Our 2005 Flop of the Year is value pricing -- specifically, the version of value pricing practiced by General Motors and Ford Motor Co.
In the fall, GM and Ford cut sticker prices on most cars and trucks in an effort to bring them closer to the actual transaction price paid by the consumer. The goal: Reduce the need for heavy incentives.
Both companies wanted to break out of the marketing rut that typecast their cars and trucks as commodities. It was a laudable goal, but rebates are like drugs -- it's easy to get hooked and tough to quit.
The automakers' current pricing quandary dates back to 2001, when GM triggered a huge buying spree with its "Keep America Rolling" program. After the lure of 0 percent financing wore off, GM tinkered with other incentives.
Last summer, GM uncorked a whopper: The "GM Employee Discount for Everyone." Once again, consumers stormed the dealerships, and both Ford and the Chrysler group were forced to follow suit.
Then Ford and GM attempted to make the transition to value pricing. Both companies cut sticker prices on 2006 models and scaled back incentives. Sales tanked. After a dismal October, GM and Ford offered year-end discounts to get sales moving again.
Value pricing eventually may succeed for GM and Ford, but 2005 was a rocky start.