Maintaining distinctions between various brands is a challenge for most automakers - and for Volkswagen group in particular. With its five main brands - Seat, Skoda, Volkswagen, Audi and Bentley - some overlap seems inevitable.
Robert Buchelhofer, Volkswagen group vice president for sales and marketing, recently spoke with Automotive News Europe's Georg Auer about brand-management issues.
Part of your responsibility is to make sure that VW group's brands do not overlap. How can you prevent that from happening?
Ever since we started our multi-brand strategy, this has been the question. The strategy is for VW group to be represented in all segments of the world market to the highest effectiveness with credible, well-founded brands.
We can show that Skoda offers very good value for money at one end of the spectrum, and Bentley at the other end in the luxury segment is a very good brand. Our goals are to:
Increase market share in each segment.
Raise the rate of loyalty of existing customers to their brand and to the VW group. If a customer chooses not to buy a VW anymore, it is better that he buys a Seat or Skoda than an outside brand.
We are doing this already. Our group market share [in western Europe] currently stands at about 18.5 percent. The rate of loyalty to the group's brands is far above our competitors'. And the rate of change among the brands is below 1 percent of the 2 million cars we sell within Europe.
To sum it up, there is already a very high fixation on VW's brands, independent of pricing and positioning. I don't see a reason for this to change.
You don't think that your customers won't decide that Skoda is just a less expensive Volkswagen?
For me, that simply has not been the case. As group vice president, all pricing for the whole group has to pass my desk. All product policy is monitored very carefully. We don't want to endanger our goal of selling more vehicles at higher rates of profit. Our business is driven by sales and profits.
Isn't it difficult to win our brand directors - to resist their desire to have exactly the car that the higher class brand is making?
What a director wishes is one thing; what is possible is another matter. We have a finely honed organization. We have group steering committees for product planning and marketing to make the decisions [about each model]. Their decisions go to the board of directors to be finalized. These decisions follow the very precise definitions of the brand profiles, consisting of strictly defined product profiles and regional market profiles.
Each brand has its special competition field and this is the base of deciding: Does this brand need that engine or not? Is this engine better fitted to Audi or to Skoda?
At the start of the multi-brand strategy, VW was focused on Mercedes, Audi on BMW, Skoda on Volvo and Seat on Fiat/Alfa Romeo. Is this still valid?
Yes. This targeting of a certain competitor really is a wonderful strategy for focusing on the basic theme of each brand. The multi-brand strategy is set down in several quite thick books. But this method of orienting each brand really puts this strategy in a nutshell.
Formulating a goal is one side of the picture; the other is to work to attain it.
In the USA, South America and Japan you are only represented by two brands, VW and Audi. Will you export Skodas and Seats to those markets?
That is part of our strategy. But we will not go into the USA with Skoda and Seat in the near future. We have decided that Seat will be offered in South America, which is a very plausible market. Skoda will establish itself in Asia, particularly China. Seat has built a sales organization in Brazil and is looking to expand into other markets.
Skoda is already in China, up to now only with imports. In the next few months Skoda will start producing cars in India - alone. There is no rule that VW and Audi have to be the first in all markets. In India, the Octavia is a good fit for the medium range, so it is not surprising we choose Skoda as the advance unit.
When will China see a modern VW?
A year ago we introduced the Audi A6; this spring we introduced the Volkswagen Passat. We will introduce the Bora there and are thinking about further products. We have invested DM3.5 billion (E1.8 billion) in China and in the next three years we shall invest as much again to prepare for China opening its market to the world.
As one of the protected manufacturers in China, do you welcome that country joining the World Trade Federation?
Yes, very much. We prepared for this long ago. We have built a plant in Shanghai, we have installed two new sales joint ventures, we have a complete sales network. We have introduced in China everything from corporate identity to navigation systems.