Volkswagen's Marketing Strategy in India

The case examines the marketing strategies of Volkswagen Group India, the Indian subsidiary of German automobile manufacturer, Volkswagen AG (Volkswagen) Volkswagen entered the Indian passenger car market in !""# by launching its car brand $ %koda In !""&, two of its other brands Audi and Volkswagen, were also launched in India Volkswagen Group India emphasi'ed on all aspects of marketing mix including product, price, place and promotion The company offered three brands including Audi, %koda and Volkswagen that together comprised of #( different models as of late !"") Volkswagen Group India mainly catered to the luxury segment of the Indian car market The company had established presence in India through separate distribution channels for each of its brands

In its initial years, Volkswagen Group India primarily used the print media to promote its products *owe+er, considering the growth potential of India,s automobile market, the company started using electronic, digital and out of home media along with print media In -o+ember !""), the company launched an integrated marketing campaign to strengthen its brand image The case describes the marketing campaign and ends with a discussion on the growth prospects of the company in future

Introduction
.n /ecember !#, !""), Volkswagen India 0ri+ate 1imited (Volkswagen India), the group company of Volkswagen Group India, announced that it aimed to sell 2"" units of 3eetle, its iconic car, in India in the year !"#" The 3eetle was launched in India on /ecember "4, !"")

Volkswagen's Marketing Strategy in India

Raj Sawant, Business Head of Automark Motors, a Volkswagen dealer in Ahmedabad, Gujarat, India, said, " here are alread! o"er #$% ad"an&e bookings a&ross India, and we ha"e started deli"ering the &ars as well' Going b! the initial eu(horia, we e)(e&t to sell around *%% Beetles in +%#%'"*

Volkswagen Grou( India, the Indian subsidiar! of leading automobile manufa&turer, Volkswagen AG ,Volkswagen-, based in .olfsburg, German!, had entered the Indian (assenger &ar market in +%%# b! laun&hing its &ar brand / Skoda' In +%%$, two of its other brands Audi and Volkswagen, were also laun&hed in India'

0"er the !ears, Volkswagen Grou( India not onl! laun&hed se"eral (rodu&ts, but also ensured that its brands were well known among the Indian &onsumers' Although, the &om(an! had had a (resen&e in the Indian &ar market sin&e +%%# and the Skoda and Audi branded &ars were well known among &onsumers, the Volkswagen brand was not well re&ogni1ed in the &ountr!'

herefore, in 2o"ember +%%3, the &om(an! laun&hed an integrated marketing &am(aign to build its brand image' It also laun&hed a marketing &am(aign for its i&oni& model, the Beetle' Volkswagen India e)(e&ted that with its brand building e)er&ise, it would be able to in&rease its sales and &a(ture a signifi&ant market share in the Indian &ar market'''

About Volkswagen
The history of Volkswagen (which means ,people,s car, in German) can be traced back to the #)2"s when 5erdinand 0orsche, a reputed automobile engineer and designer, started designing an affordable car for the common man In #)26, the first prototype of the car, called the 7d5$ 8agen, was designed in %tuttgart, Germany

Marketing Strategy in India

Volkswagen entered the Indian market in !""# by setting up its Indian subsidiary Volkswagen Group India As of !""), Volkswagen Group India had two group companies $ Volkswagen India 0ri+ate 1imited (Volkswagen India) and Volkswagen Group %ales India 0ri+ate 1imited (VG%I01)

Promotion
%koda Auto India and Audi India In !""#, %koda Auto India launched its first product, the .cta+ia, in India The company primarily used the print media whene+er it launched a new product To promote the brand image of the company, it also used print ad campaigns

The Road Ahead

In -o+ember !""), Audi India announced that it had achie+ed () percent year to date sales growth In the period between 9anuary and -o+ember !""), it sold #,((" cars as compared to )&4 cars in the same period in !"":

