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GM TO EXPAND PRICING PLAN;CONTROVERSIAL SALES IDEA APPEARING IN WASHINGTON, OREGON, IDAHO

By Published on .

General Motors Corp. will expand its controversial value-pricing strategy beyond California to Oregon, Idaho and Washington starting with the new model year.

GM next month will begin an ad blitz in the three states to introduce the program for 82 models, a spokeswoman said. Broadcast and print ads that promote the program in California will be reworked for the new markets. D'Arcy Masius Benton & Bowles' Highway One, Los Angeles, handles.

The spokeswoman declined to disclose ad spending. But one dealer in Oregon said GM has told select dealers it would spend up to $6 million in the fourth quarter to introduce the program in the region.

EFFECT OF BRAND MANAGEMENT

Robert Longpre, a Pontiac dealer in California for 25 years until recently, said GM spent $17 million on advertising the new program during its first year in that state in 1993.

Under the program, select GM cars and trucks will carry an attractive manufacturer's suggested retail price that includes a package of popular options, like air conditioning and air bags. The value-price package for GMC's 1997 Sonoma regular-cab pickup is $13,195, about $1,000 cheaper than the MSR in the rest of the U.S.

The program follows GM's switch to brand management. GM's Ron Zarrella, VP-sales, service and marketing for North American Operations, has said constant price promotions, like leasing deals and cash rebates, don't add to a brand's equity. Value selling focuses on retail prices that aren't set artificially high with the thought of adding cash rebates later to stimulate sales.

"GM value selling makes it easier for people to shop and own a new vehicle so our customers have more control over the process than ever before," he said.

But customers still want to dicker, said Mr. Longpre, whose Pontiac dealership was bought out by GM last month.

"Customers still come in and ask for a discount and an overallowance on their trade-ins," he said, adding that his profit margins dropped 35% per car in the program's first year.

Partly in response to dealer complaints, Pontiac boosted dealer discounts from 11% to 12% of each car's sticker price in 1995.

QUESTIONS ON DEALER SUPPORT

Still, Mr. Longpre said his profit margins never recovered because fixed costs like rent and electricity stayed the same or increased.

A GM study in the fall of 1995 revealed that one-third of its dealers opposed value-pricing, one-third supported it and the rest were neutral.

GM credited the program with its market share jump in California. Since 1993, GM's market share has risen by 2.5 percentage points, or 82,000 additional units annually, to 22.3%, the spokeswoman said. Those figures include sales from Saturn, which isn't in the program.

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