GM bets on money-back deal
Concerned that too few Americans are willing to buy a car from a bankrupt automaker with a legacy of poor quality, General Motors Co. has come up with a deal: Try one for 60 days. If you don’t like it, you can get your money back.
The unusual promotion is the centerpiece of an aggressive marketing campaign debuting next week. The automaker hopes the unusual tactic will turn around a long sales decline hastened considerably by its recent bouts with bailout and bankruptcy.
GM’s U.S. sales are down 35% so far this year. Its market share is at an all-time low. Even the wildly successful “cash for clunkers” program did little to boost the company’s fortunes.
Now, with $50 billion in federal bailout funds on the line, and in the face of what continues to be a brutal auto market, GM management appears to be taking a huge bet that innovative marketing can save the company.
“GM has everything at stake here,” said Jim Hossack, an industry analyst at consultant AutoPacific Inc. “GM’s very existence is in play right now.”
The new campaign, company executives said, is a bid to narrow the so-called perception gap between GM’s products and those of Asian and German automakers.
For years, GM has been watching formerly loyal customers, turned off by poor-quality products, become consumers of foreign brands. Now the automaker insists that its products are as good as or better than any made by Honda Motor Co. or Toyota Motor Corp., but that the public doesn’t realize it.
“We’ve got to close this monumental chasm between the reality of GM’s current product lineup and the public perception of the lineup,” said Bob Lutz, GM’s head of marketing.
He would not disclose the total cost of the ad blitz, but characterized it as significantly greater than recent marketing campaigns. He said GM’s efforts have been “vastly below” those of competitors on a relative basis.
“This has been one of our big problems,” Lutz said.
On Sunday, the campaign, called “May the Best Car Win,” kicks off with a nationally televised advertisement starring the automaker’s new chairman, Ed Whitacre Jr.
In a 60-second spot, the gray-haired Texan and former AT&T; chairman declares that “car for car, when compared to the competition, we just win,” and adds that GM is “putting our money where our mouth is.”
The money-back guarantee starts the next day, allowing vehicle buyers to return cars, no questions asked, between 31 and 60 days after purchase, so long as the vehicle has fewer than 4,000 miles and the owner is current on payments.
The guarantee covers purchases through Nov. 30, although GM officials say that deadline is likely to be extended.
At the same time, GM will run print, radio and television ads that pit GM vehicles against those of competitors, highlighting quality over cost.
For example, one print ad will match the Chevy Equinox crossover against Honda’s CR-V, highlighting the former’s better fuel economy. Another will compare the Buick LaCrosse with Toyota’s Lexus ES350, citing a superior warranty.
For GM, which has seen its share of the U.S. auto market fall to just 19.4%, down from 21.6% a year ago and more than 50% a few decades ago, the new campaign -- which it will run well into next year -- is a crucial endeavor and a major test of the company’s new leadership. In addition to Whitacre and a reformulated board, GM has a new chief executive in Fritz Henderson.
Whitacre has suggested that GM, down to just four brands and chastened by its tumble into Chapter 11 bankruptcy, can increase sales and market share. To do that, however, it has to accomplish something it has failed at, increasingly, over the last few years: getting people other than die-hard brand loyalists onto its dealership lots.
With that in mind, the automaker calculates that a cash-back guarantee of the sort normally reserved for exercise equipment hawked on late-night TV might be eye-catching enough to start changing that.
Although this is not the first time an automaker has run a refund program -- early this year Hyundai Motor Co. offered to take back cars from buyers who lost their jobs -- it’s the first in recent memory that offers an out based on satisfaction alone.
“The ability to give the car back is going to make people much more comfortable with purchasing,” said Joseph Priester, professor of marketing at USC and an expert on consumer psychology. He calls the guarantee program “ingenious,” particularly because the rate of return is likely to be extremely low.
Lutz said GM would ask dealers to repurchase cars and then reimburse them for the cost. To limit risk on the program, he said, GM had taken out a special insurance policy.
An intriguing part of the campaign is the choice to put GM’s new chairman front and center. The role closely parallels that of former Chrysler head Lee Iaccoca, who in the 1980s famously told Americans, “If you can find a better car, buy it,” helping turn the company around.
Yet although Whitacre is certainly charismatic -- “central casting could not have been better,” Lutz said -- he’s not a well-known public figure like Iaccoca was. Moreover, he’s closely associated with the corporate side of GM, a side the company would like to wash from the public’s mind. Focusing on Whitacre, critics say, could weaken the entire campaign, reminding consumers afresh of GM’s problems.
GM is going so far as to remove the company logo from the sides of its vehicles, and executives said the advertisements in “May the Best Car Win” will avoid making any reference to GM, instead trying to convince consumers that Chevrolet and the other brands exist independently.
“How is he representative of what Chevrolet or Cadillac wants to be?” Rebecca Lindland, an auto industry analyst at IHS Global Insight, said of Whitacre. “This is a very different situation from the Iaccoca days.”
Mike Jackson, former vice president of marketing and advertising at GM and now a partner at advertising firm Sarkissian Mason, wasn’t sure whether GM’s money-back program would boost sales, but contended that building buzz was more important.
“I’m not convinced the approach is perfect,” Jackson said. But considering GM’s challenges, “they’ve got to try something to put a stake in the ground and get attention.”
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(BEGIN TEXT OF INFOBOX)
How the GM program works
Here are details of General Motors’ new money-back guarantee program, which starts Monday.
* Cars must be a new 2009 or 2010 Chevrolet, Buick, Cadillac or GMC purchased between Sept. 14 and Nov. 30.
* Vehicles can be returned between 31 and 60 days after purchase, and cannot have been driven more than 4,000 miles.
* To qualify, owners must be current on financing payments.
* Buyers who return cars will be repaid the purchase price, excluding dealer-installed accessories such as undercoating.
* If a buyer trades in a car worth less than the amount owed on it, that difference -- which dealers often cover -- will be deducted from the refund. This occurs, for example, when a buyer trades in a car worth $5,000, yet owes $7,000 on its loan.
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Source: Times research
