Safety-minded Volvo takes some chances
Can a brand renowned for playing it safe appeal to the young and adventurous?
Volvo hopes so as it takes bold steps to re-establish itself as more than a niche brand for staid college professors and safety-obsessed parents. Along with a revamped product line, Volvo is using digital services, flexible ownership models and unconventional advertising to attract younger buyers, while also expressing its luxury credentials more clearly to compete with other European brands.
"Normally, Volvo customers are a little bit older," said Anders Gustafsson, CEO of Volvo Car USA, in a March interview. "We're starting to see we have customers below 40 years old."
Judging by its growing crossover sales, Volvo doesn't seem to be in dire need of a makeover. But its Chinese owner, Zhejiang Geely Holding Group, is looking to Volvo to be a more robust volume generator and a laboratory for innovation alongside Geely's new brand, Lynk & CO, which it envisions as a global test bed for new ownership models and connectivity technology targeting millennials.
In July, Volvo said it would take a "significant" minority stake in Lynk & CO. The tie-up would let the companies share and license technology.
The moves and well-received new products have helped stir buzz about the rebirth of the Swedish luxury brand, which was sold by Ford to Geely in 2010. But experts say the real test will be whether it can maintain the momentum over the long term, once the novelty of its comeback story wears off.
"We're in an evolution, and that evolution is complicated and messy but incredibly necessary," said Rebecca Lindland, executive analyst at Kelley Blue Book. "And it's the companies that are aware and participatory and flexible and bold that will be successful."
The backing of its well-financed Chinese parent company has allowed Volvo to be bolder and more flexible, Lindland said, something that may not have been possible under Ford.
In September, Volvo introduced a subscription service, Care by Volvo, alongside the XC40 compact crossover. Customers on a two-year plan pay a monthly fee that includes insurance, maintenance and concierge services, and can upgrade to a new vehicle after 12 months.
"New services are a way to entice younger buyers, and subscription services could be a way there," said Jon Schulz, chief marketing officer at Viant, an advertising technology company. "Retail processes need to innovate in a big way and create something more simple and seamless."
Volvo opened the online service in November and as of early April, the automaker has seen about 1,000 subscribers.
Volvo has also been drawing new customers in with emotional advertising, airing "nonlinear" stories on TV to entice viewers to research more online.
One recent campaign, titled "Embrace the Future," shows short, out-of-order clips of an astronaut traveling into space and her communications with her husband, who is driving an XC60 crossover.
"There are two types of people in the world: Those who fear the future and those who embrace it," the astronaut says in the final installment. "The future is for the unafraid."
Volvo says this and its other two similar campaigns -- "Wedding" and "Song of the Open Road" -- have boosted interactions with the brand online and on social media.
Bill Day, vice president at consultancy Frank N. Magid Associates, said such a strategy is especially appealing to younger consumers and fits well into Volvo's overall image as a Scandinavian brand.
"They're clearly focused on the emotional connection, and they do that very well," Day said. "That's particularly effective for millennial consumers. The authenticity in the ads rings true as well. They feel like Volvo experiences."
The nonlinear strategy is effective in breaking through to new customers, but not as effective in maintaining them in the long term, Day said.
"The next challenge is going head-to-head with other luxury brands," he said.
At the Automotive News World Congress in January, Gustafsson said one of Volvo's primary goals in the near term is to join brands such as Mercedes-Benz, BMW and Audi as a top-of-mind luxury nameplate among consumers.
"We have to invest in our business and our relationships with dealers, or we'll never reach the premium level," he said.
Day said Volvo's closest "emotional" competitor among consumers is Subaru, another niche brand that excels in utility vehicles. But Volvo is beginning to expand its product lineup to vehicles that more closely compete with luxury sedans, such as the midsize S60.
To begin making those connections in consumers' minds, Day said Volvo's advertising must move toward comparisons with the German brands, either overtly or subtly.
He said, "They need to get to a place of 'Why Volvo?' "
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