constantly modified it and improved the car duringthe 1950s and released different versions. Features such as a larger rear window andmore powerful engines were added, all the while retaining the car's original look andshape.From the mid-1950s, Beetle's sales in the US began increasing. The biggest factor inthe car's favor was its affordability. According to a National Automotive DealersAssociation survey of import ownership in 1956-58, 88% of US customers whobought Beetles in that period cited its 'cheaper to operate' attribute as the majorreason for the purchase. Around 60% of the buyers said that they would have gladlybought a domestic car if there were any available at the same price (around $1,280).Gradually. Beetle's 'inexpensive, safe and reliable' image began finding its way inanalysts' reviews and consumer reports. According to an April 1951 issue ofConsumer Reports' magazine, "For $1,280, the Beetle contains a lot of engineering.The engine was designed to be able to operate all day at about 60 mph, which is aboutthe car's top speed. The car behaves well on icc with far more traction than the cars

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we arc used to." Beetle's strong construction and flawless finish became popular aswell.Another factor that helped the car gain popularity was that it was rather e;lsy tooperate and maintain. According to many customers, Beetle's engine mechanism andoperation was so simple that they readily trusted their wives and children to drive aBeetle on their 0\\"1\. Since customers were very comfortable with its simplemechanism. they could even repair their cars on their own whenever necessary.Reportedly, even a mechanically chailcnged customer found it e a s y to fix problems ina Beetle. All these attributes created a feeling of attachment. trust and belongingnessin Beetle owners towards their cars.During the 1950s. Volkswagen expanded its operations globally and built factories inAfrica. England. Mexico. Brazil and Australia to meet the growing demand. Thecompany exported the Beetle to more than 29 countries worldwide. The car wasreported to be gaining the same recognition and trust among global customers that ithad in the US. By now, the element of emotional bonding with the brand had beguntaking shape.Commenting on this in the 1950s, an automobile magazine, 'Popular Mechanics,'exclaimed "What is there about this small, ugly, low-powered import that excitespeople all over the world and makes every owner talk like a salesmanl'" The samemagazine conducted.a survey of hundreds of Beetle owners and concluded that theseowners had actuallv fallen in love with the car; 96% of them rated their car as'excellent,' with nobody rating it as 'poor."To cash in on this emotional attachment to the car, Volkswagen released a series ofadvertising and promotional campaigns in the late 1950s. The company devised aclever marketing strategy that aimed at converting Beetle's underdog status in the UScar market into an advantage. As part of this strategy, Volkswagen adopted a strategyof 'self-deprecating advertising.' making fun of what many referred to as Beetle'sshortcomings (as compared to other cars).Some of Beetle's advertisement slogans which became popular during the 1960sincluded 'Nobody's Perfect,' 'Ugly is Only Skin Deep,' "Think Small,' and 'It's Uglybut it Gets There.' This kind of advertising was very much unusual in the US, wherecar advertisements generally highlighted exceptional features such as style, power,superior design and elegance. According to analysts, these Beetle advertisements weresurprising and shocking in a positive way, and their fun element won the hearts ofmany people.In addition to the above, Beetle's advertisements through the late 1950s and the 1960shighlighted the advantages of its small size, its price and affordability. its simplemechanism and its global reach. Some of the advertisements even revealed a few ofBeetle's drawbacks and highlighted the company's commitment to offer customersthe best possible quality. Volkswagen also used the hard sell technique in itsadvertising campaigns. One such print campaign featured a snowplow and a heavyblanket of snow on the ground: the slogan read, "What do you think the snowplowdriver drives to work?" (the idea being to highlight Beetle's ability to drive throughsnow).

"The Volkswagen Beetle: The Emotional Power of the Love Bug,' www.indicatorgfk.com,J uly 1 91 )9 .