Exhibits
;xhibit I< Volkswagen,s 5inancial *ighlights (!""6$":) ;xhibit II< %koda Auto India,s 0rint Ads ;xhibit III< Volkswagen India,s 0rint =oadblock ;xhibit IV< Volkswagen India,s ..* >ampaign

Issues
? @nderstand the dynamics of the Indian passenger car market ? ;xamine the growth strategies of Volkswagen Group India o+er the years ? Analy'e the marketing strategies of Volkswagen Group India ? %tudy the future prospects of Volkswagen Group India

Answers
1) Achieving the Highest levels of Customer Satisfaction
8ith &" per cent of the +ast population of India being under 4", this young and +ibrant India is more focused on consumption than sa+ings $ and as the consumer mindset changes, so are their expectations 8ith the Indian consumer being wooed by glit'y, multi$million dollar marketing campaigns, the range of choices is extensi+e This new generation has high le+els of international exposure, which has led to a maAor change in their expectations of the Buality of products and ser+ices that they recei+e from people like you and me Increasingly, what were considered ,+alue$added ser+ices, a few years ago, are fast becoming hygiene ser+ices something that we are expected to pro+ide as routine 1oaner cars and cashless transactions for insurance$based repairs are Aust some of the demands that today,s sa++y customers expect as the norm >ustomer handling, throughout the entire ownership experience, from the first test dri+e, through the regular ser+ice check$ups, and finally to the trade$in process on the next +ehicle

purchase, is extremely critical to upholding our brand image As we all know, it takes years of continuous and consistent focus on customer satisfaction to build our reputations and one misstep destroys it As dealers, all of you ha+e the extremely important responsibility to uphold the brand image of the +ehicle manufacturers As manufacturers, the only touch points we ha+e with our customers are through you $ be it on the sales floor or in your ser+ice workshops And in return, we, as manufacturers, ha+e the responsibility to help you maintain profitable operations $ because, at the end of the day, all of you are extremely intelligent business people and you deser+e to get the necessary returns on the in+estments that you ha+e made in your dealerships 3ecause, if you don,t, you,ll in+est it somewhere else $exactly what customers would do with their money, if they don,t +alue the products and processes that we pro+ide 8e must gi+e you exciting products, built with outstanding Buality, and price them competiti+ely to allow you to generate the returns to rein+est in your dealerships 8e should de+elop and maintain cohesi+e and consistent national and local marketing campaigns to generate the prospects that are so critical to our business And finally, we must train your sales and ser+ice staff to handle our +ehicles which are becoming extremely complex with the high le+els of technology that are being brought into our industry 8ith these shared responsibilities, it is the Buality of the relationships that we maintain, between manufacturers and dealers, which decides how we sur+i+e in this extremely competiti+e en+ironment *ere again, it takes honest and open communication to build the mutual trust that is necessary for such a critical association, and it takes only one misplaced action or word to destroy a relationship that may ha+e taken years to establish Emerging Trends & Challenges for Auto Retail 8e all know that India is booming in more ways than one The economy has been on the rise /espite some bumps on the road, there is an o+erall positi+e sentiment in the market, and the automobile sector, in particular, has been witnessing healthy growth According to industry estimates, in the next four years, automobile companies in India will roll out more than double the number of cars than they make today 8e expect domestic demand to grow at double$digit rates for the next three to four years Cany of you may wonder why I am repeating these statistics to you 8ith so much good news, what could possibly go wrongD 5or starters we may get complacent And, with complacency, our businesses become +ulnerable to unforeseen competition Employee Retention In today,s business en+ironment, there is an outright E8ar on finding and retaining talentE 8e are all familiar with the high attrition rates that are sweeping across India today 9ust as de+eloped countries lost Aobs to India because of low costs, India is coming under increasing pressure due to our own rising labour costs /ealerships, such as yours, are no exception and are eBually +ulnerable to the loss of trained personnel to other industry sectors

