Staff Discounts It Ain't, but GM Gas Ploy Pumps Up Sales

Promo Pushes Traffic Up About 10%, but Program Baffles Some Consumers

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Gm's free-fuel deal has been criticized for feeding the public's druglike addiction to gas-guzzlers, but for consumers it isn't proving quite so compelling as the marketing crack that was 2005's employee-discount program.

The automaker's Fuel Price Protection program, derided by environmentalists and blasted by New York Times columnist Thomas Friedman, has increased floor traffic about 10% in showrooms in the two states offering the promotion.

The number of potential customers visiting showrooms rose 8.6% in California and 10.7% in Florida in May vs. April, according to CNW Marketing Research. That compares to 4.4% for GM nationwide, but it doesn't even come close to the promotion that brought consumers flocking to showrooms last year: GM's employee-discount offer, which raised retail sales 41% in its first month and 20% in its second.

Negative publicity aside-and GM did a comprehensive job of debunking Friedman's argument on its corporate blog, FastLane-auto dealers and industry observers believe the protection program is having only limited success because it is too complex, whereas a straight discount is easier for consumers to understand.

Wes Brown, analyst at consultant Iceology, called it "a circus act," flawed because the program's benefits can't be spelled out in a few seconds like the employee discounts were. He said most consumers won't take the time to figure out their potential savings.

Under the program's terms, buyers or lessees of select 2005 and 2006 models get monthly reimbursements through Dec. 31 for any gas they use that costs more than $1.99 per gallon, via a prepaid card they can use for gasoline or other items. There is no mileage limitation. Saab and Saturn are not part of the offer. GM launched the program May 25 with ads from McCann Erickson, Birmingham, Mich., and it ends July 5.

The Florida offer covers only cars: the '06 and '07 models of the Chevrolet Impala, Chevy Monte Carlo, Pontiac Grand Prix and Buick LaCrosse.

CNW figures, however, show that increases in GM's retail traffic in the two states in May vs. April beat out rivals': The entire industry saw floor traffic jump only 3.72% in California and 5.55% in Florida.

higher closing sales

Those consumers aren't just kicking the tires, either. Though the program didn't start until May 25, GM enjoyed higher closing sales rates in those states in May vs. April, besting the industry's total improvement in that period.

GM's retail closing rate in California improved 5.34%, according to CNW, while industrywide improvement was only 2.94%. In Florida, GM's May retail closing rate increased 4.29% over April's, while the industry tallied only a 3.19% improvement. GM didn't fare so well nationwide, posting a mere 2.71% jump in closings in May vs. April, CNW found.

Still, it's far from the barnburner of a promo that was the employee discount. In its first month, June 2005, sales skyrocketed 41% to 558,092 units-GM's best month since September 1986. GM extended the program in July and again in August. In July, GM sold 530,027 units, a 20% jump from the prior July and best July since 1979. August sales fell 16% vs. August 2004, but GM said that was in line with expectations since so many '05 models had been cleared out in the first two months of the program.

Yet there is one new benefit that GM is reaping from the gas-protection program. CNW President Art Spinella said the employee-discount program had a "short-term impact on the perceptions of GM and its products; that is, it was a fire sale." But he said "Fuel Protection" could help change people's perceptions of GM.

CNW found in the first day of the program that 46% of new-vehicle intenders who didn't have GM on their list said the deal indicated the automaker was "sensitive to car-buyers' financial concerns."
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