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GM's 2-prong plan: Stoke the sales, go easy on expansion

Staying with 0% sticks it to rivals

GM's national deal
  • GM will back off regional incentives in favor of national programs such as 0% financing.

  • GM dealers like the plan but want regional exceptions.

  • Top competitors don’t plan to follow GM’s retreat from regional incentives.

  • DETROIT — General Motors is adjusting its marketing programs to keep pressure on its competitors even after 0 percent financing ends.

    The company started the 0 percent blitz at the end of September, forcing top competitors to follow suit, which put GM in the driver’s seat. The result for GM has been double-digit sales increases in October and November, and a 27.1 percent market share in November— a 1.3 percentage point boost from 2000 — the largest share increase in November in the United States.

    Paul Ballew, GM’s general director of global market and industry analysis, said 0 percent financing has been so successful that GM will back off regional and brand incentive programs to continue single, companywide national programs like 0 percent.

    “What ‘Keep America Rolling’ did was provide a jump-start,” said Ballew, who is responsible for all of GM’s vehicle sales, service and marketing research. “The key is to treat those (regional needs) as the exception and not the rule.”

    Such programs are expensive, pushing GM’s average incentive costs to an estimated $3,477 per vehicle compared with $2,897 in August, the month preceding 0 percent financing, according to CNW Marketing/Research in Bandon, Ore. But GM has taken several steps to offset the increased costs.

  • Each GM division committed much of its ad budget to promote 0 percent rather than promoting its divisional retail messages, top GM advertising executive CJ Fraleigh told Automotive News in October.

  • In the second and third quarters of this year, GM canceled 50 percent, the maximum allowable, of its upfront TV network buys, according to Electronic Media, a sister publication to Automotive News. Sanford C. Bernstein & Co. analyst Scott Hill said GM has made a similar cancellation for the first quarter of 2002.

  • Magazine spending, GM’s second largest advertising expenditure after TV, had dropped about 15 percent through the third quarter of this year to an estimated $94.6 million, compared with the year-ago period, according to the Magazine Publishers of America.

  • The company has accelerated the formation of dealer marketing groups, which will be asked to help promote national incentives by pooling money in local markets.

    “When all is said and done, we will have a more simplified structure.”

    Deal is king

    According to a recent research report by Sanford C. Bernstein & Co., consumers are more concerned with vehicle styling and deals than they are with brand image.

    “Consumers are not going to run to a piece of crap, but no longer is it enough that because it’s a Toyota it’s superior,” analyst Hill said. “As the gap in quality gets closer, consumers will turn to other sources. This simple 0 percent has done that. It has gotten consumers to look at products that they may not have considered before.”

    But GM’s competitors say they want out of the game. Until 0 percent, the automotive industry increasingly had regionalized incentives because certain products sell better in certain areas and because of seasonal differences.

    Toyota Division, for example, pledges not to follow GM’s retreat from regional incentives. Toyota has its Tundra, Corolla and 4Runner on 0 percent, marking the first time the division has done a national incentive.

    “What goes on next year is open to question,” said Steve Sturm, vice president of marketing for Toyota, “but we can’t try to cookie-cut a one-program-fits-all.”

    The Chrysler group doesn’t want to follow GM either. It just created five regional business centers in March to respond more quickly to dealers’ needs.

    “Things are different in California than they are in Florida, New York or Chicago,” said Jeff Bell, Chrysler’s vice president of marketing communications. “People have a different idea of what adds value for them, both from product to a financing offer.”

    Dealers mixed

    Dealers pushed GM for simpler incentives, said Conrad Darby, Buick dealer council chairman and CEO of Darby Automotive Inc. in Sarasota, Fla., and Venice, Fla.

    “It’s a customer satisfier when we don’t have to read 52 pages to find out if someone qualifies for an incentive,” he said.

    GM will ask, but not require, dealers to advertise national incentive programs. Ballew said GM also will continue to advertise divisional brands nationally in addition to the deal.

    “It doesn’t mean we as a company are on sale or that the discounting strategy is the way to win,” he said. “We’ll still invest in brands and the attributes of products.”

    Kathy Jackson, editor of Automotive News Marketing, and Special Correspondent Laura Clark Geist contributed to this report

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