such as insurance, financial ser+ices, healthcare and electronics 8e must recogni'e that our sales personnel are not Aust selling cars $ they are selling financial packages, warranties, insurance, and are in great demand in related sectors As I mentioned before, our +ehicles are becoming extremely complex pieces of machinery and the days of going to the corner gas station for a Buick repair are behind us .ur master technicians are skilled computer, electronics and diagnostics engineers and are open to poaching from the e+er growing electronics and IT industries I am sure, you will all agree with me when I say that training new apprentices is a time and cost consuming exercise /ealerships should start focusing on employee retention, by de+eloping clearly laid out career paths, pro+iding specific growth opportunities, perhaps through tie$ups with educational institutions, to make +aluable employees mo+e up the +alue chain within the dealership or e+en in our other organi'ations Defense against Competitive Service Centres The potential of the growing car segment is common knowledge and is attracting lots of outside interest All of you are about to face the toughest competition that you ha+e e+er seen And, this will not come from the local garages, or the road$side mechanics, or e+en other dealers The competition that you are about to face will come from large business houses who ha+e sniffed the huge potential this rapidly expanding segment presents and are willing to pump in enormous amounts of capital to capture a significant pie of the after$sales ser+ice market $ and they will do this by pro+iding top class ser+ices and a positi+e o+erall experience to the customer Automoti+e ser+icing, until recently, a capti+e re+enue stream, is about to be challenged by some of the biggest names in Indian industry These are big conglomerates with deep pockets and long$term missions to make their +entures a success Cost of these companies reflect some of the most respected names in the Indian industry %ome of the potential competitors are< F A> /eleo $ A General Cotors subsidiary F =eliance (RCare) $ 5uel %tations $ #:" with =>are facility $ *yper Calls $ (""G F 3osch India %er+ice $ &" outlets in India F Cy TV%HTV% ;xpress $ a franchisee model (26( outlets in T- I 7erala, 4" in A0, soon to enter 7arnataka) F >astrol >ar Jone $ After success in >astrol 3ike Jone F Indi+idual 3ody shops promoted by insurance companies

These players ha+e the resources to set up sophisticated, state$of$the$art automobile ser+icing centres, eBuipped with latest machines and trained personnel These companies are in the foray because of their business strategies and ha+e the staying power to dri+e small time competition out of the game .ne look at the numbers for the automoti+e ser+icing segment is enough to indicate why this industry has suddenly become an area of huge interest >ontribution margins in the ser+ice business are relati+ely lucrati+e, based on our high labour billing rates To gi+e you a parallel, 5ord,s ser+ice business, including insurance and maintenance, will be upwards of =s ("" crore .ne can Buickly do the math to estimate the si'e of total retail ser+ice business in the country 1arge players enter the industry on a con+ergence platform to le+erage synergies in their businesses =eliance 0etroleum with its proposal of setting up ("""G fuel stations across the country plans to upgrade #:"G of these fuel stations with fully eBuipped ser+ice stations under =$>are brand Asahi India has its retail arm branded as 8indshield ;xperts, promoting Buick windshield repairs, with smart cashless transactions set up with Insurance companies The next logical Buestion is $ how do we ensure customer loyalty in the face of this onslaught of competiti+e product offeringsD 8hile I cannot profess to ha+e all the answers, I do ha+e some suggestions for you to think about The first challenge is to ensure that our customers see +alue in coming back to us for after$sales ser+icing There are a number of initiati+es that dealers such as yoursel+es can take to encourage customers to return to you for these ser+ices< Extended Warranties - are a +ery effecti+e way to get the customer back to the dealership for after$sales repairs and ser+ices Loyalty Programs - such as the ones introduced by 5ord are also important strategies for retaining customers 8e offer 5ord>arGain' and 5ord,s Total Caintenance 0lan (TC0) to our owners .ur Total Caintenance 0lan (TC0) is an inno+ati+e programme that offers total maintenance at a price starting as low as =e " 2) per km The plan ensures that the customer gets scheduled maintenance or unplanned repairs completed at any authori'ed 5ord dealership for a fixed price 5ord>arGain' is the first customer loyalty program introduced by an automobile manufacturer, and rewards customers who maintain their routine ser+ice schedules at 5ord dealerships 5ord>arGain' rewards owners with loyalty points, which can be cashed in to purchase accessories and e+en to pay for ser+ice charges Abo+e all, regular maintenance at authori'ed ser+ice centres generates better +ehicle residual +alues Latest Technology - -eedless to say, state$of$the$art diagnostic and repair eBuipment is a must to inspire customer confidence 3esides helping to get the most efficient turnaround on short repairs, they ensure Buicker and more accurate diagnosis of complex +ehicle problems Promoting Use of en!ine Parts " #ccessories - .ne ace in the slee+es that all of you ha+e is the access to Genuine %pare 0arts and Accessories And, that really brings us to the inherent danger of using spurious, unauthorised partsHaccessories

