The Volkswagen Corporate Brand Challenge

Oct 1

posted by Dr. Russell Abratt in Branding | 17 Comments

CNBC reported that Volkswagen stock fell over 20 percent on Monday September 21 2015, after it told U.S. dealers to halt sales of some 2015 diesel cars, following regulators’ discovery that software designed for the vehicles gave false emissions data. The U.S. Environmental Protection Agency (EPA) stated that the software deceived regulators who measured toxic emissions, adding that Volkswagen could face fines of up to $18 billion as a result. Such actions by one of the world’s leading vehicle manufacturers, whether by design or not, can have a negative effect on the VW brand and hurt its reputation, at least in the eyes of some stakeholders.

One of the important strategic differentiators of organizations is their corporate brand. A brand is the promise it makes to stakeholders and reputation is the degree to which a company fulfills that promise. Your reputation is important among stakeholders because you need customers to be loyal to repeat purchase and recommend your brand. Policy makers and regulators should give you the benefit of the doubt, the media should support you, suppliers and other partners should provide you with high quality product, and your employees should be engaged to support you and be brand ambassadors.

Companies like Volkswagen must build their corporate brand by first building their identity. Corporate identity involves answering two questions, who are we and what are we? Corporate identity thus involves strategic choices by the organization’s leaders which include the development of a set of values and a code of ethics. Identity also involves the expression of identity. This involves the development of the brand promise, visual identity elements like the corporate name, slogan, colors and symbols, and other forms of communication. It also involves developing the brand personality.

All of these elements lead stakeholders to form impressions about Volkswagen.

1. Is it a mistake on VW’s part or was it deliberate deception?

2. Will the brand be hurt in the short or long term?

3. Who is responsible for an incident like this?

4. What has VW got to do now to recover its reputation?

Whatever happens, this recall seems to be very serious for VW.

Russell Abratt, Ph.D., is Professor of Marketing in the H. Wayne Huizenga College of Business and Entrepreneurship. He can be reached at abratt@nova.edu

This entry was posted on October 1, 2015 at 9:47 AM and has received 4814 views. There are currently 17 comments. Print this entry. Download attachment.

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• #1 by Marco Dell'Api on 10/1/15 - 2:20 PM

  

  The recent news with VW seems to be one of the major topics happening within the news today within America. After reading more on this VW article I believe that this was not a mistake but rather a deliberate deception and they happen to have gotten caught. According to wired magazine "Volkswagen has admitted to illegally using software to manipulate exhaust emissions during government testing. " (http://www.wired.com/2015/09/volkswagen-can-salvag...) With brand names (like respect) this is something that can take a life time to build for some customers and it can be gone within seconds. I feel that VW did this deliberate because they were able to hide the facts that some of their cars did not meet the EPA's standards within the USA, and perhaps instead of complying with them which may have posed more troubles (cost, time etc) they decided to hide the emissions because it was easier for company. I feel this will hurt the company within the long run because as the book teaches us about brand names and how some brand names act as an "umbrella" that can cover many other products. VW is no exception to this. VW is one of the biggest car manufacturers in the world and owns as well Audi, Lamborghini, Porsche (just to name a few) and perhaps with audi parts within these cars as well the consumer who already has a bad taste in their mouth for VW may have second thoughts about the other brands as well. Volkswagen meaning the peoples car, a car by the people to the people. What does this innocent say to the people that they made this car for? It shows that VW has lied to "the people" and this is what has tarnished the VW name in the eyes of the consumers. It is hard to say if there is one specific person here to blame because VW is a massive corporation. However in a massive corporation all things roll down hill, I believe the CEO Matthias Muller should stand question for this issue to start. However as of today the authorities in Germany have stated that he will not be questioned. What has VW done to regain it's reputation? First and foremost I believe VW will have to show the public drastic changes they have made for the better. We are starting to see that as VW recently said they are looking for a new CEO to replace Mr. Muller. We are seeing that VW is doing some in house cleaning from the top down which can perhaps put some ease in the mind of the consumer knowing that the old CEO weather he knew about this or was asleep at the helm will be removed and hopefully a more ethical and attentive CEO will be put into place.
  
