CANNES/BEIJING: Volkswagen relied too much on short-term spending and awareness when marketing its vehicles in China before being shocked into remedial action, a leading company executive has said.
Chief marketing officer Alexei Orlov told an audience at the Cannes Lions festival that the automaker "had a terrible wake-up call in 2010 when we discovered much to our surprise and horror that we were only the 126th best ranked in China as best-loved brands".
He referred to the focus on awareness "but it was not awareness we should have been worried about but effectiveness".
Having identified the importance of referrals in Chinese culture – Orlov said 73% of car sales in China come from referral, compared to 24% in the US – VW created a campaign that had consumers sharing ideas about creating cars and which pushed the marque up to 75 in the brand rankings.
But Volkswagen's Chinese operations are likely to face a new challenge, linked to the government's anti-corruption crusade.
President Xi Jinping has said that government officials should not be seen driving foreign luxury cars, which has encouraged VW's Chinese partner, FAW Group, to resurrect its Hongqi brand, used by previous leaders such as Mao Zedong and Deng Xiaoping.
And while the relatively highly priced model is not expected to be a serious competitor in the general market, it is likely to become a player in the government car market where VW's Audi brand has found a niche.
Foreign Minister Wang Yi has already chosen a Hongqi H7 sedan as his official car, which experts said is a sign Chinese officials are setting their sights on national brands.
China Economic Review cited a leaked document indicating the government had spent $39bn on autos in one year and suggested that "for automakers such as Audi, being cut out of that market would be an exclusion of epic proportion".
Data sourced from The Guardian, China Daily, China Economic Review; additional content by Warc staff