Since Beetle is a small car, VW should focus on its competition in the small car market segment. Some of the main competitors in this segment include Chevrolet Cavalier, Ford Escort, Saturn SL, Toyota Corolla, Nissan Sentra, Honda Civic, and Dodge Neon. These cars make up over 50% of the small car market, so for the New Beetle to compete it will have to steal market share from these competitors. Most of these cars offer moderate style and performance at affordable prices (see perceptual map on p.7). The New Beetle offers superior style and performance than most of these competitors and is positioning itself based on its uniqueness. This differentiation of the product allows for the premium pricing of about $17,000 - $18,000, the top end of the small car market.
Consumer Decision Making
The five distinct stages of consumer decision-making that VW has to deal with are:
- Problem Recognition: Perceiving Need - In this step, VW has to identify the need for consumers to purchase a car, create this need, and then fulfill the desire to satisfy this newly created need. In order to accomplish this, VW can conduct a market research on the whole car market, without any segmentation. This achieves two purposes: first, from the users, it identifies the features and need that made them purchase the car, e.g. style, price, etc; and secondly, this information can be used to target non-users, and to leverage the brand value based on these features. A good strategy is to use television for advertisement, mainly because of its broad and wide reach. Through this campaign, VW can educate the consumers about the new and exclusive features of the New Beetle, and also help build recognition.
- Information Search - This is the step when, having identified the need to purchase a new car, the consumer finds out more information and gets familiar with the competing brands, and their details. The consumer, typically, relies on a number of information sources, such as family, friends, advertising, consumer reports, and personal experiences during demonstrations. The most important source to target is the reference groups (family and friends) who own a Beetle, or have owned one in the past, so that they can give positive reports and feedback to potential new buyers. In order to keep them loyal, VW can arrange for special incentives or promotions or get-togethers, where they are made aware of the privilege to be part of the VW family. In order to satisfy the journalists and consumer groups, VW got it right by arranging the journalists’ visit in December 1997, and by unveiling the New Beetle at the car show in January 1998. Also, by allowing journalists to test-drive the car for a day, the company made sure that they got “hands-on” experience. VW can adopt a similar strategy to lure potential buyers; by allowing them to test-drive the New Beetle, so that they can get a firsthand feel of the car. Thus VW can make the presence of the New Beetle felt in all these areas, in order to make an impact.
- Alternative Evaluation: Assessing Value - Here, the consumer evaluates the various available choices, using different strategies. VW has to focus on highlighting the distinctive and new features of their car, compared to the other competitors in the same segment. The New Beetle can be leveraged based on its affordability, superior German engineering, unique and individualistic driving experience, style and strong heritage. In order to target the consumer, VW can have aggressive print and radio advertisement campaigns highlighting these factors, and also a strong relationship with dealers, so that their sales people can focus on these key points.
- Purchase Decision: Buying Value - After evaluating alternatives, the consumer may come up with a preferred brand, but may not necessarily purchase that brand. VW has to ensure that in the small car segment, the New Beetle emerges as the preferred choice for a consumer, and also, more importantly, the intention to purchase is definitely realized. The main two hurdles in this stage are influence of newer sources that may alter the consumers’ decision, or unexpected situational factors. One of the compensatory actions that VW can take, to tackle financial factors, is to offer good financing options. Also, they can describe their intensive factory testing methods to push the quality factor to the consumers, so they can rest assured of the value of their proposed purchase.
- Post-Purchase Evaluation and Feedback - This is the final, but most critical step in the whole process of decision making. VW has to ensure that the new consumers’ expectations from the New Beetle are met in all aspects. For this, VW can have the sales staff make post-sale calls to the consumer, where they are asked to fill out a feedback form; and also have regular meetings of New Beetle owners. All these steps ensure that the consumers’ remain loyal, and spread goodwill by word of mouth. VW can also appease the dissatisfied consumers by offering compensatory incentives, such as free car-service for a longer time, or a certain amount of cash back, though that would be only in extreme cases. These measures help curb bad publicity by way of bad-mouthing, and hence the brand image of the company is saved. They reassure the buyer that the purchase of the New Beetle is worth its price, and it is still the best choice.
Market Research
Volkswagen has to answer a simple, but very important question: “What will be the consumer’s attitude towards the New Beetle?” The answer lies in a comprehensive market research study that begins with an exploratory research approach. This approach will help VW get a “feel” for customers’ reactions to the renewal of an old classic and the new look that comes with it. VW can achieve this understanding through “test drive” focus groups and projective techniques. In the case, we see the company interviewing previous Beetle customers as well as drivers who never drove a Beetle. VW wanted to find out if the old users had any memories of the old version and if the younger, potential drivers felt any emotional connection to the New Beetle. This was a good method because the company received first hand information from users and non-users. VW should also consider “test drive” focus groups, where these same people who were interviewed before can take a spin with the New Beetle and then answer some questions about how they felt about it. Some of the questions that can be asked are: 1) “Did you feel comfortable while driving the car?” 2) “ Did you have fun while driving?” or 3) “Did you find the car classy and unique?” This different type of focus group is useful to identify what aspects of the product they have to work on in order to make it appealing to their target segment. Another method is to use projective techniques, which will give VW a psychological viewpoint of a buyer’s subconscious actions. The company can get a sample of old VW users and potential VW buyers and have them fill out a questionnaire that requires them to complete sentences. The sentence completion question can be drawn up to find out people’s first reaction to the car. For example, VW can pose these questions: “When I see the New Beetle, the first thing that comes to my mind is _______;” or “The small, round shape of a car gives me a feeling of_____________.”
Now that VW has the methods for their approach, they need to select a non-probability judgment sample where they can get good prospective customers who will provide them with this valuable information. Therefore, the age range of this sample must consist of the baby boomers and those between 18-34 years, since this age population has been increasing since 1981 and they represent the best mix of young drivers as well as car users who remember the old Beetle. The sample must also be from states, like California or New York, where there is increasing license registration and car purchases. The respondents must be enthusiastic and impulsive which are the traits that VW wants to show in their car to the younger market. The sample must also be a group of achievers who feel confident and in control of their lives and who feel that image is important when they buy something. All these characteristics fit the description of the segment that VW is targeting. The company can collect the sample by researching census data to establish the segment for which they want to concentrate. For example, choose an age group based on Census Data for Population by Age, showing the growth trends since 1981. We also gathered data for states with the most driver registrations, which will help, in the geographical targeting. Since VW is concerned about pricing the car between $17,000-$18,000, they may want to analyze data on how much people spend on cars. Based on data from Mediamark Research Inc., the majority of people in our selected age range spend $15,000-$20,000 on a car. This information will assist VW in pricing the car for this targeted age range. The focus groups and test drives that VW will conduct will prove to be valuable because it will give insight to the new perception of the car. The combination of these data sources will show VW the way in being able to price their product reasonably without losing the premium image and attracting a new breed of customers for their New Beetle.
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