Volkswagen Canada: Defying das odds

Volkswagen Canada beats the economy blues with new models, enticing promotions, and advertising that plays up its iconic past

Volkswagen has always been the little automaker that could. In 1950s America, when big cars made by big U.S. companies ruled the roads, a little vehicle by a German automaker called the Type 1 (although most people just referred to it as the Beetle or Bug), made its push into the North American market. Logic dictated that it would be an unlikely success, but with the help of a 1960s ad campaign by New York agency Doyle Dane Bernbach espousing the virtues of a small, well-built car with a simple format unseen in car ads at the time (it holds the title of top campaign of the century by Advertising Age), Beetle production surpassed the numbers of the previous record holder…the Ford Model T.

Those famous ’60s print ads can still be seen today, hanging in the Ajax, ON headquarters of Volkswagen Canada, opposite perfectly preserved models of an old Beetle convertible and another iconic VW brand, the Microbus. The little rectangular van that featured prominently in so many flower-power road trips of yore has recently experienced a resurrection of the television variety, starring in an ad campaign for the new Routan, VW’s first minivan launched last fall. In the ad, nostalgic hippies sadly reminisce about days of freedom with their Microbuses, and gaze with wonder at a passing Routan.

Helmed in Canada by president and CEO John White (pictured right), the company that changed the face of automobile advertising in the ’60s clearly hasn’t lost its flare for standing out from the pack. The Routan ads join a bevy of clever and humorous new creative, like the campaign for the TDI Clean Diesel line featuring odd couples, such as a muscle man and an elderly lady (representing power and endurance), getting married to the tune of Etta James’ ‘At Last.’ The ads are ‘very Volkswagen’ according to Bruce Rosen, director of marketing and communications (pictured left), without having to explain further what that means. Rosen – who came to VW from Ford’s Jaguar Land Rover division in 2006 – works with VW’s marketing team of five as well as AOR Montreal-based Palm + Havas and media agency Toronto-based MBS to get the ‘very Volkswagen’ messages out to the public.

And VW continues to defy the odds. Stand-out creative, with help from new, in-demand car models such as the Passat CC and the Jetta Wagon, as well as sales promotions like ‘Autobahn for All’ (offering 0% APR on all models for the first time), have meant increased sales and market share for the automaker when, again, logic would dictate that they should be in the same dire straits as many other automakers.

In May, Canadian auto sales fell 16.5% overall, with similar numbers in the U.S. as Chrysler LLC and General Motors recently filed for bankruptcy. But in the same month, VW Canada increased sales at its 129 dealerships by 7.4% compared to May 2008, and increased market share to 2.7%, up from 2.1% the year prior. Volkwagen seems well grounded to face whatever the future has in store, which may include a merger with Porsche, VW’s majority shareholder (the two companies were still in talks at press time).

The company that first gained ground in North America by pushing affordable German engineering in a simple, straightforward manner is still doing it. Its current tagline ‘Das Auto’ now appears virtually everywhere you see the VW logo. Brought in from the Germany HQ, Das Auto means ‘the car,’ and can be considered an even simpler version of the Volkswagen name itself, which means ‘the people’s car’ in German.

And while marketing has naturally become more complicated (social networking meant an entirely different thing in the ’60s), Volkswagen hasn’t forgotten the approach that made it famous, and is clearly still working – the company was recently named the Cannes Lions 2009 Advertiser of the Year.

We talked to White, who has been president of Volkswagen Canada since 1993 (previously at General Motors), as well as Rosen to find out where the brand has been lately, where it’s going, and why it seems that the little automaker that could still can.

How does Volkswagen Canada’s marketing work with Volkswagen in the U.S. and Germany?

White: Most of our material for Canada is sourced in this market. However, we don’t have the monopoly on good ideas, and if there’s good creative that comes out of Europe, we can source that out of Germany. Same out of the U.S. if that is the case. But really with Germany it’s about them providing us with the broad guidelines. The other place where we get support from Germany is with the website.

Rosen: Much along the lines of the Das Auto theme, there’s a German standard for website layout and functionality. We’ve been able to acquire a great many assets by moving to the global architecture for the website. It allows us to do two things; it’s flexible enough to personalize it for Canada and definitive enough to allow us to grab all the great materials available to us in Europe and around the world.

I should add that the use of stuff from the rest of the world works both ways. In fact we’ve had a compliment paid to us in that one of our pieces of creative that we used to launch TDI Clean Diesel was used in Denmark recently.

What are the greatest areas of difference when marketing in Canada?

Rosen: It’s a different customer base. The brand is seen slightly differently. We’re more accepting of the European value of a hatchback or a wagon whereas the U.S. is migrating slowly towards that. So our marketing really leans more European than it does North American, and the brand lends itself very nicely to that.

White: The other thing is linguistic. In Canada we need to do French language [ads] which are sometimes not a direct translation because you can lose things in the translation.

