Volkswagen house-of-brand
Executive Summary
Volkswagen house-of-brand is one of the most popular automotive brands in the globe. The company operates as a group of twelve brand portfolio, each of which appears as stand-alone firms. Due to the massive growth and increase in its product offerings, Volkswagen faces potential problems that include isolation, overload, and image-related issues. Analysis of the company’s opportunities reveals that Volkswagen has financial and human resource required to delve into more effective marketing strategies that aim at enhancing the strength of its brand portfolio. Therefore, among the proposed solutions to eliminate the identified issues and improve the visibility and reputation of the primary collection of brands, include the creation of event marketing and social media utilization. The report acknowledges that each of the resolutions has some limitations. However, the advantages surpass the cons, making the strategies ideal for use. The report also recommends that spontaneous awareness, top of mind knowledge, and supported awa
Introduction
More than eight decades since the foundation of Volkswagen, it remains one of the most popular automotive manufacturing corporations in the globe. The company operates as a group of twelve brands, all of which have a significant market share in the industry. In addition, the firm offers financial services such as dealer and customer financing, leasing, banking and insurance activities, as well as fleet management (“Group”.). The automotive product portfolio, which is Volkswagen’s primary area of focus, is branded using house-of-brand strategies as shown in figure 1. Notably, the company’s collection of brands appear as stand-alone labels, with each representing different products and markets (Rahman 2013; Elisio 2018). While Volkswagen’s house-of-brand has been used for years to try and strengthen the firm’s subset labels, significant evidence shows that the brand portfolio is not strong enough. Indeed, organizational analysis reveals that there exists overload, isolation, and image-related challenges, which can be addressed through the use of social media and the creation of high-profile events to help boost brand visibility and reputation.
In light of the highlighted background, this report consists of five major sections that include the analysis of significant issues in Volkswagen’s product portfolio. The first and second part of the paper will address the company’s brand equity, challenges, and opportunities associated with its brand portfolio, respectively. The third and fourth section will analyze possible solutions for the issues identified, their advantages, and limitations. Finally, the study will discuss methods of evaluating and measuring the outcomes of the proposed solutions.
Brand Equity
Brand equity is a crucial component in Volkswagen’s marketing as it enables the firm to remain competitive and charge higher prices for its products relative to the competitors. In his scholarly work, Farquhar defines brand equity as the value-added to a product by a label (cited in Hashim, Ying & Ahmed 2019). Aaker views brand equity as the set of assets linked to a trademark that enhances the value of a product to customers (cited in Rahman 2013). On the other hand, Huang and Cai (2015) contend that brand equity is a concept that improves loyalty. Regardless of the lack of consensus, all scholarly works acknowledge that the outcome of brand equity is the enhancement of the value of a product.
Volkswagen’s brand equity is embedded mainly on the asset of perceived quality. For example, the company’s trademark that reflects this type of brand equity is Lamborghini. As observed by Muller-Stewens and Stoning (2015), Volkswagen strives to ensure that its vehicles are viewed as “masterpieces”, an aspect that is reflected in the Lamborghini logo. In particular, Lamborghini is considered to be one of the most iconic brands in the world that represents high quality in super sports cars (“Lamborghini Brand”). The perceived quality of the Lamborghini make among consumers may be the main reason that enables Volkswagen to attach a high price to the sports car and generate significant revenue from sales.
Volkswagen’s brand equity is also influenced by the associated awareness. In the company’s context, brand awareness is the degree to which consumers are aware of other makes that are members of the Volkswagen group (Romaniuk, Wight and Faulkner 2017). Typically, a significant fraction of the global population recognizes the company since it is among the top pioneers in the automotive industry. Additionally, the company has a worldwide market share in the automotive sector, which makes it a popular brand. However, few people likely know all the subset brands in the corporation. Volkswagen has been launching online campaigns purposed to ensure that people develop spontaneous recognition of its brands. An example of these efforts is the “Why VW” marketing campaign that Osborne, the General Manager of Marketing Communications for Volkswagen, America, terms as a strategy to ensure that people remember the trademark, see the product spots, and develop an interest to check its product portfolio (Buss 2012). Participation of Volkswagen in such campaigns is a positive sign that the company’s collection of brands is yet to achieve maximum awareness among consumers.