It is absolutely critical to promote the use of genuine spare parts and accessories among all our potential and current customers This needs to be wo+en into the sales and after$sales process Genuine parts are specifically engineered for our applications and ensure that our +ehicles continue to operate at optimum le+els of performance and safety 8hile it may be possible to re+erse engineer any part, one cannot replicate it in its entirety, and missing key characteristics are +ery likely to compromise the integrity of a +ehicle system 5or example, 5ord offers collapsible steering columns to minimise chest and knee inAuries in frontal impacts These steering columns are specifically designed to collapse based on the deformation of the +ehicle,s body structure and any effort to replicate this steering system will definitely lea+e a big gap in the o+erall crash performance of the car The industry has already seen numerous failures of after$market electrical accessories, which ha+e led to loss of property and, in some cases, human li+es -ot all customers are technically inclined and may easily get swayed by the cosmetic resemblance of spare parts It is critical to build on safety as a philosophy and urge car owners to use authorised ser+ice stations and genuine spare parts A lot of education is needed on this subAect and it would ser+e us well to work collecti+ely on this common cause and combat the rapidly growing unauthorised spare parts industry 3y choosing to ignore the threat and by not creating awareness about genuine parts, we undermine the consumer,s confidence in us as automobile experts Conclusion To summari'e, our industry is growing rapidly and the landscape is changing fast To ensure ongoing sur+i+al, we must strengthen the relationships between +ehicle manufacturers and dealers to maintain an unwa+ering focus on total customer satisfaction and business profitability 8e must pay close attention to the fundamentals of our businesses, be it employee training, in+estments in facilities I technology, or implementing inno+ati+e customer retention schemes to ensure that we are pro+iding +alue to our customers And finally, all of us ha+e a social and corporate obligation to educate our customers on the benefits of using authori'ed parts and ser+ice >entreKs The scenarios outlined are +ery real and we must work together to de+elop inno+ati+e solutions to continue to pro+ide the best o+erall +alue to our customers

2) The significant growth strategy was adopted by Volkswagen Group India is during the time of
economic crisis The nationKs economic growth rate was 6 (L during this period The company managed this situation by producing small cars for the Indian market 3ut on a global perspecti+e the company outperformed the market and increased its global market share to ## 2L during the crisis

3) /uring his participation in %IAC Annual >on+ention !""), 0rof /r 9ochem *ei'mann,
Cember of the Canagement 3oard, Volkswagen AG presented a positi+e outlook for the