R 'll;c Volkswagen Beetle: The Emotional Power of the Love Bug,' www.indicatorgfk.com,Julv 1999.'The Volkswagen Beetle: The Emotional Power o r the Love Bug: www.indicatorgtk.com,J u l v 1999

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Volkswagen's promotional strategies also contributed to its success. Some of thesewere the launch of (Beetle s) Owner Magazine, which provided details about Beetleowners and their experiences; offering -gold watches as rewards to the Beetle ownerswho had been using Beetle for more than a specified number of years: and gift bondsto babies lilat were born in Beetles.

EETLE: BECOMING :-\PHENOMENONThe 1960s and 1970s were a period of glory for the Beetle. The C;Jrbecame the choiceof the rebellious. freedom loving, post-war (World War II) generation in the US. InEurope, the car became a symbol of freedom from the tough social obligations andrestrictions of that period. According to Beetle customers, owning Beetle alsoreflected their love for life. A businesswoman interviewed by 'Popular Mechanics'magazine during the 1960s regarded her Beetle as "the first major love affair of mylife." Talking of the emotional attachment of customers towards their Beetle cars inthat period, Life magazine referred to Beetle as 'a member of the family that justhappens to live in the garage.'In what can be termed as the pinnacle of Beetle's popularity, the car featured as thelead character in a series of movies produced by the Walt Disney Company (Disney)i.. the 1960s. These movies revolved around the central character 'Herbie' (a Beetle),which was portrayed as a 'Love Bug.' The Herbie movies were a great hit - 'The LoveBug' was the biggest box-office hit in 1969 - and were rated among Disney's mostprofitable live-action films.Other Herbie movies were 'Herbie's Road Trip,' 'Herbie Goes to Monte Carlo,''Herbie. the Love Bug,' 'Herbie Rides Again' and 'Herbie Goes Bananas.' Accordingto analysts. :1eetle 'sealed its cult status' by starring in these movies. They said thatthe success of the Herbie series was a testimony to emotional bond the customers hadwith the Beetle. Apart from movies, Volkswagen used Beetle toys. posters andwatercraft (Waterbugs of America Racing Association) to extend the Beetle brandfranchise.In the US, people even invented games based on the Beetle. Games such as 'SlugBug.' 'Punch Buggy,' 'Beetle Bop,' and 'Love Bug' were reportedly popular withmany people. In 'Slug Bug,' when a player spotted a Beetle car manufactured before1971, he had to shout 'Slug Bug' and hit the oilier player hard on the arm. 'PunchBuggy' was similar, but here the hitter also had to say the color of the Beetle spottedand if the hitter did not want to be hit back, he had to say, 'No punch back.' In 'BeetleBop,' the players just shouted 'Beetle Bop' when they spotted a Beetle. And in the'Love Bug: the player who first spotted a Beetle had to say 'Love Bug' and give ahug or kiss to the other player.'?Analysts said that Beetle customers were so loyal and so attached to the brand thatthey acted as its salesmen and recommended the brand to other potential car buyers.By the 1970s. there were hundreds of 'Beetle clubs' and 'Beetle associations' acrossthe world. founded by lovers of the car. These clubs organized meetings andgatherings where Beetle owners exchanged tales about their cars. The clubs alsoconducted 'Beetle contests' occasionally. Apparently, these clubs were the best placesto view various Beetle models. -By 1972. Volkswagen had sold more than 15 million Beetles across (h e world. Thiswas perhaps one of the last pieces of good news for the brand.

