GM sees big results from employee discount plan By Theresa Howard, USA TODAY
Mon Aug 22, 7:10 AM ET



Among marketing giants, there have been the cola wars, the sneaker wars and the burger wars. In recent weeks, it's been the car wars.


As the big-name brands duked it out for market share and sales to clear inventory, it's been a good time to be a car shopper, a not-so-good time to be an investor as carmakers sacrificed profit margins, and a great time to be in the business of selling advertising to the industry.


General Motors kicked off the latest battle in June, with an ad blitz announcing a companywide initiative - "Employee Discount for Everyone" - across its eight brand divisions. Ford Motor and DaimlerChrysler (on its U.S. models) followed almost immediately with similar discounts and ad buys.


The incentives have proved wildly successful in clearing unsold 2005 vehicles to clear the way for 2006 models. July sales were the highest for a single month, according to tracker Autodata. The month's sales of cars and light trucks were up 16.2%, to 1.8 million.


Such incentives are taking a toll on the industry, however. Automakers remain locked into 1995 price levels in dollars adjusted for inflation, says Dave Cole, chairman of the Center for Automotive Research, a non-profit organization that tracks auto trends.


"The industry has not been able to raise prices for at least 10 years," Cole says. "Their prices have been constant, and that's not sustainable."


As a result, even as GM continues to advertise its employee discount, the ads are featuring a Total Value Promise that incorporates premium GM features such as On-Star and stronger warranty coverage packaged into prices.


That means once the "Employee Discount" offer is finished on Sept. 6, prices might be on the rise, Cole says.


"What you are going to see is prices creep up," Cole says.


Carmakers need that to restore profitability, but it won't be easy with shoppers accustomed to discounts and doing price-comparison homework on the Internet.


"More people are shopping on the Internet than ever before," says Steve Hill, GM's general director of retail marketing. "If your (sticker price) and equipment content are not in line with consumer expectations, you're not going to get on the shopping list."


To help make its way onto more shopping lists, GM tapped real employees to star in the series of ads by McCann Erickson's Birmingham, Mich., office touting its employee pricing plan. GM's divisions such as Buick and Chevrolet developed similar campaigns for particular brands.


In the GM ads, employees are shown in front of various GM models, such as a GMC Yukon Denali, talking about their pride in GM and saying the company is doing "something we've never done before." The final frame features a woman who says, "You pay what we pay. Not a cent more."


"We wanted to tell a story using our employees and pay it off with a compelling offer to motivate consumers," Hill says.


While the offer has been hugely popular with consumers, the ads are not, according to results of Ad Track, USA TODAY's weekly consumer survey. Of those familiar with the ads, 11% like them "a lot," vs. Ad Track's overall average of 21% and the 19% average for auto ads.


Despite that low likability score, consumers clearly thought the ads worked. Some 30% rated the ads "very effective" - well above the average of 21%.


Hill was surprised by the results. "It's absolutely the best stuff we've ever tested," Hill says. He says consumer awareness for the employee discount plan hit 93%.


GM hopes it can keep the new buyers attracted by the discounts coming back with the Total Value Promise.

In the two months of the employee pricing, GM doubled its sales to non-GM owners.

"Once we invite them in the family, they usually stay," Hill says.

It sucks for the people that bough their vehicles at full price right before these discounts were priced out