automoti+e industry in India in the coming years %peaking as one of the panelists for the topic M=;VIVA1 N The >urrent I 5uture %tate of the Global Automoti+e Industry I 0ositioning of the Automoti+e Industry in IndiaO, 0rof *ei'mann said, he sees a growth especially for passenger car market *e also mentioned that the growth can further be enhanced through +arious go+ernment incenti+i'ed initiati+es such as +ehicle replacement program According to 0rof *ei'mann, year !"") has seen a marginal growth and India is going to play a +ital role to keep up the momentum and re+i+ing the industry globally /uring his presentation, 0rof *ei'mann also highlighted Volkswagen GroupKs ambitious plans for the India market as the company is targeting capturing :$#"L of market share within the next four to six years *e also talked about the in+estments that Volkswagen has made through %kodaKs plant in Aurangabad and recently opened VolkswagenKs plant in >hakan, 0une The >hakan 0lant will be producing the soon to be launched the (th generation 0olo in India 8ith an in+estment of (:" million ;uro (i e around 2: billion rupees, or 2,:"" crores I-=), it has a capacity of producing #, #",""" cars Hyear %peaking on the occasion, 0rof *ei'mann said, MVolkswagen Group is present in India since !""# when %koda entered the market %ince then, we ha+e launched #( different models across Group brands, which is a uniBue success e+en compared with other manufacturers in India This strategy has been successful, a clear sign of which is our positi+e year$on$year growth O Taking into consideration on VolkswagenKs focus on growth markets, India assumes an important position since the automobile market here will go from its present # # million +ehicles sold per year to ! million +ehicles in !"#4 %haring his +iews on this, he said, MIndia is a huge market that we belie+e offers us potential In India, the passenger +ehicle segment has seen a growth despite the current market situation and Volkswagen plans to tap this 8ith the +aried models across our brands as well as the establishments that ha+e been set up we hope to be able to cater to our customers as well as dealers in the best possible manner O MVolkswagen is committed to the Indian market, the proof of which is the constant in+estment and growth that we pro+ide through the +arious proAects initiated India is one of our key markets and we know that the future harbors a huge potential .ne of our biggest commitments is the 0olo that we plan to introduce soon O he further added ;+ery year, the %ociety of Automobile Canufacturers (%IAC) hosts an Annual >on+ention focusing on issues influencing the Indian automoti+e industryKs competiti+eness and its integration with the global economy The theme of this yearKs Annual >on+ention was MAuto Industry< =e+i+al, =estructuring I %ustainable GrowthO 0rof *ei'mann spoke at the plenary session which ended at a positi+e note focusing on M=e+i+alO At a time, when the world is facing a recession, he was able to integrate what policies in place would impro+e the situation as well as how India could see the way forward

4) 8hat started with =atan TataKs dream to make worldKs smallest and cheap car, Tata -ano, has become a rage nowadays amongst the automobile giants across the world including ol!s"agen to tap the compelling Indian automobile sector of smaller cars