10 Rcponcdlv. these games \\'L'Tt: popular ev en in the 1990:;.2 5


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BEETLE LOSES GROU],;DIn the early 19705, Beetle's sales began declining across the world. TIle decline wasthe most alarming in the car's largest market, the US. This was attributed largely tothe increased competition in the small passenger car segment with the entry of foreignbrands, mainly Japanese compact car brands, which were technologically moreadvanced in this segment. Volkswagen tried to recapture m a r k e t s h a r e by introducing anew Beetle model, Super Beetle (1971). This model had many improved andadvanced features such as a new suspension, which allowed the trunk to be deeper(thus increasing luggage space), and a new, fully equipped dashboard. However,Super Beetle failed to work wonders in the US market.With Beetle's sales declining across the world, Volkswagen changed its strategy. Itdecided to focus less on the Beetle and more on developing and launching newbrands. In 1974. Volkswagen stopped production of the Beetle at Wolfsburg,popularly called as the 'Town of the Beetle.' However, production of the carcontinued at other factories in Brussels, Emden and overseas. The Wolfsburg plantnow began manufacturing 'Golf.' Launched in 1974, the Golf became an instantsuccess in Germany due to its advanced technological features. This resulted in afurther decline in demand for the Beetle in Germany. In 1974. Volkswagensuccessfuily launched Scirocco (a sports car), which w a s even voted as the 'Car of theYear' in Germany.During the 19705, US government regulations on safety and emission controls withregard to the automobile industry became stringent. And Beetle, which could not bemodified to meet those standards, began losing ground. Gradually, a host of new carmodels with advanced technology and high safety levels began eating into its marketshare. In 1975, Golf was launched in the US under the 'Rabbit' brand name. TheRabbit's growing sales also affected demand for the Beetle.The above developments were perturbing indeed for a brand that was tili recently thedarling of the masses. Analysts felt that though Beetle still enjoyed an emotional bondwith its owners. it was incapable of meeting their changing needs and preferences.Since other small cars. with better options and technology in the same price range werereadily available, customers stopped buying Beetles.In 1979, less than 50 Beetles were sold in the US, and in that very year. Volkswagenstopped manufacturing Beetle at all its factories across the world, except Brazil andMexico. Whatever demand was left for Beetle tapered off by the end of the 1970s asthe number of models competing with it increased significantly. I I

TIME FOR BEETLE AGAIN!Accepting that the Beetle was all but dead, Volkswagen began focusing onstrengthening its product portfolio in the late 1970s. It decided to launch and acquirenew brands to become a global leader in the automobile segment. In line with theseplans, the company launched the Jetta car and Volkswagen truck in 1979. In 1985, toreflect its increasing thrust on globalization, V.olkswagen changed its name fromVolkswagenwerk AG to Volkswagen AG (Refer Exhibit I for a brief note onVolkswagen).

II -D1eBrazil plant stopped production in 1993. Beetle continued to be manufactured only at thePuebla plant in Mexico, mostly for local sales. Mexicans remained faithful to Beetle eventhree decades after it had been abandoned by other countries.

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In 1985, the company added 'intelligent four-wheel drive" 2 models to its portfoliowith the launch of the Golf'Syncro and the Transporter Syncro. 'Intelligent four wheeldrive' enabled the division of power between the two axles, LllUS ensuring maximumdriving comfort and safety to drivers in all weather conditions.In 1986, Volkswagen acquired SEAT, a leading Spanish automobile company, andbegan operating it as an independent unit. In 1991, the company also acquired Skoda,an automobile company in the Czech Republic that manufactured the popular Skodacars. In the early 1990s, Volkswagen was clearly the leader in the German car marketthrough its four car brands, Volkswagen, Audi, SEAT and Skoda.However, during the early 1990s, Volkswagen faced a variety of problems inmanaging its global operations, especially in the US. During 1989-92, the company'ssales in the US declined sharply, and its marketshare fell below 1%. According toanalysts, this was a major disappointment for a company which had dominated theimported cars segment in the US in the 1950s and 1960s. Analysts attributed this to itsefforts to 'Americanize' its leading brand Golf to attract the US customers.Accepting the mistake, Carl H. Hahn, Chairman of the Volkswagen ManagementBoard, said, "Our basic mistake was to trust the design adaptation of the Golf toAmerican thinking; too much attention to outward appearances, too little toengineering detail. We had every hope of building a 5% share in the US. But we werenot true to our heritage. We gave American customers a car that had all the handlingcharacteristics- one might say, the smell. - of a US car. We should have restrictedourselves to our traditional appeal, aiming at customers who were looking not forAmerican style but for a European fee!.,,13Volkswagen also admitted that there were quality problems with its cars, mainlybecause of its failure to transfer the German production culture to its US operations.Company sources revealed that their attempts to mesh US operations with Germanoperations had turned out to be a costly mistake. Volkswagen's internationaloperations ran into problems in other regions as well. SEAT faced a financial crisis in1993 and Skoda had a tough time breaking into the Polish, Hungarian and WestEuropean markets.During that period, the automobile industry in Europe faced a recession whichseverely affected the company's financial condition. Due to its many problems,Volkswagen posted a loss of $1.1 billion in 1993. To overcome these problems, themanagement, led by CEO Ferdinand Piech (Piech), began considering the possibilityof reviving Beetle. It seemed that Volkswagen wanted to improve its performance inthe US by cashing in on the nostalgia of customers for the Beetle brand.

