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Tuesday, June 14, 2005

GM's Desperation Move

General Motors is in a tough spot, to be sure. The US automaker's sales are suffering. GM's stock price hit a five-year low this spring. Plus, the company announced that it will cut up to 250,000 jobs.

In response, GM is playing the price card. In a huge advertising campaign, GM is announcing that anyone can walk in and receive the abosolute best, rock-bottom price: the employee-discount price.

This will result in a sales spike. GM will move some vehicles. And I'm not sure what other option the company has at this point, given the need for a rapid improvement. Yet here is what I struggle with: where does GM go from here? What do they do next?

What does a company do, once it has played the price card? Customers might now expect a low, low price from GM all the time. Once the current sales campaign ends on July 5, customers might be inclined to wait on the sidelines, anticipating the next super-duper sale. What happens to all of the customers who paid a higher price for their GM vehicle, prior to this historic price cut ... how do they feel now?

Let's hear from the readers of the Marketing Genius blog ... what do you think GM should do once its "employee discount price" promotion ends? And do you agree with its price-slashing move?

8 Comments:

Anonymous inkling said...

Upon hearing GM’s ubiquitous radio ads, my first thought was, “How do the GM employees feel?” They have already suffered massive layoffs for the past few decades, are looking at the probable reduction of the product line in the near future, and are being asked to tighten their belts yet again. Now, one of the few benefits that has helped maintain their loyalty to their foundering employer is being given away for free.

GM execs may have thought this was a way to stop the bleeding in their balance sheets, but I fear it has reopened deep wounds in their workforce. Just another in a long line of terrible business decisions by the suits.

12:27 PM

 
Anonymous John Q. Public said...

With their huge pensions, free healthcare, and overpaid hourly rates, these lazy union workers are about to see what its like to work for a living like the rest of the US.

They certainly have some huge job cuts coming, they may actually have to pay a monthly premium for health care (but I guarantee its still less than any of us), and they will be lucky if GM doesn't go bankrupt just to dissolve their pensions.

12:41 PM

 
Anonymous inkling said...

My first post was not intended to take a side in the labor vs. management war at GM (both the labor leaders and management have caused more damage to GM than any marketing campaign could fix, IMHO). My point was mostly about the purpose of employee discounts. Their only reason for being is to instill loyalty in their workforce and convert employees into brand evangelists. You don’t want your Chevy brand manager showing up at a family get-together driving a Toyota, nor your Gap employee wearing Eddie Bauer. Giving non-employees an employee discount is just odd, not to mention counter-productive. Why not give customers a dental plan while you’re at it?
I think GM would be better off giving the same percentage discount, just under a different name. Call it a customer appreciation discount (alright, that’s too dull). Leverage that GM’s an American company by doing a Flag Day to Independence Day discount to honor our nation’s hard workers, etc. But by just changing the name it would drastically reduce a potential employee backlash -- the last thing the auto giant needs.

1:59 PM

 
Anonymous Anonymous said...

In all the press I've seen, there are long lists of reasons that detail why GM is strapped for dollars. To my surprise, they all fall into the same catagory: costs. Yes GM has a massive problem with so much money going to employee benefits and a labor force that can shut down Production if not satisfied, by I can't believe I haven't heard more suggestions of fixing things above the cost line. Sales is how you increase the bottom line. The only situation where increases in net income must come from decreasing costs is when sales are static. Which brings me to the question at hand-

How can GM increase long-term sales? How about by producing vehicles that people want to buy more than other vehicles from other car makers? It has to start with the products! $2000 cash back, dealer financing, rock-bottom prices and all the other typical noise are just gimmicks to move something that otherwise wouldn't move on its own. The products GM produces have to meet the market demand. Marketing activities can take it from there, but Marketing by itself cannot create long-term demand for products that people make decisions against wanting or needing.

5:45 PM

 
Blogger Jen said...

I agree with Inkling. I feel that it will cause (and probably has already caused) a decrease in employee morale at GM because of this promotion. That is the first thing that I thought when I saw the ad. Well, that and "Is this really true? Are they really giving the same discount as what the employees receive? That's not possible!" (I am very skeptical about car advertising.) But, after hearing various reports, I guess it is true!

My husband and I are in the market for a new vehicle. He and I were considering taking advantage of this discount. The more I think about it, the more I get a bad feeling about it. I just think that there is something wrong with a company that will sell the loyalty of their employees to make a buck...especially when they have laid so many employees off. (I am sure many other companies do it, they just don't make it obvious.)

So, when I purchase the new vehicle, I may be buying Hyundai again (this will be my third Hyundai purchase and I am very satisfied with them). However, if they do come out with the "super-duper sale" after the initial promotion, it may be too good to pass up. Now, who's selling out???

I don't know what GM will do next. I guess we will have continue to watch them play limbo....where the question is, "How low can they go?" (in price and in policy)

6:14 PM

 
Anonymous Len LaCara said...

When it comes to giving people a reason to buy, you need more than a price gimmick. Even if the price is $20,000 or more. With the possible exception of a Saab (which I hope GM hasn't ruined) you couldn't pay me to drive one of their vehicles.

Seriously, has anyone seen much innovation lately out of GM? Once you get past that funky looking Chevy SSR, what else is there? I'd love a car with OnStar, but not if it's tucked inside another stodgy vehicle.

Maybe I'm not being fair, but perception is everything when it comes to cars. Common wisdom is, GM cars have quality issues. The ones I have driven certainly did. GM may have dumped the Oldsmobile brand, but these are still your father's cars. (I should know; mine just bought a Buick.)

Bottom line -- You would have to blow up the company and start from scratch to make people sit up and notice GM. I don't think they have the cash or nerve to try.

8:53 PM

 
Anonymous Carl said...

I'm a big fan of the "experience economy" - I think they really need to look at how to apply this to their industry. Given that they've already decided to (apparently) give out the employee discount, I think some marketing effort to communicate that the customers are family (i.e. just like the employees - which is why they're giving out the discount). Then build on this with other "family initiatives." Turn the whole process into an experience, from beginning to end. It's certainly an uphill fight, but that's the direction I would take it. Of course, I'm not in charge at GM and they're not beating down my door. :)

2:10 PM

 
Blogger Anish said...

That they will definitely drive some cars out of the stores is true and yes there will be customers who will come and take the price advantage...however what may have been a desperate attempt to generate top line and get rid of inventories will result into a brand erosion with the customer waiting for the next big deal...Price is the one alternative that definitly does not work in building a customer bond that brings him or her again and again ..unless price is hallmark of ones entire business model

10:45 PM

 

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