  In conclusion it is hard to say what the fate is for the German car maker but VW PR had this to say "Volkswagen will need to spend years getting back into the public’s good graces. No more mistakes, be contrite.
  
  “It will leave some pain, and it might not be recoverable for VW,” Shankman says. “If I were their engineers, I’d be buffing up my resume. This is five years of bad PR, at least.(http://www.wired.com/2015/09/volkswagen-can-salvag...)
  
  Weather this takes years or more there is no doubt that VW has tarnished there name in the public eye and all those years to prove they were "the peoples car" has been taken away that quickly.

• #2 by Craig Cassagnol on 10/8/15 - 10:09 PM

  

  I think VW CEO Matthias Muller should publicly address the issue at hand. The truth is, VW had done some things is the past that they are not to proud of. They should publicly apologize and it should be televised. Now VW needs to find the best scientist to create an even "greener" automobile. This will help open the eyes of people who will in the future purchase cars.

• #3 by Nilda Romero on 10/9/15 - 8:48 AM

  

  Volkswagen is a huge brand and a corporation that owns other big names as well. As mentioned above by Marco Dell'Api's comment how can the people expect to trust the brand in the future of any of its other companies. It seems Volkswagen may have done this deliberately. The car making process is one that takes time to develop and somewhere along the way with all the tests someone must have known that the software was giving false data. The only thing left for them to do now is hope that by mending their mistake and developing a car with truely low emissions that their loyal consumers continue to stand by them. Even after trying to make ammends I believe that this will hurt Volkswagen in the long run.

• #4 by William Hollis on 10/9/15 - 12:51 PM

  

  The question of whether or not VW made an honest mistake or engaged in deliberate deception is irrelevant because the public already views corporations in a negative light and will therefore look at VW as another corrupt business. The brand will be hurt in the short term however people have short memories due to the information age that we live in. The public may be upset initially but they will quickly forget about this incident and move on to the next scandal that comes up. I believe that the CEO is ultimately responsible for an incident like this because he/she is tasked with the oversight of operations within a company. I think that VW needs to engage in an aggressive PR campaign to convince the public that they are committed to maintaining the highest level of ethics going forward.

• #5 by Juan Mantilla on 10/12/15 - 2:53 PM

  

  I consider this was no unintentional mistake, the CEO, who was in charge of the decision concerning the emission issue, made a choice and took the risk it involved. He got caught and now has to face the consequences. I agree in what Mr. Cassagnol said above, VW should publicly apologize on the first place, then develop a greener model and finally create an aggressive and intense marketing plan including mass media worldwide in order for the brand's reputation to get reinstated as soon as possible. Their efforts should move towards this and their budget should allow more money into the marketing team for their brand to recover what they lost these couple past weeks.

• #6 by Chayne Christian on 10/15/15 - 7:22 AM

  

  My thoughts on this incident with VW is that it was a deliberate act of deception. Manufacturing a diesel vehicle represents a cleaner, greener, model. VW knew that wasn't what they were manufacturing. Before regulators discovered the false readings VW was well aware that the vehicles were below EPA standards and their brand will suffer from their deceitful ways. Consumers trust company's products when they make choices on eco-friendly products and to find out as a consumer that what the company knowing sold you isn't what was marketed. That causes a major distrust in a brand and the company. I agreed that they should be fined, and have to find a way to correct the wrong in the vehicles that have been sold by bringing them up to EPA standards, since the products were knowing sold( I feel) under those faulty marketing tactics. It should be an option giving to the consumers of VW, and a public apology as well.

• #7 by Toosdai on 11/6/15 - 6:57 PM

  

  If you were a Volkswagen shareholder it should make you disappointed to know that firstly Volkswagen made an announcement of cheating on the clean air rules of the United States secondly, the consumers negative perception of the brand and thirdly the fall in significant fall in stocks after the announcement and thereafter. A brand should enlighten customers of a company’s character and quality of product. For a consumer to mention a brand it should result in good or bad experiences of the company. I think that Volkswagen has damaged their brand and will have a challenge in restoring it because they were deceitful and falsified their advertisement. Maybe Volkwagen need to replace the recalled vehicles to gain their reputation back.