Issues and Opportunities
Volkswagen faces a myriad of problems that are associated with its brand portfolio and branding strategy; despite being a popular brand in the automotive industry. Notably, industrial analysts observe that there exists an overlap between some of the Company’s major brands, which is an aspect that leads to sales cannibalization (Madslien 2011). Volkswagen comprises twelve brands, many of which offer the same services. For instance, Volkswagen’s Golf provides similar services as Audi A3, which is a feature that creates an overlap between the two brands. As a result, the overlap and continued effort of the company to introduce more products in its brand portfolio may lead to a reduction in sale and revenue generated from some makes.
The long-term effect of the overlap of brands is detrimental as it likely creates an overload in the firm’s marketing strategies. As is evident from the Volkswagen’s website, the growth of its group of brands creates a high degree of complexity in brand and product management (“Together 2025+”). Notably, Volkswagen uses house-of-brands as its primary branding strategy to strengthen each of the available trademarks. While the approach is ideal in Volkswagen’s scenario, due to existence of products with unique audiences and value, it creates the issues of overload, whereby the organization develops and implements diverse marketing strategies, which are costly and highly problematic (Gillum 2018). Therefore, the overload experienced in the management of the corporation’s brands is a significant issue that affects the strength of each product.
Volkswagen lacks a clear primary brand image to accompany its various products. Notably, the brand lacks common tangible and intangible attributes that the consumer can recognize (Isoraite 2018). As a result, there exists a possibility of confusion on whether the subset labels represent the primary brand. In terms of tangible attributes, all of Volkswagen’s brands have different logos. For instance, its primary logo is modern, simple, and clearer with a blue tone, which the corporation considers to be a leap towards a digital application with simple, user-friendly interfaces (“Volkswagen Unveils New Brand” 2019). On the other hand, one its brand, Lamborghini, has a unique logo of a bull zodiac sign, which is a sign of heritage from the company’s founder. The logo also acts as a sign of the high performance of the model. From the two examples, there exists a possibility of confusion among consumers on whether the Lamborghini brand represents Volkswagen, given that the former is a subset of the major brand. Therefore, lack of a clear brand image poses a significant issue on the strength of Volkswagen’s brand.
The concept of individualization of brands within the primary trademark dilutes the robustness of the Volkswagen’s brand. The corporation utilizes a house of brand strategy, which implies that each product portfolio in the company stands alone (Rahman 2013). The isolation of each product portfolio makes it difficult for the parent company to boost the reputation of the individual brands. The adverse effects of this approach are reflected in the company’s emissions scandal of 2015. In particular, Volkswagen was found guilty of fraudulently scheduling laboratory tests aimed at measuring nitrogen oxide (NOx) emissions for diesel TDI engines produced between 2009 and 2015 (Dura 2019). The scandal, which mainly affected its Passat models, greatly affected the company’s public image and sales in subsequent years. One of the reasons for the rapid decline in sales may have limited the power of Volkswagen to boost the reputation of the individual brands after the scandal. Based on this information, it is arguable that isolation is among issues that affect the strength of the Volkswagen’s brand.
Opportunities
Volkswagen has the opportunity to strengthen its brand by utilizing the high revenue generated from the individual brands. In 2019, the firm’s group of sales revenue totaled EUR 60.0 billion, which was a 3.1 percent rise from 2018 (“The Volkswagen Group” 2019). The subset brands have individually been generating significant revenue over the past few years. For instance, a Statista report reveals that Volkswagen Group’s Porsche marque generated around EUR 26 billion in revenue, in the 2019 financial year (Wagner 2020). The statistics signify the financial ability of Volkswagen to fund the resources required to strengthen its brand.