REINVENTING THE BEETLEVolkswagen adopted a cautious approach to the relaunch of Beetle as many companyexecutives, including the R&D chief Ulrich Seiffert, opposed this idea. They felt thatthe company just could not afford to invest in an outdated model at this point. Most ofthem felt that Volkswagen needed new, state-of-the-art models to revive its sales inthe US and improve its financial condition. A s a result, the company decided todevelop a prototype of a New Beetle as a concept car. 14

12 In a four-wheel drive power is delivered to all the four wheels, whereas in front-wheel orrear-wheel drives, power is delivered to the front two and rear two wheels respectively. Four-wheel drive vehicles are less likely to skid than front or rear wheel drives.

13 Inan interview with the Harvard Business Review, July-August 1991.14 A 'concept car' is a rough version of a next generation car, which sports new looks andcapabilities but is not fully functional,

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T he firs t p ro to ty pe o f th e ;\C\\' B ee tle (w ith m an y m od ific atio ns in s ha pe a nd fe ature sth at d iffe re ntia te d it fro m th e o ld B ee tle ) w as u nv eile d a t th e lutcrnational Auto S howin D etroit in 1994, A fter th is. V olks wa ge n re ce iv ed th ou sa nd s o f emails f rom acr os sth e w orld . re qu estin g the c om pa ny to re lau nc h B ee tle , T I1 eN ew B ee tle re ce iv ed su cha warm and overwhelm ing response that e v e n V olksw agen w as astounded,R eportedly, car shoppers and m edia people m obbed the N ew B eetle display area andhordes of people came to the show. just to get one glimpse of the New Beetle.C om m entin g o n this, P ie ch sa id , " W e w ere , to sa y th e le ast. overwhelmed.t'"V olksw agen then decided to go ahead w ith the relaunch and announced that the N ewB eetle w ould be launched in 1998. H ow ev er, d esp ite th e ov erw he lm in g re sp on se , th ec omp an y p la nn ed to manu fa ctu re o nly 1 00 ,0 00 B ee tle s every year at the Puebla plant.R eportedly, m ore than half of the N ew B eetles m anufactured w ere to be targeted atthe US and Canadian markets, w ith the remaining targeted at Europe and otherma rk ets a cro ss t he wo rldIn view of the overw helm ing response to the N ew B eetle, the com pany realized itspotential, and m ade m any changes to the prototype to m ake the car m ore acceptable,tr en dy a nd c on tempo ra ry . T he New Bee tle f ea tu re d te clmo lo gic all y a dv an ce d fe atu re sin li ne w ith o th er Vo lk sw ag en v eh ic le s. Its e ngin e w as in th e fro nt, u nlik e th e o rig in alBeetle which had its engine in the rear. O ther changed features in the New Beetlewere f ron t-whee l drive, l iqu id cooled engine, s tand ar d a ir -coi ld it io ning and f ou r t imesth e h orse po we r o f th e original Beetle.A cc ord in g to c om pa ny so urc es, tile N ew B ee tle 's b od y d esign w as b ase d stru ctu ra llyo n th e G olf a nd w as m ore sp ac io us th an th e old B ee tle . T Ile c ar c on ta in ed s ta te -o f-th e-art sa fe ty fea tures a nd c le arly refle cte d E uro pea n d esig n a nd e ng in ee rin g. H ow ev er,the New Beetle retained som e of the old features of the original Beetle such asb ul bo us fe nd ers , g au ge p od , a b ig ro un d s pe ed ome te r, fro nt-p as se ng er d ss hb oa rd g ra bh an dle s a nd a flo we r v a s e in the dash -board.T he N ew B eetle w as priced around $15,000 (th e o rig in al B ee tle w as p ric ed a t $7,000in 1979). V olksw agen said that the new car targeted the S ame d emogra ph ic p ro fi lewhich took Beetle to its peak in the 1950s and 1960s, th e b ab y boomers" in the US,H ence, B eetle w as no m ore an entry-level brand, but a brand for a cash rich segm entthat wanted to relive the past. Com menting on the New Beetle, C live W arrilow,President and CEO, Volkswagen (North America), said, 'The new Beetle is ac omp le te ly mo de rn d es ig n, a lmo st fu tu ri sti c. It is designed to appeal to people whofondly recall the past as w ell as young people w ho have no connection to the originalc ar a t a ll. W h ere as th e o rig ina l B ee tle p ro vide d b asic tra nsp orta tio n, th e N ew B ee tle isan up-mar ke t, l if es ty le v eh ic le . Its h igh ly emo tiona l. a c ar th at m ak es the e xp erie nc eo f d riving fu n again. ,17

