Full throttle Featured

7:00pm EDT December 31, 2006

Cup holders.

It was so basic, yet such an important selling point for Volkswagen in North America, says Frank Witter, CEO of Auburn Hills-based Volkswagen of America Inc.

Americans and Canadians like to have their coffee and soft drinks with them as they drive, something that might never cross the mind of European auto designers if they weren’t exposed to American lifestyles.

“Americans have a very specific requirement for a lot of storage opportunities for fluids,” says Witter, a native of Hanover, Germany. “That is of less or no importance to Europeans.”

Because of the cultural similarities, it would have been easy for Volkswagen’s Germany-based designers and engineers to fall into the trap of thinking that the wants and needs of North American customers are the same as those of European customers. But something as simple as a lack of cup holders could have cost Volkswagen customers on this side of the Atlantic and cut into its estimated $18.23 billion in revenue from the United States and Canada for fiscal year 2006.

“The problem with Americans is they look like Germans,” Witter says with a laugh. “If you talk about the Chinese market, everybody recognizes it is different immediately, in language, culture and everything. But that’s not the case in North America.”

Because of the less-obvious differences between the North American and European markets, Witter helps coordinate periodic workshops that bring a number of Volkswagen’s German engineers and designers to the United States to absorb the lifestyle and form a detailed view of how Americans use their cars.

The engineers and designers then head back to Germany to act as Volkswagen’s reference for American culture as new vehicles are created.

To Witter, there is only one way to bridge the international gaps of business: Listen, and form a company culture that values listening. Listen to those who buy your product, listen to those who make your product and listen to those who are in the field trying to sell your product.

Witter says it’s the only way you’ll truly understand your market.

“We all know here that the American customer has very different expectations and a very different lifestyle,” he says. “That’s what a product like a car needs to accommodate.”

What customers want
Witter calls it the “sweet spot”: Understanding your customers’ wants and needs, and then providing them with a product that matches those needs.

“I love to remember 1998 when we introduced the new Beetle; that was a sweet spot,” he says. “We couldn’t build them fast enough because it was exactly what people wanted. That’s what understanding a market and understanding your opportunity is all about.”

Creating that connection is a three-step process. You must find out what your customers want, provide them with what they want, and then advertise the fact that you have what they want.

Finding out what customers want is where the skill of listening is most important. In addition to having Volkswagen’s German design staff come to America to experience the cultural landscape, Volkswagen’s leaders also seek information from the dealers and the customers themselves.

The customer and the customer interface are valuable places to pick up information on the market and what sets your product apart in the eyes of customers.

Volkswagen’s corporate office receives constant feedback from dealer owners on customer demographics and what marketing campaigns are working and not working.

“The dealer input is extremely important in terms of the feedback we get and the types of customers coming in to the showroom,” Witter says.

The Internet has also become an effective method to seek customer information.

“We know from research that almost 80 percent of our customers visit our Web sites before going on to the final purchase process,” he says. “Audi and Volkswagen are probably the top two in terms of utilizing the Web for information. And because there is an emotional attachment to the brand, people are more likely to provide us with some personal information about themselves.”

Volkswagen performs frequent research on what customers view as the main points of attraction to the company’s vehicles. It goes beyond vehicle features and value propositions to defining the emotional attachment between Volkswagen and the American public. “We did quite a bit of research to really embrace what the brand of Volkswagen stands for in the United States,” Witter says. “Then we matched up our current product offering with the public perception.”

Volkswagen’s leaders found that, while the company has a degree of mass appeal, particularly with vehicles such as the Beetle, its appeal on the whole is far more niche-specific. Volkswagen’s ads attempt to reflect that.

“Look at our advertisements,” Witter says. “They clearly speak about the brand and its products. It’s about the emotional connection, which is not necessarily appealing to everybody, but we are also not out there to be everybody’s darling. If you look at the latest marketing efforts, you will see that they are clearly sending a message which is very different than what others are doing.”

If you do not create an emotional selling point, or some other means of differentiating your product from that of your competition, it becomes just another commodity in a crowded marketplace, and the only means of separating it from the pack is monetary incentives. “If you are selling them something they really do not need or want, you need to incentivize them to buy it,” he says. “But if you incentivize, you compromise your profitability. That’s why to understand what customers are and to serve them with an offer that suits their needs is the key objective.”