The existence of a pool of competent workforce provides an opportunity for the brand to utilize employees’ experience to strengthen its brand portfolio. Volkswagen’s annual report indicates that the company has approximately 600,000 employees globally (“Full Speed Ahead” 2018). Additionally, the firm provides the workers with training and development opportunities to strengthen the latter’s professional skills in the firm’s different vocational groups (“Report on Risks” 2018). Therefore, the firm has an adequate and competent workforce that can be utilized in various operational activities, such as marketing, to help strengthen Volkswagen’s collection of brands.
Possible Solutions
Event Marketing
The issues identified in the previous section can have detrimental effects on the strength of Volkswagen’s brand portfolio. The adoption of event marketing is among the solutions that can mitigate the adverse effects of isolation, overload, image-related issues, and strengthen the company’s brand portfolio. Wu (2016) notes that event marketing increases direct contact between enterprises and consumers, making the effect of the interaction more significant. In Volkswagen’s context, the strategy can be used to eliminate image-related issues, enhance the brand’s visibility, and strengthen the trademark of different car models among consumers. Notably, a pool of competent workforce can answer arising questions regarding the primary and subset brands, which can improve consumer knowledge of the group of brands and image.
Advantages of Event Marketing. Indeed, a high-profile event can easily enhance brand awareness among consumers and change the latter’s perception of each brand in a positive way. Additionally, event marketing can be an ideal way to reduce overload related to customized marketing efforts for each make. Notably, the house-of-brand strategy adopted by Volkswagen requires the creation and implementation of diverse marketing strategies, which are costly and highly problematic (Gillum 2018). Consequently, event marketing can be used as a substitute for individual marketing strategies, whereby information about each brand is relayed to consumers at the same time.
The event approach can create an opportunity for Volkswagen to create awareness and also develop a mutually benefitting relationship with consumers. According to a report by The Event Marketing Institute, 74% of consumers involved in a study mentioned that engaging with branded event marketing experiences enhanced their chances of purchasing the products in a promotion (Archambault 2020). Therefore, it is ideal for Volkswagen to harness the power of event marketing and utilize it to strengthen its sale and brand portfolio.
Event marketing creates brand value significantly for the engaging parties. the concept signifies the customers’ perception of the economic worth of a brand. Prior studies conducted among 74 real estate companies in China revealed that firms that spent on event marketing experienced a positive impact on their brand value (Liu, Zhang and Keh 2016). Similarly, Volkswagen’s investment in event marketing would enhance the value of its brand portfolio by creating a long-lasting reputation among attendees of the event.
Limitations of Event Marketing. While event marketing would be an ideal strategy for Volkswagen to strengthen its brand, the proposed approach may be prone to certain limitations. The strategy is a seasonal marketing approach; thus, it may not create the degree of visibility required to enhance the strength of the company’s primary brand. In addition, the solution would only improve the profile of the firm’s brand portfolio among attendees. Consequently, the limited scope of event marketing may not achieve the desired outcome of enhancing Volkswagen’s visibility and reputation among global consumers.
The outcomes of event marketing may not match the input invested in the strategy, thus imposing an unnecessary financial burden on the company. Organizing an event marketing requires a multitude of resources, including workforce and an area with a maximum seating capacity. At the end of every event, an organization may expect results that match or surpass the number of resources invested in holding the event. Nonetheless, resources applied in a Volkswagen event marketing may not match the desired outcome since the strategy would only target a limited capacity of people.
Social Media Utilization
An alternative solution to the identified issue would be the utilization of social media to reduce overload and eliminate image-related problems. Capitello et al. (2013) observes that social media has the potential to increase brand visibility. Husain, Ghufran and Chaubey (2016) also add that if approached correctly, the virtual platforms can help companies improve their brand awareness. Notably, social media is an interactive platform where users can share ideas and feedback about a product. Consequently, its utilization can enable Volkswagen to enhance knowledge about its brand portfolio to the target market. Sharing information about its primary subset brands over various social media can also help create awareness about its corporate image, and the synergy of its brand portfolio.