15 'T h e No st al gi a Boom : Businessweek, M arch 2 3, 1 99 8.16 M arketers hav e divided the po pulation of the U S into different 'gen eration s' such as the

silen t g en eratio n (h om b etw een 1 92 5 an d 1 94 2), th e b ab y b oo mer g en eratio n (b orn b etw een1 946 an d 1 %4). generation X (born betw een 1965 and 1976) and generation Y (bornb etw een 1 97 7 an d 1 99 -1 ) 1 1 1 < . : term b ab y b oo mers' refers to p eo ple h om d urin g 1 94 6-1 96 4(after th e en d o f W o rld W ar II). T his p erio d w itn essed h ig h p op ulatio n g ro wth an d d yn am icch an ges in th e economy of th e U S , R eportedly, the baby boo mers w ere a freed om an d funloving genera tion. T h e y a ls o pa rt ic ipa te d a ct ive ly in social and political events and had ama jo r impac t 01 1 s oc ie ty , e co nomy a nd b us in es se s in th e US , B y th e early 2 1" cen tu ry, b ab yboomer s a ccoun te d f o r ne ar ly one- th ir d o r th e to ta l p op ula tio n o f th e US ,

17 'The Beetle is B a ck l' www.autoweb.com.au ,January5, 1998.
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Volkswagen began advertising the New Beetle in the mid-1990s itself. Though theNew Beetle was mainly targeted at the baby boomers, the company decided tobroadbase its appeal by focusing on the 'style minded' younger generation. Itsadvertisements sought to revive the past emotion') towards the Beetle and highlight thechanges in the New Beetle. A few taglines and captions of the New Beetle brand were'If you have sold your soul in the '80s, here's your chance to buy it back,' 'Theengine's in front, but its heart's in the same place,' 'Less Flower, More Power.' 'HugIt? Drive It?' and 'Drivers Wanted' (Volkswagen's new brand logo).According to analysts, through these advertisements, Volkswagen was trying torecapture the 'love affair' the original Beetle had with customers in the US. Thecompany seemed to have succeeded in its attempts: there were large waiting lists forthe New Beetle and customers were reportedly even ready to wait for months to getdelivery of their Beetle. All this, even before the first New Beetle had been launched!

