Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e
Back Matter Video Cases © The McGraw−Hill
Companies, 2002action. The charge was to create a thoroughly modern version
of the beloved Beetle, a car that would utilize the latest
cutting-edge edge technologies housed in the uniquely identi-
fiable shape of the most widely produced car in history.
Twenty-one million original Beetles have been built since
the original idea for the car was shown to the German govern-
ment in 1934 by Dr. Ferdinand Porsche. Porsche’s dream was
to build a simple, high-quality car for the masses, a car that
even the average owner could learn to care for and maintain
with minimal expense. That was the formula that had worked
so well in the United States when Henry Ford introduced the
Model T and put America on wheels.
Porsche’s dream for the “people’s car” (or Volkswagen)
would not become a commercial reality until after World War
II, though some prototypes and early production units had
reached the public prior to the war’s outbreak. By 1948, the
war-damaged factory was rebuilt and the Beetle was being pro-
duced in full scale in Europe. It was also in that year that the
Beetle was shown to the U.S. public at the N.Y. Auto Show.
By the late 1950s the Beetle was the leading imported car in
America, and hundreds of thousands of Americans were driv-
ing the small cars with air-cooled engines. Many people loved
the simplicity and economy of the car, and the quality was very
high. The car represented a very good value for the consumer’s
money.
Japanese auto manufacturers took notice of Volkswagen’s
success in the United States and designed their own compet-
ing models of small, economical cars. But they were different
in character than the Beetle. The Japanese-produced small
cars were more like shrunken versions of full-sized cars. They
had big car styling and incorporated many features that U.S.
car buyers of the 60s wanted, including power-assisted steer-
ing, power windows, and automatic transmissions. The small
cars introduced by Toyota, Nissan, and Honda quickly cut into
Volkswagen’s sales volume. Although sales in the small-car
category grew rapidly, increased competition left smaller sales
volume for the previously dominant Beetle.
VW management held steadfastly to the “simple is beauti-
ful” positioning that was carefully reinforced in the Beetle’s
advertising campaign. Advertisements with headlines such as
“Ugly is only skin deep” reminded customers that the real
beauty of the VW was its simplicity, reliability, and the eco-
nomical ownership experience it produced. Despite this
message, many people in the market were attracted to the
larger choice of options and features found on the Japanese en-
tries. After the Beetle’s U.S. sales peaked at 423,000 units in
1968, sales began to decline.
Volkswagen responded to the market changes that were
taking place by introducing the Rabbit, a small European
hatchback that was refined to incorporate many of the features
Americans wanted. The Rabbit was an immediate hit. Even
though it did not have the instant recognizability of the Bee-
tle, it benefited from the Beetle’s reputation.
The decline of the Beetle in the U.S. was complete in 1981
when VW management removed it from sale in the U.S. mar-
ket. However, VW continued to produce and sell the car in
Mexico and South America. These were strong markets for
the car because the Beetle was ideally suited to developing
economies where simple and reliable transportation was more
important than a long list of fancy accessories.Although the original Beetle was a simple car, the New
Beetle is not. As VW marketers began to develop the concept for
the “New Beetle” they realized that the affluent American con-
sumer expected features such as air conditioning, stereo systems,
and security features—as well as government-mandated safety
items such as airbags and 5-MPH bumpers. The New Beetle
would clearly require a degree of complexity and sophistication
that Dr. Porsche could never have imagined.
The product development process incorporated customers’
reactions from auto shows around the world. The reaction to
the Concept 1 was nearly uniform worldwide, so VW manage-
ment knew they would have a winner if they could build a
street vehicle that incorporated the looks of the Concept 1
with an affordable platform. They found that platform in the
one they were developing for the Golf, Europe’s most popular
car. With a few modifications, a New Beetle body could be
built over a Golf chassis. This eliminated much of the time
and expense of developing a completely new automobile. The
use of the Golf platform also made it possible for VW to bring
the New Beetle to market more quickly.
Just four years after first showing the Concept 1, VW man-
agement unveiled the New Beetle at the 1998 North
American International Auto Show. The response to the
“real” car was overwhelming. During much of the show it
wasn’t even possible to get near the car because of the crowds.
Executives from competing auto producers were astonished
at consumers’ reaction to the car, and were even more con-
cerned when they learned more about VW’s marketing strategy.
Preintroduction guesses by the automotive media had suggested
a price of $18,000 for the base car, but VW management priced
the New Beetle at a low $15,200. This price included airbags,
air-conditioning, power door locks, a multispeaker stereo sys-
tem, tilt and telescoping steering, and many other attractive
features. The automotive press in attendance at the unveiling
applauded loudly when the price was announced.
Volkswagen marketers had crafted a very desirable new
product that their dealers and customers were anxious to have.
A promotional strategy was created to build enthusiasm for
the car’s official arrival in showrooms in spring 1998. Dealers
were shown the car at a special party at Disney World in
Orlando, Florida. There they not only got to drive the car but
also to participate in Disney-style clinics on the attitudes and
expectations of the New Beetle target market. Nostalgia was
an important component of the target customers’ feelings to-
ward the car, but testing also revealed a broad demographic
and psychographic appeal that included many young buyers
who had never owned an older-style Beetle.
The dealers thought that the 50,000 units scheduled for
production the first year would not be enough to satisfy the de-
mand, but they were hopeful that some of the visitors to their
showrooms could be switched to other VW products. VW’s
product line included cars that were either more economical
or more spacious depending on the customers’ needs. Jeff
Williams, a VW dealer, explained the problems and the ex-
citement associated with the new car:
I’m sure we’ll have trouble meeting the demand that seems to be
in the market. The car is really exciting customers. I have one
customer who’s ordered one for his 19-year-old daughter. He
hopes she can have as much fun with her car as he did with his
Beetle 30 years ago.Video Cases 707