Advantages of Social media Utilization. One of the key benefits of utilizing social media in strengthening Volkswagen’s brand portfolio is wide coverage. Notably, social media platforms, such as Facebook, have the highest scores in terms of social interaction, as it allows people to correspond with others, share ideas, and quickly provide up-to-date information (Voorveld et al. 2018). Therefore, social media would be an ideal platform for Volkswagen to share information about its collection of brands, as the message will reach the masses at the same time. In addition, there exists a myriad of social media platforms, such as Snapchat, Twitter, and Instagram, which can help the company gain even higher visibility that would translate to a strong brand portfolio.
Notably, Volkswagen can cut back on its marketing expenditure without inflicting a negative effect on its brand awareness by using social media. When in use, the associated platforms only require an investment of time to create websites and publish content about the company’s brand portfolio. In addition, the social media platforms are highly interactive; hence, their incorporation in marketing would curb the issue of isolation. House-of-brand reduces the capacity of the parent company to boost the reputation of subset brands; however, when using social media, Volkswagen has significant power to protect the reputation of the individual brands, through an integrated social media system. Indeed, through feedback from consumers, the company can improve the features of its brand portfolio to make them more appealing to purchasers.
Limitations of Social Media. While social media is a cost-effective and highly interactive platform, it is prone to disadvantages that would limit its effectiveness. Just like the platform can help build on the reputation of the Company’s brand portfolio, it can easily taint its image. Mostly, this may happen when Volkswagen falls victim of allegations of involvement in unethical activities, as was the case with the 2015 emission scandal. As a result, rather than strengthen the company’s group of brands, the platforms can easily damage its reputation. Social media is also limited in scope. A Statista report shows that as of January 2020, social network penetration stood at 49 percent (Clement 2020). The statistics indicate that a significant percentage of the world’s population does not use social media. Consequently, the scope of social media can limit visibility, which is a primary way of enhancing the strength of the brand.
Methods of Evaluation and Measurement
The primary aim of the utilization of social media and event marketing would be to strengthen Volkswagen’s brand portfolio. Therefore, the outcome of the proposed solutions would be measured against the three criteria of brand awareness proposed by Torelli (2013): spontaneous awareness, top of mind knowledge, and supported awareness. Under spontaneous awareness, the company can conduct surveys to determine the portion of the population that is aware of its brand portfolio without any assistance (Switala et al. 2018). A positive response from consumers would be an indication of the effectiveness of the proposed solutions. The efficiency of the solutions would be evaluated against the top of mind knowledge, which is the percentage of respondents that can identify one of Volkswagen’s brand subset during a study (Switala et al. 2018). A positive outcome would be an indication that the brand is strongly rooted in the consumer’s mind. Supported awareness, which represents the percentage of respondents that can declare brand knowledge after the interviewer mentions it, would be used (Switala et al. 2018). Similarly, the ability of consumers to complete the task unassisted would be an indication of the effectiveness of the recommended solutions in strengthening the Volkswagen brand among consumers.
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Conclusion
The growth of Volkswagen Group’s brand portfolio is an ideal move for the company to maximize market coverage. However, this growth also poses a threat of brand overlap and potential problems of isolation, image-related issues, and overload during marketing. Due to the adoption of the house-of-brand strategy, Volkswagen customizes each of its marketing messages, an approach that is costly and complex. Additionally, the house-of-brand reduces the ability of the parent company to build on the reputation of its subset brands since each brand portfolio stands alone. Indeed, there exist potential image-related issues, whereby it is unclear whether the brand portfolio represents the primary brand.
Due to the detrimental effect of the identified issues on the strength of the company’s trademark, two solutions are proposed, and they include: the creation of event marketing and utilization of social media to strengthen the reputation and visibility of the company’s twelve brands. Based on the evaluation of the two solutions, it is evident that they have numerous opportunities that the Company ought to harness. Volkswagen also has the financial and human resources required to facilitate event marketing and content creation on social media platforms. As a result, measuring the outcome of the proposed solutions against the three criteria of brand awareness to ascertain their effectiveness, will be a necessity.
Reference List
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Appendices
Figure 1: Volkswagen House-of-Brand
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