Volkswagen Phaeton Car

When Volkswagen conceived the Phaeton project, they wanted to prove that Volkswagen, the brand that for more than 50 years has owned the market position of "the people's car", could build a world class luxury sedan. The Phaeton was introduced in Canada and the USA in the fall of 2003 and was roundly praised by auto journalists as a superior car in terms of value and performance. Yet within two years the Phaeton was deemed a failure and pulled from the market in North America. What went wrong?

The problems at the car company had been brewing for years. According to one expert, the cause of the difficulty was that Volkswagen had gotten away from its clear vision of which market segments it was targeting. "In the good old days it was all very straightforward. If you asked marketers at Volkswagon about their brand, they would draw you a neat diagram with VW at the top and boxes with Beetles, Golf and Passat underneath. They were all very distinctive products and sub-brands aimed at very different market segments.

The consumer auto market has always been relatively clearly divided into segments. There are economy cars for first-time car buyers; sedans for the urban couple or family; minivans, wagons and SUVS for the suburban family; trucks for blue collar workers and farmers; luxury cars for the upper classes. Not every car maker competes in every segment and part of Volkswagon's success has always been its leading position in the minds of consumers when it comes to economy cars. After all, the word Volkswagen in German means "the people's car".

Marketing Magazine's David Menzies test drove the Phaeton in 2004. When he drove it to an Argo game, the parking attendant mistook the car for a Passat. That's when he realized that the car was doomed to failure. "If there is a key marketing lesson to be learned from Volkswagen's folly into the land of six-figure luxury it's this: It's easy to bring a brand down market. But bringing a brand up market -even an established world-renowned brand - is extremely difficult, perhaps impossible."

In July 2004 Volkswagen blamed the failure of the Phaeton on the marketing department. "The biggest problem the car industry has is its marketing department. The advertising didn't help either." Print ads showed the Phaeton beside the Beetle, with the caption "It took 54 years to grow one this big". Television ads showed a test subject named Matt arrogantly identifying luxury car brands by looking at a picture of the car. When shown the Phaeton, he confidently states it's a Mercedes. Ad critics said "Why in the world, if you're trying to sell a $70,000 car would you want to position it as a pathethic lookalike? As VW surely must have learned from Audi's experience, looks like a Mercedes is not synonymous with like a Mercedes. It's synonymous with "cheap knockoff".

Volkswagen's most successful advertising always focused on its brand positioning. Ad execs said "Advertising is communications. The objectives of an ad program is to communicate something about the brand....The goal of an ad program should not be to communicate but to occupy a position in the prospect's minds."

Source: Marketing Third Edition Armstrong Kotler Cunningham and Buchwitz

How many different market segments does Volkswagen target? Outline each segment