What was true then is true now: There's no sales bait like a rebate
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"If you want to move merchandise, then a proven effective way is the good old price reduction."
So opined the editorial pages of Automotive News on Aug. 20, 1979.
The gist of the opinion was regarding a specific rebate program and how the cash incentives made sense for Chrysler Corp. - if its main competitors, Ford Motor Co. and General Motors, did not match the company's efforts.
We all know how that turned out.
While Chrysler has been credited with (or blamed for) giving the auto industry its own version of the cents-off coupon in January 1975, Ford really was the first company to use customer rebates - 60 years before Chrysler.
Henry started it
According to American Automobile Manufacturers: The First Forty Years, by John B. Rae, the first rebate program was initiated by Henry Ford on his Model T.
Henry Ford announced that "if the company sold 300,000 cars between Aug. 1, 1914, and Aug. 1, 1915, each purchaser of a new Ford during that period would receive a share of the profits. The sales figure for these 12 months was 308,213, and every buyer was actually given a $50 cash rebate."
Making things sweeter was that at the same time, Ford reduced the price of the touring car, writes William Adams Simonds in his book, Henry Ford: His Life, His Work His Genius.
"During all Motordom's history, no shrewder sales aid had been devised," Simonds wrote.
That first round of rebates cost Ford more than $15 million.
Why did Henry Ford do it? Well - cha-ching - it helped sell cars.
Creating demand
The more Ford reduced the price, the more demand he created, the more cars he sold and the more money he made.
"From 1908 to 1913 Ford knocked down the price from $850 to $600, and sales leaped from about 18,000 to 168,000," said Burton Folsom in Henry Ford and the Triumph of the Auto Industry. Folsom quoted Ford as saying, "Every time I reduce the charge for our car by one dollar, I get a thousand new buyers."
Added Simonds: "The yearly sales neared the $90 million mark."
Art Spinella, president of CNW Marketing/Research in Bandon, Ore., says Ford spent an average of $3,416 per vehicle on incentives in 2002.
He describes incentives as including customer and dealer cash, lease subventions, floorplanning assistance and dealer and salesperson incentives.
What started out as $50 here and there has evolved into 0 percent financing, subvented lease deals and several hundred to a few thousand dollars off a vehicle's price.
You can reach Arlena Sawyers at asawyers@crain.com.