THE NEW BEETLE MAKES ITS MARKThe New Beetle, launched in March 1998, soon stole the hearts of customers acrossthe world. As Volkswagen had hoped, the New Beetle struck an emotional chord inmany Beetle lovers. Commenting on the memories New Beetle evoked a customer,Dennis 1. Berger, 52, said, "It opened up a memory of when I was a teenager in NewJersey. This car reminds me of the '50s, when there was not a care in the world.?"Cemmenting on this, anbther Beetle lover said, "I think that Volkswagen has a sort ofcult following.,,19According to an article, "the New Beetle rekindled the magic of its legendarynamesake a ne instantly became a welcome ray of sunshine in an all-too-serious carmarket ..20 The car was reportedly huge hit wherever it was seen. Commenting on this,an auto journalist said, "I have never driven a car that has generated more interest.Stop at traffic lights and you are surrounded - like a pop star recognized on the street.Truck and van drivers give you the 'thumbs up' as they go by. Even kids smile andwave, rather than throw stones and try to steal your radio. ,,21 .More significantly, thanks to its advanced features, the New Beetle succeeded inattracting the younger generation as well. Analysts attributed this to its positioning asa 'cool, hip and fun car' which stood apart from the typical mid-priced Japanesepassenger cars which were positioned on quality and advanced technology. They saidthat the New Beetle met the technology standards of those cars and also offeredquality mingled with styling resembling the vintage Beetle. In addition, it representeda carefree era in American History. Hence it was received readily by the youngergeneration (Refer Exhibit II for a look at the original Beetle and the New Beetle).Commenting on Volkswagen's efforts to bring the romantic past of the mid-1900s tothe 2151 century customer, Gerald Celente, publisher of Trends Journal said, "TheBeetle is not just empty nostalgia, it is a practical car that is also tied closely to theemotions of a generation.?" A Beetle fan summed up the issue saying "This is a carfull of character. Forget the imperfections that would make modem car designerscringe. It is not that sort of vehicle and the way the first batch of imported Beetles18 'The Nostalgia Boom: Businessweek, March 23,1998.19 'Bug Lovers Compare New Model to its Classic Counterpart,' www.alligator.org, March 16,1998.

20 "Volkswuger-'s New Beetle Selected 1999 North American Car of the Year:www.theautochannel .corn, January S, i999.21 'TIle '60s All Over Again? Volkswagen Reinvents the :Beetle for a New Decade,'lnternational Herald Tribune, March 20,1998.

22 'TIle Nostalgia Boom,' Business Week, March 23, 1998.29
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Questions for Discussion:1. Examine the evolution ofthe Beetle brand and its growth over the years. How didthe strategies adopted by Volkswagen contribute to the brand's success over theyears?2. Critically analyze the reasons for the emergence of Beetle as a cult brand,especially in the US. How far do you think the emotional bonding of customerswith the product contributed to its success? Do you think such an emotionalrelationship with a productextends the product's life span? Justify your answer.3. Examine the reasons for the discontinuation of the Beetle brand by Volkswagenand critically comment on the rationale for its relaunch. Do you think thenostalgia factor is strong enough to change the fortune of a company in anyindustry? Support your stand .4. Critically. analyze the strategies adopted by Volkswagen to promote the New

Beetle. Do you think the New Beetle will be able to achieve the cult status of itspredecessor?Why/Whynot? lC FAl C e nte r f or M a na gem en t R e se ar ch . A ll rig hts re se rv ed .

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Exhibit JA Brief Note on Volkswagen

