Volkswagen: the most popular car brand in Germany
Volkswagen: the most popular car brand in Germany
A view from Professor Dr Sven Reinecke

Will the VW scandal harm the 'Made in Germany' label?

Might the fallout from the furore over Volkswagen's rigged emissions tests cause wider damage to German brands' reputations as a whole and can VW itself recover, asks Professor Dr Sven Reinecke, executive director of the Institute of Marketing at the University of St Gallen (HSG) in Switzerland.

Volkswagen’s emission manipulation scandal raises the question as to how badly a brand suffers from such a shocking incident. From a marketing point of view, the following statements can be made:

1. It takes a great deal longer to establish trust in a brand than to destroy it. Nonetheless, a strong brand enjoys such a degree of brand goodwill that this will be perfectly able to cushion dents and 'reputation shocks'. Most scandals are forgotten after a short time. The fact that Mercedes-Benz’s A-Class failed the (evasive manoeuvre) elk test, and fell over when it was introduced to the market at the time, rather amused customers and competitors alike – but everyone knew that such a strong brand as Mercedes, which is positioned on safety, would be able to get to grips with this problem. By now, the story has been forgotten, the A-Class is a commercially successful car, and Mercedes-Benz still stands for 'safe cars'.

2. However, if a brand’s strength is inadequate at the time of a scandal, matters become critical. If the Smart car had fallen over when first on the market in the same way as the A-Class, the Smart brand would certainly no longer exist, because it did not have any strength at the time. In the 1980s, the Audi brand, which was then weak in the US, was almost destroyed by the "unintended acceleration" reproaches, which caught the attention of the media; it has taken decades to recover.

Volkswagen is the most popular car brand in Germany – numerous customers will perceive an attack on this brand as an attack on their own identity.

3. The more strongly a scandal affects criteria that are crucial to purchasing decisions, the more critical the situation is for the brand. Compliance scandals such as those of Siemens and UBS may (almost) drive a company into financial ruin, but from a marketing perspective, they are less critical than scandals that have a direct impact on customers. Volkswagen has been positioned on the value of 'purchase security', as slogans from "Da weiss man, was man hat" ("Then you know what you’ve got") to "Das Auto" ("The Car") testify. This reliability of the value of a Volkswagen car has now been dented, however – at least with regard to diesel engines. It is of very little comfort, then, that it would certainly have been worse if safety-relevant driving functions had been affected.

4. Customers’ identification with a brand makes the latter more resistant. Volkswagen is the most popular car brand in Germany – numerous customers will perceive an attack on this brand as an attack on their own identity. Some Greenpeace PR campaigns against Volkswagen have therefore blown over with relatively little effect in the last few years. 'Green' is not the main reason people drive Volkswagens, and thus they don’t take kindly to being lectured by Greenpeace.

5. Customers hate to be hoodwinked. No one likes to be manipulated, in other words to be prompted to act against their own will. In contrast to many other recall campaigns, the present case appears to constitute malicious and deliberate deception of consumers and authorities. This not only multiplies the financial loss caused by fines and damages, but also severely harms the brand strength.

6. The longer and more frequently a brand hits negative headlines, the deeper the scratches and dents the brand will suffer. In situations of crisis, the classic PR rules apply: a company has to communicate openly, comprehensively and honestly. In a scandal of this scope, the high degree of involvement of the press and politics combined with rivalries within the company will ensure that everything will come to light anyway. The apology and resignation of VW CEO Martin Winterkorn were therefore the first necessary steps toward comprehensive information. If Volkswagen acts and communicates well in the crisis, then it could prove that – apart from legal reporting – the case will be forgotten within a few months.

7. Repetitive scandals are the coup de grâce for a brand. If Volkswagen is lucky, then the brand will get away with a 'suspended sentence' for the time being. If, however, another Volkswagen scandal should occur within a short period of time, then the days in which the company has been among the strongest German brands will be numbered.

Will the damage caused by VW’s current emission manipulation scandal go even further by chipping away at the international quality label, "Made in Germany"? Isn’t Volkswagen a synonym for "Made in Germany" – solid German quality, engineering and reliability?

Internationally, Germany is associated with quality, beer, cars, cleanliness, punctuality and Merkel.

The answer is unequivocal. International country-of-origin brand studies, conducted by the University of St Gallen, provide clear evidence that national images are long-term and inert – they hardly change, even in situations of crisis. Thus the latest financial and banking crisis has not had an adverse effect on Switzerland as a financial centre, even though everyone had assumed the opposite. "Made in Germany" is not merely Volkswagen, but also BMW, Mercedes, Miele, Continental, Bosch, Vorwerk, Bayer, Hansgrohe, Fielmann, Trigema, BASF and so on. It stands for the high performance of hundreds of medium-sized companies – the German 'Mittelstand', in particular.

Internationally, Germany is associated with quality, beer, cars, cleanliness, punctuality and Merkel, but also still with Hitler and the Second World War. In past years, this country’s image attributions have undergone hardly any change. This is why the impact of individual scandals – bad as they may be when viewed on their own – must not be overestimated. It would require several scandals of exclusively German companies to be communicated throughout the media worldwide, for weeks, for the robust "Made in Germany" quality label to be permanently destroyed.

Not that this is an excuse for Volkswagen’s objectionable, unethical behaviour in any way, but professional, honest and sustainable management can help the company overcome the scandal. Didn’t Siemens, Toyota and Mercedes-Benz have scandals not very long ago? Scandals are apt to destroy trust in one fell swoop, but a high degree of brand strength can mitigate all this. Brands take time to build, but, in a crisis, grant the company valuable time, too.