Last week, Ford Motor Co. blinked and announced $600 rebates or 4.8% financing on 17 models, including the Ford Taurus, off to a slow sales start since being redesigned for the 1996 model year.
Rebates are widely regarded as a short-term solution that in the long run cheapens brand image.
"Automakers have spent so much money advertising price....they've largely eliminated any brand image they had," said Art Spinella, VP-general manager of CNW Marketing, a Brandon, Ore., automotive consultancy.
So far, General Motors Corp. and Chrysler Corp. haven't followed Ford's lead in offering rebates across almost its entire product lineup, although each has been offering incentives on some slow-selling models.
Both GM and Ford recently adopted brand management structures, designed to instill a sharper marketing focus that would result in more focused products and brand images. A Chrysler team is drafting a plan to sharpen the definition of its brands.
GM'S BRAND GOAL
GM's long-term objective is to shift funds from incentives and toward brand-building activities such as advertising and events sponsorships, said Ronald Zarrella, group VP for North American sales, service and marketing.
GM, with more than 50 models, plans to eventually back each with at least $30 million a year in ad support, Mr. Zarrella said last week during the Automotive News World Congress in Detroit.
"If you spend below [$30 million], you're sort of wasting money," said GM's marketing czar. Additional ad funds can be found by "shifting all that price support money over towards building brand equity," Mr. Zarrella said.
While GM already spends about $2 billion a year for advertising, direct marketing and sponsorships, it's estimated the automaker spent at least $3 billion in 1995 for price incentives.
Because of the long lead times for product development, Mr. Zarrella said the shift of funds from incentives to advertising would be a five-year process.
"To think that we can [eliminate incentives] for every one of our brands would be naive, but we can get a lot closer than we are today," Mr. Zarrella said.
For Ford, the No. 1-selling Taurus is only one of the vehicles posting poor numbers. Other major disappointments: the Ford Contour/Mercury Mystique compact sedans introduced as 1995 models after a global development effort; and the Ford Windstar minivan, being trounced by Chrysler's redesigned minivans.
"Our dealers have to be competitive, particularly on the car side," said Ross Roberts, VP-general manager of Ford division.
THE PRICE FACTOR
One reason cited for Ford's weak sales is the company's attempt to move products upmarket into higher-price territory.
The rebates will be advertised in tags on existing spots, by J. Walter Thompson USA, Detroit, for Ford, and Young & Rubicam for Lincoln-Mercury Division.