Forbes.com writes that the employee discount pricing strategy embarked upon this summer by General Motors, Ford and DaimlerChrysler summer “their short-term bottom line, but it hurt their brands in the process.”
While sales were up when the promotions were first introduced, they eventually fell because consumers thought the companies were desperate to unload inferior inventory. The companies all saw their ratings fall in the categories of for brand image, quality, credibility and perceived resale value.
And more importantly, the strategy managed to widen the gap between the major US car manufacturers and their foreign brethren, none of which deigned to use the employee discount strategy.
While sales were up when the promotions were first introduced, they eventually fell because consumers thought the companies were desperate to unload inferior inventory. The companies all saw their ratings fall in the categories of for brand image, quality, credibility and perceived resale value.
And more importantly, the strategy managed to widen the gap between the major US car manufacturers and their foreign brethren, none of which deigned to use the employee discount strategy.
- KC's View:
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We agree with this assessment completely. In fact, when we were writing our regular column for the IGA Grocergram a couple of months ago, we noted that the big problem was that the major US car companies defined themselves in terms of low price…and only low price.
We wrote:
“This decision created several problems for the US car companies, at least in our estimation. For one thing, we wondered how they were going to convince people that they weren’t paying too much money for their cars once the promotion ended. But we also think that the rush to cut prices actually created the impression that the entire US auto industry was in trouble – an impression that became harder to ignore once Toyota announced during the heat of the summer and the discounting that it, in fact, was raising prices.
“Toyota’s message seemed to be this: ‘Let the other guys turn their vehicles into lowest common denominator commodities. We’re going to produce quality, and charge for it.’”
Which was the opposite of the message being sent by the US companies.
The US companies managed to commoditize their brands…which also created a new problem for them – which was how to create an exit strategy from the employee discount promotion. Best we can figure, people are likely to feel that any other promotion will have a price tag that is too high, and will be able to argue that when buying a car (and will be able to access all the pricing information they want over the Internet).
Just a dumb move. And probably every bit as desperate at its core that it seemed to be on the surface.
There are lessons here for any retailer that believes in focusing primarily on price as a way of differentiating itself in the marketplace.