Volkswagen manufactured a variety of automobiles including cars, trucks andvans. After beginning with the Beetle cars in the 1940s, Volkswagen increased itsproduct range and began manufacturing buses and vans (Volkswagen Transporter)in the 1950s. In 1955, the company launched the Kannann Ghia cars, incollaboration with Karmann, a German automobile body maker, and Ghia, a famousItalian designer. By the late 1950s, the Volkswagen Transporter became one of thebest selling transporters in Europe and the US. In 1960, Volkswagen became alim.it company, Volkswagenwerg AG, with 60% of the shares owned by thepublic and th e remaining 40% equally controlled by the German Government andthe Lower Saxony State (Germany), where Volkswagen was headquartered(Wolfsburg). By the mid-1960s, the company had expanded its operations to manycountries across the world.In the mid-1960s, Volkswagen realized the need to strengthen its product line byadding new brands (by then the Beetle had been in the market for over 15 years). In1964, it acquired Auto-Union Gmbh, a part of Daimler Benz AG, another leadingautomobile company in Germany. In the same year, VOlkswagen decided to focuson R&D and invested heavily in establishing a full-fledged R&D division. Sincethen it developed different versions of the Transporter and Kannann Ghia carsalong with a number of versions of the .Beetle. In 1965, Voll-swagen's subsidiaryAuto-Union launched Audi, a new luxury car brand, which reportedly was the firstcar brand of Volkswagen in the premium segment of the car marketIn 1969, Volkswagentnerged two subsidiaries, Auto Union and NSUMotorenwerke, toform AudiNSU Auto Union AG. Volkswagen entered the carrental business in 1970 by acquiring 'Selbstfahrer-Union,' the largest car rentalbusiness in Germany. The company launched the Passat in 1973, a new c a r brandin the mid size segment of the market. By the late 1970s, as Beetle sales' declinedacross the world, the company stopped production of Beetle except in Brazil andMexico and focused on increasing its product range. In the 1980s and early 1990s,Volkswagen acquired brands such as SEAT and Skoda. By the early 1990s,Volkswagen e x p a n d e d its reach to various countries across the world and also S ( ! tup manufacturing facilities in the US, Africa, the Asia/Pacific region and Europe.The company faced a major crisis in the early 1990s on account of a recession inthe automobile industry and the unimpressive performance of its subsidiaries.Under the leadership of Ferdinand Piech, who took over as CEO in 1993, thecompany restructured itself to return to profitability. As part of this restructuring,Volkswagen tried to shed its image as a People's manufacturer and to positionitself strongly in every segment of the passenger c a r market, including the premiumluxury segment. In line with these plans, the company acquired brands such asBentley, Bugatti and Lamborghini in the I990s and launched many new versions ofits brands since 1993. The launch of the New Beetle also helped the companyincrease its market share in the US, a major international market.In the -early 21st century, Volkswagen (Germany) remained the largestmanufacturer 'Ofautomobiles in Europe and also emerged as the fourth largestautomobile producer in the world. In fiscal 2002, the company's revenuesamounted to $91.13 billion, a 16.2% increase over revenues in 2001. Its net profitfor the same period amounted to $2.71 billion, an increase of -l.9% over the netprofit earned in 2001. In addition to the Beetle, the company's major car brandsincluded Golf, SKODA, SEAT, Passat, Audi, Jetta, Lamborghini and Bentley.

Compiled from various sources.

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Additional Readings & References:I. The Beetle is Back! www.autoweb.com.au. Jan uary 5 , 1 99 8.2 . Surnaik, H arrisburg H osts N ation 's Secon'd Show ing of V olksw agen's L ong A waitedNew Bee tle , www.modeweekly.com. J anu ar y 1998 .3 . Newman Christina, Bug Lovers Compare New M odel to its Classic Counterpart,www.alligatorstory.com.March 16,1998.4. G reen G avin, T he C ar C olU mn, In ternation al H erald T ribun e, M arch 20,1 998 .5. The Nostalgia Boom : Why the Old is New Again. www.businessweek.com, M arch 2 3,

1998.6 . Volkswagen 's New Beetle Selected 1999 North American Car of tbe Year,www.theautochannel .com. Ja nu ary 5 , 1 99 9.7 . H yae M oon Sung, V olksw agen's N ew B eetle, www.adcritique.com, M arch 1 5, 19 99 .8 . New M odel for New Beetle Range, www.autoweb.com.au, Apri1 29 , 1 99 9.9. The Volkswagen Beetle: The Emotional Power of the Love Bug,wwW.indicatorgflc.com.July 1999.