9ust to gi+e a glimpse of the idea, this year has seen many new entrants and niche names in the smaller cars sections like 5ord 5igo, Caruti %wift, -issan Cicra, and 5iat @no, foraying into the market with their offerings making it as challenging as it can become .ne more name has entered into the fray and is none other than German automobile maAor Volkswagen, which has earlier introduced 0olo, but there ha+e been reports doing the round and the company has confirmed the same that they are planning to roll out e+en a smaller car than their +ery own, 0olo 3elie+e meP we will ha+e something smaller than the 0olo 8e are working on it, Volkswagen GroupKs India >ommunication *ead 7urt =ipphol' was Buoted as saying when people wanted him to clear the air about the new model *e, howe+er, clarified that nothing has been finali'ed yet Volkswagen (V8) has started manufacturing operations in India earlier this year at its >hakan plant, rolling out the compact car 0olo It has in+ested around =s 2,("" crore on the plant, which has the capacity to produce ##",""" units per annum The small car market in India, the second fastest growing auto market in the world after >hina, is a lucrati+e one It accounts for about &( o+er cent of the total Indian car market, which is approaching ! million units annually 8hile Caruti %u'uki, India operations, is the leader with o+er (( per cent market share, new entrants like -issan and 5ord are spicing up the competition *yundai, Tata Cotors and General Cotors are also significant players in the segment Volkswagen is also trying to ha+e a significant piece of the pie .ther small change they ha+e made in 0olo is the integrated third box to suit more of your luggage and renamed it as ento The ento is felt to be positioned between 0olo and 9etta %edan 8ith the planning of e+en a smaller car than the 0olo, reports are rife that it might be named as 5ox or Ibi'a Coreo+er, Volkswagen is also expecting to strike a chord in the bu''ing Indian compact car segment 0resently, the Volkswagen 5ox is operational in 3ra'il and expected to make an Indian entry soon >onsidering India becoming a hotspot for in+estors from all around, a battle of sorts is expected to win the customerKs satisfaction that the VolkswagenKs ento or its future prospects, 5ox or Ibi'a are beefing up like ne+er before This is an excellent piece of information for our economy to earn foreign benefits and re+i+e itself 8olfsburg H 0une, "! .ctober !"#" $ Volkswagen is strengthening its commitment in India< The Group opened its training academy in 0une today (%aturday) The academy pro+ides training for apprentices, employees and dealers from all Group brands and production plants in India The inauguration was attended by 1ower %axonyKs Cinister 0resident /a+id CcAllister, who +isited the new Volkswagen plant in 0une accompanied by a ("$member delegation The >hairman of the 3oard of Canagement of Volkswagen AG, 0rof /r Cartin 8interkorn, also

welcomed Cukesh Calhotra, 0resident of the regional >hamber of >ommerce, to the inauguration 0rof 8interkorn underscored< EThe Volkswagen Group is seeking to become a top employer at all of its sites worldwide 8e do not make a distinction between established home markets and emerging growth regions because the same applies e+erywhere< Top products can only be manufactured by a top team E *e added that Volkswagen was bringing first$class +ocational training and professional de+elopment to the site with its Aobs EThat strengthens the company, the employees and the region E /a+id CcAllister emphasi'ed< EVolkswagen is creating a li+elihood for many Indian families and is not only in+esting in production halls and machinery, but N more importantly N also in people Vocational training is one of the key challenges in India today, not only for the apprentices themsel+es, but also for continued economic de+elopment and for the country as a whole E Cukesh Calhotra drew attention to the cooperation between the Volkswagen India Academy and the 0olytechnic >ollege in 0une and commented< EThis is a pilot proAect for the whole of India in the field of training and +ocational de+elopment in the automoti+e industry E The Volkswagen India Academy, which has #,("" sBuare meters of space, is eBuipped with seminar rooms and pro+ides practical training in ad+anced +ehicle and production technologies Apart from the professional de+elopment of employees, customer ser+ice personnel and the current #!" Group dealership, the Academy is also the base for VolkswagenKs +ocational training in India The Group has de+eloped transnational standards for +ocational de+elopment in recent years that are oriented to the good record of the internationally recogni'ed twin$track +ocational training system in Germany The Academy is located at the 0une plant which was opened in Carch !"") to build Group +ehicles for the Indian market 0rior to the inauguration, the delegation toured the plant which is one of VolkswagenKs most modern factories and currently has a workforce of !,!"" V8 opens new plant in India to make 5abia, 0olo Volkswagen AG said Tuesday it has opened a new production plant in 0une, India, where the %koda 5abia and a new +ersion of the V8 0olo will be built for the domestic market %koda is one of VolkswagenKs nine brands, which also include Audi and 3entley luxury cars and %cania hea+y$duty trucks 8olfsburg$based V8, ;uropeKs largest carmaker V8 to ramp up its car production in India 8orldKs biggest auto giant, Volkswagen is reaping success, thanks to its new 0olo, which has lots of fan followers in India Volkswagen has in+ested =s 2:"" crore in its >hakan 0lant near 0une, and recently rolled out its #","""th car during the first week of 9une !"#" As per the German companyKs plans, the production house will manufacture cars at full