December 3, 2005

The VW Story

I love my Volkswagen Phaeton. It's perfect. But, two years after the launch of this car that has been reviewed favorably against the best luxury cars available, VW is not going to sell Phaetons any more in this country.

What happened is that a company that has been super smart in its marketing from Day One may have made a mis-step in its Phaeton launch.

From the start, VW was a classic example of smart marketing. The company brought its first cars to this country in 1949. For a decade, they depended essentially upon publicity and word of mouth. By 1959, VW was the best-selling imported car in America.

Then they launched their legendary "think small" campaign, and made a successful brand even more successful.

In an era of big cars, VW came in and claimed a new category - small cars - for itself. Then they built the brand with pr and stengthened it with advertising.

That's a success formula that Al Ries praises in his book, "The Fall of Advertising and the Rise of PR." According to Ries, "Advertising should follow PR in both timing and theme. The theme of an advertising program should repeat the perception created in the mind of the prospect by the PR program."

Publicity builds brands. Advertising maintains and strengthens them.

"Advertising is insurance," says Ries. "That is, advertising protects a brand from competitive attacks. Advertising is the price you pay to maintain your brand's position in the mind."

VW was on a roll. But, when they decided to bring out the Phaeton to compete with the Lexus 500 series, the Mercedes 500 series, and the BMW 700 series, they may have made a classic marketing error.

Think back on Toyota and its luxury model. Rather than a line extension, Toyota introduced an entirely new brand: Lexus.

So, too, did Honda create Acura, and Nissan create Infiniti.

They are all successful.

But VW stuck with its own name and simply put a model name on the Phaeton, not a new brand name. As such, they couldn't convince consumers that the masters of simple cars (the VW bug et al) could create a truly competitive luxury car. So they struck out...at least in this country.

There are lessons both in the many years of VW's success and in the company's failure adequately to differentiate and position its fabulous Phaeton.