10. Beetle M ania, www.dispatch.co.za. February 2 9, 2 00 0.Il. Volkswagen. www.businessweek.com. J uly 2 3, 2 00 1.12. V olksw agen R eveals 2003 N ew B eetle C onvertible, www.theautochanne1.com.

Sey tember 13 ,2002.1 3. In nes S tu art, B eetle o n th e B reeze, www.theadvertiser.news.com.au. J une 26 ,2003.14. Hallm ark Channel Rev. Up 'Herbie,' The Love Bug, tbe Lovable Star W ho Providesthe M ost L aughs per G allon, June 3O -July 3, www.biz .yahoo.com.June 2 6, 2 00 3.15. Slug Bug! VW Beetle-Inspired Game Rolls A long with a New Generation,www.azcentral.com, Ju ly 5 , 2 00 3.1 6. Fullerto n E lizaU eth. T im e to Say A dio s to th e 'L ove B ug.' www.iol.co.za, July 9 , 2 00 3.17. B ell Alistair, U nd er D eath Sentence, O ld B eetle T akes Final B ow , w ww .reuters.co m,J uly 10 ,2 003 .1 8. V olksw agen Sh ow s L ast E dition o f B eetle, www.abcnews.com, J ul y 11 ,2003.1 9. B itten Fan s B ereav e B eloved 'B ug ,' www.motortrend.com. July II,2003.2 0. V olk sw ag en U nv eD s F in al B eetle, www.motortrend.com, J ul y 11, 2003 .21. Last of H istory 's Best-SeUing Auto M ade in M exico, www.knoxnews.com, July 12,2003.22. Pods Unite: Volkswagen Beetle Buyers to Get Complimentary Apple iPod,www.macdai lynews.com, J ul y 15 ,2003.23. www.vwgroup.com24. www.vw.com25. www.newbeet le .com2 6. www .vw asia com27. www.wps.prenhal l .com28. www.hoovers .com29. www.theharbinger.org30. www.news.bbc.co.uk31. www.beet lemaniaenvy.nu32. www.members .netro.com.au

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http://www.autoweb.com.au./http://www.modeweekly.com./http://www.alligatorstory.com.march/http://www.businessweek.com%2C/http://www.theautochannel.com./http://www.adcritique.com%2C/http://www.autoweb.com.au%2C/http://www.indicatorgflc.com.july/http://www.dispatch.co.za./http://www.businessweek.com./http://www.theautochanne1.com./http://www.theadvertiser.news.com.au./http://www.biz.yahoo.com.june/http://www.azcentral.com%2C/http://www.iol.co.za%2C/http://www.abcnews.com%2C/http://www.motortrend.com./http://www.motortrend.com%2C/http://www.knoxnews.com%2C/http://www.macdailynews.com%2C/http://www.vwgroup.com/http://www.vw.com/http://www.newbeetle.com/http://www.wps.prenhall.com/http://www.hoovers.com/http://www.theharbinger.org/http://www.news.bbc.co.uk/http://www.beetlemaniaenvy.nu/http://www.members.netro.com.au/http://www.members.netro.com.au/http://www.beetlemaniaenvy.nu/http://www.news.bbc.co.uk/http://www.theharbinger.org/http://www.hoovers.com/http://www.wps.prenhall.com/http://www.newbeetle.com/http://www.vw.com/http://www.vwgroup.com/http://www.macdailynews.com%2C/http://www.knoxnews.com%2C/http://www.motortrend.com%2C/http://www.motortrend.com./http://www.abcnews.com%2C/http://www.iol.co.za%2C/http://www.azcentral.com%2C/http://www.biz.yahoo.com.june/http://www.theadvertiser.news.com.au./http://www.theautochanne1.com./http://www.businessweek.com./http://www.dispatch.co.za./http://www.indicatorgflc.com.july/http://www.autoweb.com.au%2C/http://www.adcritique.com%2C/http://www.theautochannel.com./http://www.businessweek.com%2C/http://www.alligatorstory.com.march/http://www.modeweekly.com./http://www.autoweb.com.au./

beetle the birth

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