General Motors' hugely successful employee pricing promotion in the US is coming to an end.
The nation's number one auto maker introduced the scheme in June to help shift 2005 models from dealer lots. The promotion offered all customers the opportunity to buy vehicles at the same price as would be paid by a GM worker. Rivals Ford Motor Company and Chrysler quickly aped the idea.
The scheme is now to be replaced by 'Total Value Promise' pricing, under which GM will try to offer 2006 models at prices closer to what it believes are actual prices once incentives are included.
However, they will be generally higher than employee discount rates and industry analysts and dealers are questioning whether GM will be able to wean customers off the cheaper deals without a significant drop in sales.
Says analyst Jesse Toprak: "Unless they can make up the difference in discounts by offering additional rebates or other creative incentives, there will certainly be a slowdown in GM sales beyond September."
He adds: "Sales people are really going to need to communicate these changes effectively. It's going to backfire unless it's handled well."
The employee discount scheme was always destined for a short shelf life, comments GM's North American vp of marketing and advertising Mark LaNeve. He adds: "What we learned is: the customer is smart. They recognize a really good value when they see one and they really appreciate transparent prices."
Data sourced from Wall Street Journal Online; additional content by WARC staff