A Multi Brand Strategy Marketing Essay

Definition: Product may be anything consumable or acquirable and it is usually designed to meet the needs of the people. Product should not be necessarily an object it may be related to service, ideas and sometimes it even relates to place and people as well.

“A product can be defined as anything that satisfies a want or need through use, consumption, or acquisition” [1] (John 2010: 250)

Volkswagen is a multi-brand strategy owns Audi, Bentley, Bugatti, Lamborghini, Seat, Skoda, Scania, Volkswagen nutzfahrzeuge (commercial vehicles) and Volkswagen das auto (international version).

Before getting depth insight of products of Volkswagen’s, let us glance towards its wide range of brands and their classification.

Volkswagen mainly alienates its products into three major sectors according to the market strategies: The first group is for mass segments in which VW (Volkswagen international and Volkswagen commercial vehicles), Seat and Skoda have been segmented and these products are designed and targeted for mass market. The second division is for luxury segments in this Audi, Bentley, Bugatti and Lamborghini brands lies and these segments are marketed for quality and brand image. And the final segment is exclusively for Scania where the heavy motor comes in action and that includes trucks, buses and coaches.

These segments were framed by Martin Winterkorn, CEO and head of R&D department of Volkswagen group of brands. [2] 

Source: Adopted from Pg No.437, Illustration 12.1; Volkswagen: A case of centralisation, from reference2.

Further description will be on VW (Volkswagen International brand) only.

cycle_pic1.jpg

Source: http://green.vivotek.com/image/quality/cycle/cycle_pic1.jpg

Product life cycle: The process involving right from the designing of the product to its end may be termed as product cycle. Products are manufactured considering the product market and literary designed as per the customer needs.

Definition: “The product life cycle offers important insights into how decision making-for the product itself and for other elements of the marketing mix-is likely to involve”. (John 2010: 272).

They are broadly classified in five different stages they are as follows:

Introductory stage: This stage involves penetration and skimming. The length of this stage should be short to hold down the inventory and R&D costs. This process is risky, expensive and time consuming. Volkswagen’s product illustration describes their products introduction stage. The statement “By 2013 we are aiming to reduce energy consumption and CO2 emissions at our European production plants by more than ten percent.” Says Green IT management Volkswagen.

Growth stage: This stage start with an increase in sales. In this stage product expands to attract new segments and the competition raises with the product class. Here keen concentration should be taken in providing product availability and competitive rate. VW’s newly launched Beetle model is competing in the current market with the products of same class by keeping competitive price. (Compared to mini-cooper, source: News on BBC top gear)

Shake out stage: In this period overall growth rate seems to drop or if competitor’s loss the market then it may be heaped with gains. All it depends on the product competition, efforts to emphasize promoting and price factors. Volkswagen was having the worst track records in America during this decade 2001-2010, that is 235 complaints were claimed out of 100,000 cars. [3] 

Mature stage: This stage technology, demand, trend and competition attain mature stage. Hence overall product market that is customer functional dimension, customer segment dimension and technology dimensions reaches the mature stage. And due to this factor all brands appear more similar to each other, in this stage price fall occurs. VW’s most products now on market are in this stage. This does not indicate an appraisal or decline in growth of the company.

Decline stage: This is the very critical part of the product life cycle. It is because their need to be implementing some tough decisions in the organisation. Cost increases due to deplete in sales and hence on the asset base product cost need to reduce on one hand and on the other hand if company decides to vacate the market then it leads to the increase in sales of other competitive firms.

Expected characteristics and responses by major life cycle stages proposed: (John 2010: 274)

STAGES IN PRODUCT LIFE CYCLE

Stage characteristics

Introduction

Growth

Shake out

Mature

Decline

Market growth rate

Moderate

High

Levelling off

Insignificant

Negative

Technical change in product design

High

Moderate

Limited

Limited

Limited

Segments

Few

Few to many

Few to many

Few to many

Few

Profitability

Negative

High

Low

High for market – share leaders

Low

Firm’s normative responses

Strategic marketing objectives

Stimulate primary demand

Build share

Build share

Hold share

Harvest

Product

Quality

Continue quality improvements

Rationalize

Concentrate on features

No chance

Product line

Narrow

Broad

Rationalize

Hold or reduce selectively

Reduce

Price

Skimming

Reduce

Reduce

Hold or reduce selectively

Reduce

Channels

Selective

Intensive

Intensive

Intensive

Selective

Communications

High

High

High

High to declining

Reduce

Product Market: “A product market establishes the distinct arena in which the business marketer competes.” [4] Four dimensions of market definition are strategically relevant:

Customer function dimension: This involves the benefits that are provided to satisfy the needs of organizational buyers. (Thomas 2010: 220)For ex. Volkswagen is launching its Beetle model which was redesigned from its old version and hence the target of market will be mainly concentrated on organizational buyers.

Technology dimension: There are alternative ways a particular function can be performed. (Thomas 2010: 220)This relates with the wide varieties of the commercial vehicles of VW and the mass segment sectors where as model like Fox, Polo and Golf. These products combine considering price and built with the technology as well.

Customer segment dimension: This segment has distinct needs that must be served to satisfy the customer for the fullest. Hence price will not be a major factor in this segment only the product and its quality matters. Volkswagen designs and claims for complete driving experience and safety for Passat, Jetta, Touran, Eos, Touareg, Tiguan, Phaetom and Sharan.

Value – added system dimension: Competitors serving the market can operate along a sequence of stages. [5] The value added systems for Volkswagen includes their blue motion technology, Hybrid segments, fuel saving segments and their recycling technology.

Volkswagen’s product strategy excels other competitors:

Blue Motion technology: Blue motion products are designed to suit environmental friendly condition and it is the pioneer company to do so. These products have been launched recently and they assure to save fuel than the previous models. Polo Blue motion emitted the least co2 of about 99g/km by consuming only 3.8liters of diesel in 2006, and as per their assurance they proved right in 2010 by developing second generation Polo Blue Motion with emissions reduced to 87g/km. Considering these facts into picture and looking out companies efforts in bringing environmental friendly products Volkswagen has been awarded with “Most sustainable brand category” and was ranked best in automotive industry by IOW.

Source: Volkswagen annual report 2010

“”Blue Motion is already an established brand” – (Dr. Ulrich Hackenberg, Member of the Board of Management of Volkswagen Brand responsible for Technical Development)

Thou Volkswagen had many compliments in US market for the last decade (Reference 3) but now in the same market last year Volkswagen Golf won top honours including best new car in its class and IIHS top safety design. And Volkswagen Jetta TDI in the same market continues to be best and found to be the low annual fuel cost. [6] 

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