Engaging employees
Making yourself visible and accessible to customers is only part of the battle when creating your brand. Employees should also have a strong voice in the direction of the company.

As with customers, it’s all about engagement and finding out what they value. But unlike customers, you’re concerned about something far more encompassing than how they view your product. You’re asking them how they view your company as a place to work.

Witter says the employee experience is every bit as important as the customer experience. And the employee experience starts in the CEO’s office, where the philosophy of listening to employee ideas is born. “First and most importantly of all is fostering that type of environment where employees are actually encouraged and incentivized to bring up ideas,” Witter says. “We train our management that they should take this seriously and foster that type of spirit.”

Volkswagen relies on group and departmental leaders — the people on the corporate and dealership levels who interact the most with employees — to drive home that message in meetings and throughout their day-to-day work.

Keeping the door propped open might encourage some employees to bring their ideas to the table, but many others need to be regularly encouraged to step up and share what’s on their minds. In the works at Volkswagen of America is an employee idea-management process. The process is still being hammered out and might not be functional until later this year, but when the process is finalized, Witter hopes to have a formal way for employees to submit ideas to upper management and have them considered.

“We want to make sure that employees do understand and get the confidence that the system works, that ideas are being followed up with and that the initiative is really being taken seriously,” he says.

Right now, Witter has many less-structured routes for engaging employees. For those at Volkswagen of America’s corporate headquarters, he conducts luncheons once or twice a month with 15 to 20 employees from all levels of the company, taking questions on a wide spectrum of company matters.

For those who don’t work at the company headquarters, communication becomes more difficult. Witter says he sends out a monthly newsletter to all locations to brief them on what’s happening with upper management and encourages all employees to contact him with questions.

Written and verbal interaction is a big part of engaging employees, but it doesn’t start or end there. Providing employees with adequate training and retraining is also essential.

To some, training might seem like a necessary hoop to jump through, the business equivalent of a dental checkup. But Witter says it is all part of employee engagement and giving employees a sense that they really can affect the company for the better.

Volkswagen holds periodic training sessions at locations throughout the United States. The company tries to quickly familiarize its employees with new car models and new features on existing models. But Volkswagen has also taken it a step further.

As with customer interaction, it has made the Internet a key component of employee training.

From year to year, there are usually minor changes made to the features on existing vehicle models. On the dealership level, salespeople and service technicians are required to learn the new features and then pass a test. To reduce the inconvenience to employees, Volkswagen has set up an Internet classroom where they can take a test and receive immediate feedback on their score. “We use the Internet to optimize the result with the least effort,” Witter says. “It becomes very effective sales-side in a new model year.”

When an employee consistently does good work or shares ideas that help improve the company, you should never fail to reward that person. Rewarding employees for good work is every bit as critical as allowing them to share their ideas in the first place.

To reward employees, you have to have clearly defined goals in place that set the bar for good work performance. That means everyone in upper management has to be on the same page with regard to organizational goals.

“It’s setting measurable objectives and holding everyone accountable for their accomplishments,” Witter says. “We derive those objectives from the objectives we set for the brand. We grow that into leadership objectives and then roll them into employee objectives. So it’s basically a cascading process.”

Volkswagen’s goals are set with seven items in mind: New car sales, cost, dealer profits, dealer satisfaction, customer satisfaction, employee engagement and residual value performance of leased cars. Every goal has to lead to one or more of the objectives.

Once employees have met their goals, there are many ways to reward them. Witter says monetary compensation is the most obvious, but you shouldn’t stop there.

“Monetary compensation normally has short-term implications,” he says. “But recognition needs to be in much more than just monetary forms. We give leaders a small budget which can be used for putting on events, celebrations of successes. We recognize people in my monthly employee newsletter.”

The gestures of gratitude don’t have to be extravagant. The proverbial pat on the back can go miles toward engaging an employee and giving that person confidence in the organization and their place within it.

“It should be happening as we speak, numerous times throughout the day,” Witter says. “It doesn’t need to be in the lobby with every employee. It could be in a group staff meeting. It could be spontaneously walking to somebody’s cubicle. It could be a balloon for the best-performing employee in the call center in a given week. “It’s about the sum of the small things, the little thank-yous. Recognition will do wonders for you. It’s not only about the big bonus once a year, it’s the continuous awareness that this is important for all of us.”

HOW TO REACH: Volkswagen of America Inc., www.vw.com