The company risks alienating not only fans of the “People’s Car,” but dealers, the local face of the brand, who feel blindsided by the scandal.
NEW YORK — German engineering may lose some marketing pop after Volkswagen’s stunning admission that it rigged emissions tests.
The revelation is particularly damaging since Volkswagen has long pinned its reputation on its technological prowess, with the tagline, “Isn’t it time for German engineering?,” along with its focus on environmental sustainability.
“Brands are all about trust and it takes years and years to develop,” says Nigel Currie, an independent U.K.-based branding consultant. “But in the space of 24 hours, Volkswagen has gone from one people could trust to one people don’t know what to think of.”
Volkswagen CEO Martin Winterkorn, 68, stepped down Wednesday. He took responsibility for the “irregularities” found by U.S. inspectors in VW’s diesel engines but insisted he had personally done nothing wrong. “I am doing this in the interests of the company even though I am not aware of any wrongdoing on my part,” his statement said.
Although the company has apologized, Volkswagen has yet to explain how the cheating was allowed to occur. The company risks alienating not only fans of the “People’s Car,” but dealers, the local face of the brand, who feel blindsided by the scandal.
“The most important thing is that VW comes out and tells the public what happened, who was involved and make sure that it doesn’t happen again” said Jeremy Robinson-Leon, principal and chief operating officer at New York-based corporate and crisis PR firm Group Gordon.
That communication needs to happen soon, says Michael Jackson, the CEO of AutoNation, the largest auto-dealership chain in the U.S. He says VW diesel owners are angry, and dealers don’t have enough details to share with them. Jackson gives VW a week to explain its actions or he feels the brand value will be damaged.
VW risks losing owners like Peggy Schaeffer, 64, a librarian from Durham, N.C. For Schaeffer, her 2010 diesel Jetta Sportswagen was the ideal car, peppy but still environmentally friendly. Now, “I really feel like I’ve been had. I’ve been hoodwinked. This is deliberate fraud and deceit,” she says. Schaeffer is uncertain what she’ll do next.
“I’ll watch and wait and see how the company behaves,” she says.
Being an environmentally friendly company is in Volkswagen’s DNA. Back in the 1960s its first U.S. ads urged people to “Think Small” in an era of gas-guzzling cars. More recently, Volkswagen launched a global “Think Blue” campaign in 2010 with the aim to “become the world’s most ecologically sustainable car manufacturer” by 2018.
“They had a brand image that is very straightforward, honest and in recent years dependent on being a leader on environmental standards and pushing those,” said Kelly O’Keefe, professor of brand management at the VCU Brandcenter. “Now it appears they’ve been cheating to get there, which is a devastating revelation.”
Recent ads have promoted its “clean diesel” technology, which provides high fuel economy, in its Passat, Jetta, and other cars. One campaign shows older ladies in a Passat bickering about whether diesel fuel is “sluggish” or “stinky.” A Jetta ad says the car’s engine is “painstakingly engineered without compromise.”
The scandal broke Friday in the U.S., and the last “Clean Diesel” ad ran Monday, according to iSpot.tv, which tracks TV ads in real time. Volkswagen appears to have pulled the ads from its YouTube channel, although they remain on some dealer pages and elsewhere on YouTube.
Volkswagen should now focus on its cars with gasoline engines and be very aggressive with pricing promotions, said David Kiley, author of “Getting the Bugs Out, the Rise, Fall and Comeback of Volkswagen in America.” Volkswagen did not respond to a query about future advertising plans.
“This really shoots to pieces the diesel business,” Kiley says.
In fact, YouGov BrandIndex, which tracks a brand’s perception, said news of the scandal has brought the carmaker to its lowest U.S. consumer-perception levels in more than six and a half years.
VW may also need to pull back on the whimsical side it cultivated with Super Bowl ads like “The Force,” in 2012 showing a young boy dressed like Darth Vader using his pseudo-powers on a Passat; and a 2013 ad depicting a man so happy driving a Volkswagen he started speaking in a Jamaican accent.
“It’s really hard to do cute when people don’t trust you,” VCU Brandcenter’s O’Keefe says.
More broadly, Volkswagen’s environmentally friendly image has taken a big hit, said Ann-Christine Diaz, editor of ad trade magazine Creativity. The company, once known for a flower vase installed in every Volkswagen Beetle, has worked hard globally on that image, she says. For example, a campaign out of Russia in 2015 — part of the “Think Blue” environmental sustainability campaign — featured vending machines installed around Russia that only accepted used batteries as payment.
“They set out to become the most eco-friendly car brand by 2018,” Diaz says, referring to the goal of the “Think Blue” campaign. “Now Volkswagen looks like a big hypocrite.”
Of course, brands have weathered scandals before. Johnson & Johnson survived a recall of Tylenol after cyanide was found in some pills in 1982. Toyota recovered from millions of recalls between 2009 and 2011, and BP endured the Deepwater Horizon explosion and oil spill that killed 11 and led to an environmental disaster five years ago.
George Pappachen, EVP of Kantar Media in New York, says Volkswagen has the media reach to get its message out. It’s a top 10 advertiser in many markets in Europe including Germany, France and Poland and in the top 20 elsewhere in Europe. In the U.S., Volkswagen is among the top 25 advertisers, and regularly appears in Super Bowl ads.
Volkswagen and Audi, which is controlled by VW and also part of the emission scandal, spent $721.9 million on advertising in the U.S. in 2014, according to Kantar Media.
But VW will travel a long, painful road before the scandal is behind it, experts say.
“If VW manages this crisis properly, they can get past this with the customers in the marketplace fairly soon,” says AutoNation’s Jackson. “With the regulators, it’s going to be a longer story.”