VW's cheating scandal has had greater impact than GM ignition switch recall

(January 26, 2016) RHINEBECK, N.Y.  — Phoenix Marketing International, a global marketing services firm, has released new findings regarding the severity of the recall related to the Volkswagen diesel software cheating scandal which emerged in late 2015.

Phoenix has been closely monitoring key brand metrics and consumer sentiment beginning in early 2014 as the GM ignition switch saga unfolded. In light of the VW scandal, Phoenix reached out to consumers yet again to evaluate how this scandal differed from other previous recalls, and to also determine the impact on VW’s key brand metrics compared to GM’s key brand metrics at the peak of their scandal.

The research findings were quite interesting. Perhaps most interesting (and most concerning for VW) is the fact that consumer recall awareness has reached over 60%, which was higher than at any point during GM’s recall situation.

“Recalls certainly have been a part of the industry landscape for many years, but over the last few years they have really become more common and more buzzworthy,” said Brian Maraone, president, Automotive for Phoenix Marketing International.

“However, VW’s most recent recall scandal seems to be doing quite a bit more damage because of the premeditated nature of the scandal. †It’s very obvious to consumers that VW chose to cheat on the emissions standards. This is different than other recalls we’ve researched in that those scandals generally involved a cover-up of a safety issue. All recalls are bad, but the evidence of premeditation is what makes VW’s situation somewhat different and worse in the minds of automotive consumers. If manufacturers are knowingly trying to cheat emissions tests, what else are they knowingly trying to cheat?”

When asked to what extent the VW scandal would affect consumer’s brand impression of VW, over 50% of respondents indicated that their impression of the VW brand was “worse” or “much worse." This is a somewhat alarming percentage when put into context with the GM percentages in 2014. The VW brand had a very strong brand impression rating prior to the recall scandal. Further amplifying the matter is that it’s well known that this was done on purpose in order to skirt the regulatory authorities within the United States.

Maraone continues, “Consumers generally don’t have a very good impression of brands that knowingly lie. While other manufacturers may do the similar types of things, VW got caught and must pay the price. The costs associated with rebuilding the brand are certainly going to be high.”

Phoenix also set out to measure the impact on VW consideration. The percentage of consumers who are “less likely” or “much less likely” (7-point scale) to purchase a VW vehicle is over 50%. Again we see that this percentage is higher than the percentage observed during GM’s recall situation. At the heart of the VW scandal is trust. Consumers don’t trust the VW brand currently and that’s likely to show up in the 2016 sales figures.

Finally, many auto manufacturers have made serious mistakes throughout the years, and over time, consumers have forgiven them and continue to purchase automobiles. We suspect that will be the case here too. While these numbers appear to be all doom-and-gloom for the VW brand, auto consumers will eventually forgive and forget. However, it will take time.

“It will be telling to see how VW handles this recall throughout the coming year because previous research has shown that the way in which an auto manufacturer conducts a recall can have a major impact on consumers’ perceptions, either positive or negative,” said Maraone. In the end, it’s important to realize that honesty, integrity, and strong core values must be more than just lip service; they must be ingrained throughout all levels of an organization.