GM's pie-crust pricing promise

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After declaring its value-pricing strategy "not a promotion, it's a promise," General Motors Corp. appears to be breaking its word.

Having cleared much of its '05 stock this summer with an "employee price" on virtually every model, GM last week extended the promotion through Sept. 30, and added big `06 SUVs and pickups. The move came just weeks after the automaker slashed list prices on those and other '06 models under its new Total Value Promise strategy.

In doing so, GM succeeded in making pricing more complex at the very time it is trying to simplify the deal. The line between employee price and value price becomes less clear; customers will have to figure out which `06s get the cut-rate employee price and which don't. And now that the precedent has been set for `06, consumers must be wondering if the September one-month promo on `06s will be followed by an October one-month promo.

The transition to value prices-lower stickers, fewer rebates-is proving harder than GM sales and marketing chief Mark LaNeve had hoped. GM started Detroit's employee-price frenzy in June and tried to end the deal in August to allow a clean move to the value strategy, but it was forced to reverse course and stick with the promotion in August to match deals from Ford Motor Co. and Chrysler Group.

Reasserting market leadership, GM last week was first to extend employee prices through September. Spokeswoman Deborah Silverman said the company extended the promotion and added some `06s based on its success and "competitive actions." Ford added a few '06 trucks to its deal in August; GM one-upped Ford by adding more trucks in September.

Ms. Silverman said the high price of gas was not "a direct factor" in the decision to offer gas-guzzling '06 trucks at employee prices; truck sales surged this summer despite the price at the pump. Ms. Silverman said GM's value marketing strategy is proceeding on course. "This promotion is a logical extension of Total Value Promise," she said. Mr. LaNeve wasn't available for an interview.

Among the troubles GM faces-including Moody's credit downgrade to junk status last week-the "problem" of employee pricing should be welcome. The promotion caused consumers to look at GM's improved lineup, led to record sales and proved GM still can move a market. Jim Sanfilippo, exec VP of Omnicom Group auto consultancy AMCI, called it "one of the most memorable and exceptionally well-executed General Motors marketing programs of all time."

TACTICAL MISTAKE

But Mr. Sanfilippo said GM made a tactical mistake by applying the employee-pricing promotion to `06 models. GM needed to reduce SUV prices, he said, but better to have done it under the banner of Total Value Promise. "This is a messaging issue, and I think it's correctable."

George Magliano, an auto expert with forecasting consultancy Global Insight, said GM's move last week was a sign it needs to lower value prices so they are more in line with employee price.

Art Spinella, president of CNW Marketing Research, endorses a simple idea: Keep "employee price" because it resonates. "`Value pricing' doesn't connect," he said. Consumers "understand employee pricing instantly."

"Total Value Promise" could be a corporate theme, perhaps a successor to the old "Mark of Excellence," he said. But it makes no sense to replace a success like employee pricing "with something that makes people yawn."

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