Brands will survive

Today, 70 years after the first Beetle rolled off the assembly line, the Volkswagen Group is facing its greatest challenge yet: by cheating on emissions tests, the company not only intentionally violated environmental standards, but also deceived their customers.

A Brand Is Based on Accumulated Trust

A loyal customer base is formed over a brand’s entire lifetime – from its creation all the way to yesterday night. The basic prerequisite, however, is that customer expectations are consistently met, which serves to continually uphold confidence in the brand. The longer that this occurs, and the more reliable it is, the more trust customers will inherently place in the brand’s performance. But what happens when a brand – whether intentionally or accidentally – betrays customer trust? What are the possible consequences?

And Germany’s Leading Industry, No Less …

Whereas consumers have more or less “gotten used to” food safety scandals, the Volkswagen scandal cuts deep. The German automotive industry has always enjoyed enormous international prestige. The positive connotation of the phrase “Made in Germany” is largely thanks to the automotive sector’s unique history of continuous success and its innovative and pioneering spirit. When you look at the top automotive brands worldwide, the majority are German companies. With their brand offerings, Mercedes-Benz, BMW, Porsche, Audi and Volkswagen have been able to establish and maintain unique competitive positions on the global market. Will the scandal call everything into question?

The Golden Rule: Everything Comes to Light Eventually

Initially, this situation proves one thing: it is not worth it to circumvent regulations or to compromise on performance in order to achieve short-term results or hit growth targets. And it is never worth it to act in a way that drags down the quality of your product. Brand-name companies have a responsibility to their customers and must therefore consistently focus on the long term. This is particularly true for quality companies. The Volkswagen scandal is therefore a wake-up call for any organization that has compromised or completely abandoned their brand attributes due to intense pressure in terms of competition or pricing.

Strong Brands Can Weather the Storm

More often than not, the damage occurs at the company level, where penalties and financial repercussions impact financial strength and profitability. The Volkswagen Group is a healthy organization; however, they will need to shift their focus toward company development in the future. In terms of customer base, it is worth noting that millions of Volkswagen and Audi customers are completely satisfied. Addressing the problem openly together with the willingness of the Group’s management to quickly correct the problem will allow the consequences of these lapses in judgment to fade into the background over time, even among those who have been directly affected.

Summary

By tampering with the emissions software in their vehicles, the Volkswagen Group has not done the German automotive industry any favors, but it has not brought about its demise. As with the López scandal of the mid-90s, this scandal also opens up an opportunity to return focus to consistent implementation of quality standards. Furthermore, brands need something that sets them apart. This is difficult to achieve using platform strategies. What the emissions scandal highlights is that virtually all of the brands under the umbrella of the Volkswagen Group use the same engines and the same technology, even though they embody completely different value and price positions on the market. This could be another aspect that the brand managers evaluate during this period of reinvention.

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