Magazine article Marketing

ANALYSIS: VW's Brand Statement on Wheels

Magazine article Marketing

ANALYSIS: VW's Brand Statement on Wheels

Article excerpt

Volkswagen has raised eyebrows with its luxury car, but Ben Bold discovers it could be for the benefit of its mass-market models.

Since its birth in Germany in the 30s, Volkswagen's mission has been to sell reliable cars to the general public. With a market share of 12.36% for the year to April 2003 compared with 11.83% for the previous year, it is bucking the market trend.

So, why has the manufacturer of 'the people's car' launched the Phaeton, a model costing up to pounds 68,000 aimed at luxury-car buyers?

Last week Marketing reported that VW is turning to the internet for its entry into the luxury car market, targeting predominantly 35- to 45-year-old men. The Phaeton is considered by some to be VW's most important launch of recent years - it is certainly the most hyped. But there is bemusement as to why a mid-market marque is launching a luxury model, especially given that parent VAG owns premium-car brand Audi.

No one disputes the quality of the Phaeton's engineering or finishing.

As a luxury car it undeniably fits the bill and most motoring press reviews have been positive.

For car manufacturer groups that own multiple marques there is always going to be crossover. VAG owns Skoda and Seat, its more affordable product ranges; VW, the group's mass-market brand; and Audi, its luxury car marque. The group also owns Bentley, Bugatti and Lamborghini.

Portfolio overlap

Some of those brands do share the same platforms and bear a similarity in design. For example, there is scant difference between the physical make-up of some of Skoda's models and some of VW's.

For instance, Skoda last year launched its Superb, similar to the VW Passat - although bigger and cheaper. Many industry insiders felt that it was a model too far for the once-derided brand, but they agree that it had a beneficial effect on the marque. Nevertheless, people are willing to pay more for a VW than they are for a Skoda. Accordingly, people would be less inclined to pay the same amount of money for a VW that they would for an Audi. So, is VW trying to cannibalise its sister brand's market?

'I think that while car companies have portfolios there is always going to be overlap,' says Jon Sanders, sales and marketing director of MG Rover.

'I think VW is definitely trying to move the brand upmarket.' Quentin Willson, the motoring journalist, says he's not entirely comfortable with the concept of a luxury Volkswagen. 'If the car were mine, I'd de-badge it on the spot,' he said in the Sunday Mirror.

Mike Moran, worldwide marketing and strategy director at Thames Water and former Toyota commercial director, is somewhat bemused. He feels that VW has 'done it to prove that it can'. He adds: 'If you step back and analyse what demand there is for cars in that sector and the extent to which mass-market volume prestige brands have been able to sell cars in that category, you're aware that they haven't.'

Sanders agrees and cites Renault's launch of the Vel Satis last year, which has failed to meet expectations. 'There is definitely a question as to whether consumers pay this amount of money for a mainstream brand,' he says.

Raising perceptions

'People are quite status-conscious of what they drive,' says automotive analyst Peter Schmidt, who produces industry newsletter AID. …

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