Also, the Americans like to use a lot of American icons. If you look at some of our [U.S.] advertising right now, we’ve got Brooke Shields, David Hasselhoff, NASA, things like that, which we don’t sign onto in Canada because they’re not seen as Canadian icons and it wouldn’t work as well, and if you tried to translate it, it won’t work at all.

The other thing is that we’ll spend a lot of advertising on some of our small cars. The Americans, because of the segments being different, wouldn’t necessarily do that.

We’ve seen a lot of TV advertising from VW but what have you been doing online?

White: We’ve done three things. First, we totally revamped [a year ago]. The second thing is that we’re revamping and investing big dollars in the dealer websites. The dealers have just agreed to that and we’ll be launching by the end of the year.

Also, we started doing online advertising by running some of the TV spots exclusively on Lost on, for example. We were the first auto manufacturer that did that, where if you wanted to watch an episode of Lost, it was brought to you by VW and you have to go through the VW commercial to get into the streaming of your episode. That being said, there’s no doubt that traditional media and TV still takes the biggest chunk of the pie – the creative and media spend.

Have your marketing strategies changed given the economy?

White: I’d say without getting into how much we’re spending, the overall marketing budget that Bruce has to play with is about flat, because it’s one of the first places that corporations want to look at. The easiest thing to target is marketing, so I believe that there needs to be a certain element of investment. The biggest challenge we have is, as you spend more in online, you still need to have some element of mainstream marketing, and Volkswagen is very strong in sponsorships and promotions with places like Mont Tremblant and resorts in the Canadian Rockies or Blue Mountain. It’s really a juggling act to be out there and make sure that you still have your share of voice.

Your advertising touts ‘affordable German engineering,’ why is that such an important selling point?

White: German engineering is usually seen as the car is precisely engineered. There’s the connotation of driving the car along the autobahn at fast speeds, and that if you’re to do that, there needs to be some quality that is engineered into your vehicle. The car feels different, it drives different than, let’s say, a North American car, an Asian car or a Korean car depending on where it’s sourced. And then the affordable component being that there are other German manufacturers out there, including our own Audi brand, so we try to portray ourselves as affordable German engineering, which can be easily accessed by the masses.

What kind of response have you had to your ‘Autobahn for All’ promotion?

White: It’s the second time we did ‘Autobahn for All.’ We did it when we lowered the price on all of our cars at the Toronto Auto Show last year. We’re only four weeks into the [new] campaign but the positive signs are there. I think ‘Autobahn for All’ is broad and deep in terms of all the elements associated with it. And if we look at the sales of the first four weeks, it’s initially successful. It seems to be driving traffic. The longer-term consideration measures will not be known for a while but I think that Bruce and the folks at the advertising agency have done a good job on that program.

Rosen: It’s a fully integrated campaign including all areas of media, so it’s got TV, radio, dealer support, online, outdoor, point-of-sale, all of the elements from a tactical perspective, and the branding of the ‘Autobahn for All’ message is there.

How are VW sales doing in the U.S.?

White: We’ve grown our share in the U.S., so we’ve outperformed the market. We’re one of the top three in terms of performance versus the year previous. It’s difficult, our business is down, but fortunately nowhere near as down as the bigger players, whether it’s the Detroit Three or the big Japanese competitors. It’s a struggle, but with the share increasing, we’re on the right path.

Volkswagen is a leader in diesel. How is diesel doing in Canada?

White: It’s doing quite well. It represents an extremely significant percentage of our Jetta wagon sales [the majority]. And it’s significant also with our Jetta sedan sales. We expect it to be a big piece of our Touareg sales and also a good piece of our Golf sales. If it wasn’t for diesel right now, we would not be showing the sales gains versus last year, despite everything else that we’re doing.

What do you think will be the big consumer trends in the near future?

White: Clearly there’s a downsizing in the Canadian market in terms of the size of vehicles. So not only in terms of the size of the car, but in terms of the size of the engine and the types of technologies to drive fuel efficiency. The compact SUV segment has become the biggest segment out there, which not that long ago was the van segment. The other trend you’re going to see is more alternative energy, so whether it’s clean diesel technology, hybrid technology, longer-term fuel cells, electric vehicles, things of that nature. It’s going to be driven by the economy and by the ultimate increase in the price of gas and the price of oil which will not stay where it is.

You recently unveiled BlueMotion Technologies branding. What does this encompass and how will it be carried out in your marketing plans going forward?

White: BlueMotion is an umbrella branding that encompasses all of the fuel-efficient technologies that are available in the Volkswagen brand. So whether that is TDI Clean Diesel [or] it’s other technologies. We’ve announced that we’re going to come out next year with hybrid technology. We’re the first to offer direct shift automatic (DSG) transmission, which is very fuel-efficient, and TSI technology with fuel-efficient gasoline engines. So we’re using this as an opportunity to label all of these technologies under one umbrella brand which Bruce can then more easily market.

Rosen: We include it in all of our alternative fuel-saving technology advertisement, so wherever there’s a mention of what we deem to be an energy-saving technology, we will always label it with BlueMotion.

