Volkswagen Trying to Enter the Luxury Car Market

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Table of Contents

Background
Current Status
SWOT Analysis
Alternative Solutions
Recommendations
Rationale
Closing Remarks
Bibliography

Background

To begin with, it should be emphasized that Volkswagen is the company that positions itself as the manufacturer of reliable and comparatively cheap cars. Surely, the presentation of high-class Phaeton cars failed, as customers do not associate Volkswagen with luxury cars. In the light of this fact, it should be stated that the real problem may be covered in the managerial drawbacks, and may be solved in several ways.

Current Status

The model was represented in 2005, and the 2009 model was subjected to minor facelift changes. The daytime running lights were modified, and the new Fuel Stratified Injection became available for the models.

The company aimed to reintroduce the model in the USA in 2009, nevertheless, the results of this action are still invisible. As for the previous sales, up to 20,000 models were delivered to Germany (of 25,000 produced). Nevertheless, the luxury car segment is dominated by the Mercedes Benz S-Class and BMW 7 series, however, both models are achieving more than twice the sales volume of the Phaeton in 2008.

SWOT Analysis

	Positive	Negative
Internal	Strength Reliable Cars Well known brand Professional Management Team	Weakness Improper positioning of the new model Lack of proper promotion
External	Opportunity High awareness of the brand in the largest markets	Threat High competency in the sphere of luxury cars

Thus, the problem of the company is the improper positioning of the new model. In spite of the fact it is positioned as the luxury car on the largest markets, lack of proper promotion appeared to be the largest drawback in the allover marketing strategy. The target audience is just unable to associate the company with luxury cars, thus, the advertisement department should deal with this problem.

High competency in the market of luxury cars should not be regarded as an obstacle, as this market is featured with the essential conservatism among customers: up to 80% of customers prefer some particular car manufacturer. Consequently, if Volkswagen admirers find out about the new model, there will be high credibility of buying Volkswagen Phaeton by them.

Alternative Solutions

Originally, the problem may be solved with different approaches. From the marketing point of view, the obvious solution is to get back to manufacturing the cars which the customers got used to knowing. Originally, Volkswagen is associated with small, ugly and reliable cars, which are comparatively cheap and available for almost all the social classes. Nevertheless, the company will have to reject manufacturing the Phaeton model and forget the sector of luxury cars.

The managerial solution will be to produce these cars in China. This will provide the reduction of the price for the model; however, the reliability of this car will be seriously doubted. Consequently, this is not the best solution.

Another variant of solving the problem of penetrating the market of luxury cars is advertising and promotion. There is a strong necessity to destroy the stereotype within the customers, who associate Volkswagen with the manufacturer of cheap and available cars. This reputation prevents them from buying the luxury model of the ‘cheap’ manufacturer. Thus, a properly arranged promo campaign would help to move the problem from the standstill. (Mullin and Walker, 432)

Recommendations

Create a promo campaign showing all the advantages of the luxury car by ‘People Manufacturer’.
Arrange a series of test drives
Participate in Salons
Create a series of video clips
Provide the model for a movie shooting

Rationale

The necessity of a successful promo campaign has been already explained in the part of the alternative solutions. Originally, all the recommendations from the list are aimed at supporting this campaign. The test drives will show people the reliability of the new model, and support the awareness of the brand within the target audience. Moreover, test drives are often used in commercial videos, thus, there will be an opportunity to combine it with shooting video.

Participation in salons, where luxury cars are exhibited will provide penetration into the segment of luxury cars. Moreover, these actions are featured with the experience exchange. Taking into account the fact that presentations are the most important part of marketing, there will be a great opportunity for presenting a model in comparison with the other manufacturers.

The series of commercial videos are an integral part of any promotion. Videos should be interesting, with numerous special effects and they should represent the reliability of the model. Originally, the high reliability should stay the trump of the company. If a model of the car will be provided for shooting some blockbuster, people will be more aware of the existence of this model.

Closing Remarks

The next steps for promoting this model will be the evolution of the design or adding some technical features. V-8, V-12, and V-16 models should be available. AS for the promo campaign, the next step should be the representation of a supercar on the basis of Phaeton, participation in Formula races (Formula 3 at least), and the design of a concept car, for the customers could associate VW with the luxury vehicles.

Bibliography

Mullin, J. and Walker, O. Marketing Management: A Strategic Decision-Making Approach. McGraw-Hill/Irwin. 2004.

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