The Volkswagen scandal highlights how quickly the public’s trust in a brand can be destroyed. It takes years to build a brand and develop customer understanding of the brand promise, so when we find that the company has been dishonest about their product’s qualities it undermines the customer’s understanding of all that the brand stands for.
In the case of the VW emissions scandal it transpired that the company actively misled the industry and customers by adding software to their cars which identified when they were being tested for emissions and altered the engine’s performance accordingly.
Billions of Euros have been wiped off VW’s share price within a few days, and the company is putting aside nearly £5bn to cover the costs of the scandal, which includes the recall of 480,000 vehicles in the US, where the scandal broke.
What is the cost to the VW brand?
Trust is a central pillar of any brand promise and is especially important for brands and products where we are relying on them for health or safety. In the same way as the purity of bottled mineral water or the effectiveness of medicines, the level of engine emissions is seen as a central product feature for a car.
VW didn’t just suffer from manufacturing faults or erroneous reading of the data, they have actively sought to mislead the independent testing body in the USA. If they are actively manipulating these tests, what else are they doing? The consumer may question the veracity of their safety testing data too. It is extremely hard to regain a position of trust once it is broken.
VW has until now benefited from a counter-culture identity alongside it’s mainstream appeal – think VW Bugs (Beetle) and VW Campers – whose owners lovingly restore older vehicles to bring them back into use. This segment of their target audience will feel particularly betrayed by the company’s actions, although I think that their love of the vehicles will outweigh their anger at the corporate’s actions.
VW will find that it will take many years to rebuild their reputation (and sales), if they ever actually manage to do so.
What can Volkswagen do now?
The corporate response from VW is spot on: Hold your hands up and apologise for this error in judgement and promise to make it better no matter how much it costs.
If this were a smaller brand with a shorter heritage and less equity there would be the option of scrapping the brand and starting again – like Murdoch did with The News of the Word after the phone hacking scandal broke. It was later replaced with a Sunday edition of sister publication The Sun, but equally a new title could have been created to take its space in the Murdoch product portfolio.
That option is not open to Volkswagen, the world’s second biggest car maker behind Toyota, given the number of cars in use bearing the VW logo and the number of vehicles on the production line. Creating a new brand to replace the Volkswagen brand would be prohibitively costly and take many years to develop, and their vehicles would probably still be seen as a rebadged VW car.
Volkswagen group will need to invest heavily in the VW brand to carve out a new market positioning and rebuild the trust that has been lost in the eyes of the consumer. The Group has had some success with this approach in the past, having developed a mass market brand out of Skoda, whose name used to be a laughing stock across Europe.
If that strategy fails, however, VW may choose to sideline the Volkswagen brand, and refocus attention to one of its other brands – Audi for instance. By stretching the Audi brand and creating additional models that span the traditional VW customer’s needs they can retain their VW customer base within their family of brands.
Can other brands learn lessons from VW?
Whilst the road ahead for VW will be a tough one, what can other brands learn from this scandal?
1. Your brand promise and product features should be grounded in fact
Don’t set your brand up to fail by claiming to be the ‘best’ or ‘purest’ if that is not something you can substantiate or is not sustainable. Be honest about your product or service features and benefits from day one.
2. Honesty is an essential pillar of every brand – be honest with yourself, your employees and customers
It is likely that any dishonesty, trickery or understatement of the truth will be uncovered eventually, and that is unforgivable in the eyes of today’s consumer. Customers don’t like to be deceived, and they demand an honest, adult relationship with brands –especially with premium brands and expensive purchases.
3. The importance of peer review and recommendation for today’s consumer means that each and every customer should be treated with respect.
It’s a tough juggling job for brands in today’s consumer market as every ball needs to be kept up in the air at the same time. If you drop a ball and, for instance, customer service levels drop for some customers – you can be sure that other consumers will soon hear about it on social media. Consistency is key for your brand to establish and grow.
As a proud owner of a VW T5 Campervan and a fan of the Volkswagen brand I hope that Volkswagen recover from this scandal by fixing their business practices and then re-invigorating the VW brand.