White: We’re known as the diesel company, or the company that offers TDI, so it’s a way of communicating to the consumer that we’re more than TDI. TDI’s critical, it’s a huge percentage of our business, but we’re expanding beyond TDI.

Other companies are pulling their minivans, so why has Volkswagen launched the Routan now?

White: First off, I need to acknowledge that the timing around which we launched the Routan was less than optimal.

It was launched at the time of the year where the seasonality is going into a downturn and when the market was in a downturn. However, that being said, product decisions are made years in advance and at the time that the decision was made, we looked at the size of the segment, which back then was about 200,000 vehicles a year.

Since then the segment has declined more rapidly than we thought, and of course, then you launch in the middle of a recession. But we went with it because we believe that there are incremental opportunities.

Only about 15% of existing Volkswagen customers have indicated that they’re looking for a vehicle like this, so what we’re trying to do is expand our customer base, recognizing that though the segment has dropped, it’s still a significant segment, almost 100,000 cars a year.

Others have dropped out, and I guess it depends on if I look at it as the glass half full or half empty. If I look at it half empty, I’ll say, ‘people are pulling out, maybe we should do the same.’ On the other hand, with less players, there’s a better opportunity for us. So we’re committed to the vehicle, we’ve spent a lot of money on it, and we’re going to do everything we can to make sure we sell as many of them as we can.

Is it true that the manufacturing of it has stopped?

White: I want to clarify that. We had a ramp-up plan with Chrysler [VW's partner in manufacturing and design of the Routan] of X number of cars over a certain period of time. And unfortunately the production ramp-up plan was more aggressive than the sales have been, so we had to significantly slow the pipeline to ensure that we’re better balancing supply and demand. We already have a plan in place.

So is it true that no vehicles have been built for a specific period of time? Yes. But it’s something that is temporary and once we’re comfortable that we’re down to a manageable inventory, then [we'll go] back to a more realistic sales plan which will call for a slower ramp-up.

How has marketing for the Routan differed in Canada versus the U.S.?

White: The U.S. decided to take a totally different approach than us, they decided to use Brooke Shields. It did grab people’s attention and it got a lot of press, which is sometimes what you’re trying to do with your marketing.

In Canada we decided to take an approach where, because the car is a rational purchase, we were trying to create a bit of emotion in using the history of the Microbus – nobody else can do that – and tying in those that used to have a Microbus to today’s more rational buyer. We tried to throw a little bit of humour into it and a little bit of nostalgia.

The U.S. [has since] moved to a much more rational approach with the car, more of a ‘features and benefits’ approach.

Why do you think playing into the history of the Microbus appeals to Canadians?

White: Well actually I think it could have also appealed to Americans, but we developed the campaign separately. When Bruce and I and the agency had discussions about how to differentiate a van, which is really a rational purchase, we wanted to do something that stood out.

There are two cars that people are nostalgic about in our brand. One is the Beetle and one is the Microbus, and it’s a little bit iconic. We wanted to make an unemotional purchase a little emotional. And that whole hippie generation, the music by The Grass Roots, this type of thing, I think it brings a smile to people’s faces and a lot of people are saying, ‘I know that ad, the hippie ad.’

Volkswagen recently sponsored Canada’s Next Top Ad Exec (CNTAE), a cross-Canada student competition organized by the DeGroote School of Business, where the participants created a campaign for the Routan. What insights did you gain from that?

Rosen: CNTAE was not only a challenge for us in ensuring that the students are engaged in the process, but it was a challenge for them, creating an advertising campaign around a vehicle that they weren’t anywhere near the demographic for. It really challenged them to come up with some interesting creative that they had no comfort level with at all.

And it allowed us to get out to the universities and campuses across the country and expose our products and ideology to a huge number of people that we would not normally have access to.

Coming out of it I think we ended up with some really interesting stuff and there’s a couple of nuggets in there that are probably worthy of consideration when we look at the plan for Routan moving forward.

What are your top goals right now and in the next few years?

White: The top goal right now, in a down market, is to sell as many cars as we did last year and still make money. So by doing that, we’d increase our share. The market’s projected to drop by 17% and if we can sell as many cars as last year or close to it in that type of environment, and do so in an intelligent and healthy manner, that would be clearly our short-term goal.

In terms of product goals, working on continuing to expand the Canadian product lineup going forward so that we can play in more segments, because only then can you grow your business. So without getting into details about which cars, clearly it’s about playing in more segments and bringing more cars to market.

Rosen: It’s spending the money more wisely so that we can continue to cut through the clutter, and create awareness and consideration for the products. Class-leading products require class-leading consideration messages and we think we’re doing that and we need to do more of it and we will.

We like to be first at a lot of things that we do, for example, we’re the first automotive manufacturer to be in the Porter Airlines terminal. We look at that as a real success story, it’s done very well for us, the demographic’s spot-on for the car that is there, the Passat CC, and we’ll continue to do more of that.