Can Volkswagen rely on the loyalty of its customers?

23rd Sep 2015

Volkswagen have been bearing the brunt of an unheralded level of attention in the last few days, after it was revealed that the global car manufacturer had been using in-car software to fix emissions levels in the US and help pass strict testing regulations for its vehicles.

Billions of pounds have been wiped off the value of Germany’s leading company, and its US chief executive, Michael Horn, started the charm offensive immediately by apologising publically at an event in New York on Monday night, stating that the company had been dishonest with regulators and, crucially, the public.

While the act of emissions-fixing throws into question just how dishonest and unethical Volkswagen has actually been and is likely to lead to heavy fines for the manufacturer, another issue the story raises is how loyal Volkswagen can expect customers to stay in the aftermath, after such a damaging revelation from the brand.   

According to new research from Rocket Fuel, Volkswagen has established some of the strongest brand loyalty among global car manufacturers, placed behind only Audi, also owned by the Volkswagen group, Mercedes Benz and Alfa Romeo.

Rocket Fuel’s research shows that 41% percent of Volkswagen drivers have owned a car of the same brand in the past 5 years, compared with 61% of Audi customers, 56% of Mercedes Benz customers and 51% of Alfa Romeo customers.

But perhaps more significantly, VW owners are also some of the most brand conscious drivers going, with 28% citing brand as the most important factor in their decision to buy their VW in the first place. Only drivers of Alfra Romeos (36%), Audi (35%), Mazda (33%), and Honda (31%) are more brand conscious.

Yet, does this scandal subsume brand advocacy? Anne Perkins, a lead correspondent for the Guardian, thinks customers are unlikely to maintain loyalty, and the company will need to take to extreme measures in order to regain an impending breakdown in trust:

“The reputational damage to Volkswagen will do more harm to the company’s long-term prospects than losing billions of dollars in fines and legal challenges.

“Senior executives at VW, not to mention the people of Lower Saxony, which owns 12.5% of the company and 20% of the voting rights, will not be so cosy at night. They may hope that the full and immediate confession that they have made will stop the rot, but they know that there is a ritual to be observed once the fiction can no longer be sustained.”

Indeed, the company is all too aware of this point, and the extreme measures have already begun, with Volkswagen Group CEO Martin Winterkorn resigning in a bid to put things right.

His official statement said: "As CEO I accept responsibility for the irregularities that have been found in diesel engines and have therefore requested the Supervisory Board to agree on terminating my function as CEO of the Volkswagen Group. I am doing this in the interests of the company even though I am not aware of any wrong doing on my part.”

However, crucially, he added:

"This is the only way to win back trust. I am convinced that the Volkswagen Group and its team will overcome this grave crisis.”


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