• #8 by Sedika Elliott on 11/6/15 - 9:41 PM

  

  Its very unfortunate that the Volkswagen brand took a hit such as this, however they were dishonest and they tried to deceive the consumers. This puts a major negative label to there brand. Branding is very important, when the name Volkswagen comes to mind, we think of one word "quality". We think of the best interior, engine, tires etc., this incident definitely will tarnish the branding of the VW brand and turn away a lot of consumer from buying. I agree with the EPA's method of fining the company, they need to be held responsible for there actions. Hopefully this will hinder them from pulling any other tricks in the future.

• #9 by Luis Martino on 11/8/15 - 10:05 AM

  

  It was very shocking when I first read the news that VW had deliberately manipulated the software that gave false emissions data. As the CEO of the time stepped down, I realized that VW will have an uphill battle of regaining lost trust from both stakeholders and current customers. Even though the brand will be hurt in the short term, I do believe that with a new, trusting CEO, the company will be back on track in the long run. VW to recover its reputation has now to pay its fines, find ways to truly apologize to those who have been negatively affected by this event, and most importantly, create an incentive program specifically tailored as to answer the question: Why should I as a customer continue to drive/buy a VW vehicle?

• #10 by Omar Ortega on 1/14/16 - 4:50 PM

  

  Since the news broke, Volkswagen shares have lost close to a quarter of their value. This was a company that had been created based on integrity. Rebuilding their credibility will be difficult and will need to be the focus for this company to regain trust from its customers. One of the biggest issues with credibility today is failure to deliver on commitments or promises. Leaders are susceptible to making mistakes, for example, violating the law or placing their organization in jeopardy. Because of their self-interest, they may be unable to identify their errors. Their decisions or lack of moral values could cost them their credibility in the public’s eye. It is vital for leaders to do the right thing and act as accordingly. Leaders need to make ethical decisions that assist their people in also making the right choices.

• #11 by Andrew Liberty on 1/14/16 - 7:15 PM

  

  Volkswagen means the "peoples car". As a car of the people they are going to have to rebrand their product in order to regain the peoples trust to drive their car. A car is an investment that people have to feel safe in. They have lost a lot of trust in their product it is going to be important to change their brand and show they are truly the peoples car.

• #12 by Lior on 1/15/16 - 6:44 PM

  

  Volkswagen (VW) is a very good automobile brand that has manufactured fine cars since World Word II. So the question concerning whether the specific model emission data software is a defect or not, is very important for the sake of this situation. VW has also defined itself for decades as a carmaker that creates fun cars, and is known around the world for this. I do not think that the results of this specific software, we as a consumer of this brand for generations, should degrade the company and cause damage to the brand. In addition, I also disagree with the fact that the company therefore should then have to reestablish their identity or brand. VW will continue to be well identified in the automobile industry as great company that produces a great product.

• #13 by Kristoffer on 5/17/16 - 7:53 AM

  

  Hi!
  
  We are an event agency in Denmark working with VW. The danes doesn't care about this case, and the sales has actually gone up ever since! I'ts quite fantastic.
  
  Thanks for the reading!
  
  Kristoffer

• #14 by Jnui on 11/10/16 - 9:25 AM

  

  VW CEO Matthias Muller should publicly address the issue at hand, as well as apologize and resign. The barrier for diesel cars in the USA is much higher than other countries, even though this may have been artificially increased by big business interests in this country, it does not excuse the underhand tactics.

• #15 by Nick on 3/4/17 - 8:02 AM

  

  good or bad experiences of the company. I think that Volkswagen has damaged their brand and will have a challenge in restoring it because they were deceitful and falsified their advertisement. Maybe Volkwagen need to replace the recalled vehicles to gain their reputation back.

• #16 by Martin on 3/21/17 - 4:34 AM

  

  The brand has been damaged, but the sales hasn't fallen to record low records. People are still buying and will buy VW cars. We just have to wait for another manufacture being caugh cheating with emissions and the VW one will be forgotten.

• #17 by T M on 4/19/17 - 4:00 PM

  

  VW will likely recover