September 28, 2015
Trust in Volkswagen’s brand is in freefall at the moment…

Trust in Volkswagen’s brand is in freefall at the moment…

The Drum – September 23, 2015.

Has Volkswagen’s emissions scandal smashed the brand beyond repair? Trust in Volkswagen’s brand is in freefall at the moment, pushing its marketers into rebuild mode that will need to rethink what its cars stand for after it admitted to cheating exhaust tests for its diesel cars.

The German car marque’s chief executive Martin Winterkorn has resigned after he apologised for the deception under his leadership. He has asked customers to believe in the company amid the biggest scandal in its 78-year history as it draws up a plan to repair the shattered trust in its “Made in Germany” image.

Volkswagen estimates that as many as 11 million of its vehicles worldwide have been affected after admitting it used software to deceive US regulators measuring toxic emissions in some of its diesel cars. It has put some €6.5bn aside to cover “the necessary service measures and other efforts” though it is looking at $18bn of fines and has been ordered to recall half a million cars.

It’s an ethical and marketing nightmare for a brand built on reliability. The knock to Volkswagen’s reputation was reflected in the market’s response, with its shares plummeting 20 per cent on Tuesday to close at €111.20 – a 32 per cent drop since the crisis started. This could fall even further over the coming days should the emissions scandal spread globally after both Germany and South Korea revealed plans to conduct their own investigation into the company’s emissions tests.

According to Amobee Brand Intelligence, which measures digital consumption and conducts granular analysis of online behaviour and consumer views across 600,000 websites, negative sentiment around the brand increased by 1,998 per cent between 14 September (before the scandal broke) and 18 September, after the findings of the The Environmental Protection Agency (EPA) emerged.

As much as 24 per cent of mentions across digital media about Volkswagen included the word ’emission’, while 12 per cent of content used the word ‘recall’, six per cent used ‘Defeat Device’ and three per cent brought up ‘smog’.

The negativity around the brand was also encapsulated by a separate study of over 8,000 tweets by analytics provider AdmantX. Among the more prominent reactions to the scandal from people were disappointment – VW was a brand we all trusted. Plus, VW owners know their car has lost a lot of value should they want to resell it – and also fear – about Germany’s reputation, environment and pollution, but also people in Wolfsburg worrying about losing their jobs and VW’s investment in the city.

Given the severity of the issue, it’s not surprising then that Volkswagen has been quietly recalibrating its marketing.

The Drum contacted Volkswagen to comment on how it plans to combat the spiralling perception, but a spokesperson declined to share any detail beyond a statement already in circulation. However, actions speak louder than words, and a number of videos that promoted the car maker’s diesel tech have reportedly been removed from its official USA YouTube account. As originally reported by jalopnik.com, a search of the account reveals that ads for campaigns such as the ‘Diesel Old Wives Tales’ and ‘Like Really Clean Diesel’ have been deleted.

The videos were reportedly removed at the request of Volkswagen, according to jalopnik.com.

“Blindly continuing a campaign which is fundamentally undermined by the businesses actions will hinder trust for the future as well as today,” said Jo Arden, head of strategy at 23red.

It’s likely advertising for Volkswagen’s diesel cars, particularly in the US, will be pulled or at least suspended. Owners of the recalled cars can file deceptive marketing complaints with the Federal Trade Commission because the affected vehicles were promoted as “clean diesel”.

“Consumers have bought into the brand because they have genuine concerns in this area and want to make a positive choice,” said Arden. “Volkswagen have undermined that choice and with it will have made loyalists feel cheated. They need to totally rethink what they stand for, how they can be what they stand for and then how they can ask consumers to believe that.”

Volkswagen is such an iconic brand that damage of the scandal to Germany and the wider automotive industry might be greater than the damage to Volkswagen itself. The share prices for Fiat Chrysler Automobiles and Tata Motors slumped 5.7 per cent and 6.7 per cent, while Daimler (7.1 per cent) and BMW (5.5 per cent) also suffered drops. While none of the companies have been accused of cheating the test like Volkswagen, the scandal has sparked calls from some quarters of the industry for a broader probe into the industry.

“The VW emissions situation poses a raft of challenges to VW, and indeed the entire automotive industry,” predicted Felicia Rosenzweig, partner at Prophet. “In general, it’s likely that automotive manufacturers will reassess their marketing campaigns to reassure the public and stake their own claims.”

At least for the time being, the ‘clean diesel’ landscape has changed and current promotions may seem hollow.

Questions will also likely be asked at Red Bull, where recent reports suggest the sale of its Formula One team to Volkswagen was imminent. Red Bull was rumoured to be looking for a development and sponsorship role as world’s largest automaker takes the reins as supplier.

VW chief executive Martin Winterkorn had apparently already agreed the deal with Red Bull boss Dietrich Mateschitz. However, there have since been calls for Winterkorn’s departure as shares plunged.

This immediate situation may provide an opportunity for electronic vehicle manufacturers to be bolder about their own technologies. The sudden popularity of electric cars, that saw them dominate the Frankfurt Motor Show this year, is in part driven by increasingly tougher emission legislation from European regulators.

“Volkswagen can send a powerful signal by taking a leadership role in the industry, addressing emissions outcomes and automotive testing for the industry, so that statements related to environmental impact and safety can be believed,” said Rosenzweig.

It will be a long and arduous road to recovery for Volkswagen that will need its marketers to mend the discord between brand and product if the company’s diesel cars are to become trusted once again.

From The Drum, http://www.thedrum.com/news/2015/09/23/has-volkswagen-s-emissions-scandal-smashed-brand-beyond-repair