Full version General Motors

General Motors

This print version free essay General Motors.

Category: Business

Autor: reviewessays 25 February 2011

Words: 4812 | Pages: 20

General Motors

Introduction

General Motors Corporation, hereafter referred to as GM, has an impressive history spanning over 100 years. According to GM’s website, GM is the “global industry sales leader since 1931,” and their sales are representative of such a business. GM has a responsibility to its stakeholders to remain competitive and profitable. With the decline in the economy dating back to approximately year 2000 and the impact of rising fuel prices, GM found itself in a struggle to remain profitable. Losses in profit coupled with high inventory levels, GM recognized the need for an unprecedented sales promotion to empty its dealerships of the rapidly aging current year models. In June 2005, GM announced its “Employee Discount for Everyone” sales promotion. The results were phenomenal, as sales skyrocketed to record levels. The sales promotion was, indeed, without a doubt, a success. However, the sales promotion worked on the premises of discounting – a method which deteriorates brand image. The purpose of this paper is to redesign this sales promotion in an effort to not only sell vehicles, but also promote long term branding. Elements contained within this paper include: New Targeting, New Positioning, New Goals, New Messaging, New Creative, New Media Choice, and lastly Evaluation of Plan. All of which will be discussed in greater detail in their respective sections.

New Targeting

In order for GM to over come their tarnished image, they need to adopt a new promotional strategy and opt-out of their old discounting ways. GM needs to adopt a strategy that will enhance their brand image. They can do this with the following targeting and new promotion. The new target audience is full-nest families and the new promotion is aimed at building long term brand loyalty is through a built-in maintenance program.

To begin, GM’s new promotion will not be discount orientated but instead one that will add value to their image. The idea behind the new sales promotion revolves around a maintenance program. The maintenance program is designed to provide the customer with an excellent protection/warranty plan. The maintenance program is not an additional expenditure for the customer because the cost of the program will be built into the overall sales price of the vehicle. The specifications of this plan include either 100,000 miles or 7 years of protection (which ever one comes first). The protection plan covers a huge array of parts and also services. These services include but are not limited to routine oil changes, schedule check ups, fluid flushes, and tire rotations. The services will be explained to the customer upon purchasing the vehicle along with guidance for when they need to come back for all the services.

With this new sales promotion, GM needs to segment properly in order to attract full nest families, the group for which their vehicles are intended to be sold to. A full nest family refers to any household which includes at least one or more children. GM would have the most success segmenting to this group because they have similar needs and lifestyles. Generally speaking, this segments’ lifestyle consists of sports, traveling, or just a means of transportation for several people. With this lifestyle, families need vehicles that can support such activities. GM can provide these families with solutions to their needs and lifestyles with all the vehicles they manufacture. This new segmentation will help GM target the proper market because most of their vehicles are sold to families with similar needs and lifestyles.

This sales promotion will provide many benefits to GM and the consumer. The benefits will include convenience, quality, and a better brand image. To begin, the maintenance program will be available to the customer anywhere. Meaning that if they are away from the dealership in which they purchased the vehicle, they can still get the free maintenance performed on their vehicles at another participating GM dealership. This provides convenience for the customer which results in the customer associating a better brand image about GM. Quality is also created with this program because the customer knows that skilled factory-trained service technicians, using the latest diagnostic tools and genuine GM parts, will be maintaining their vehicles. This promotion also acts as a catalyst to enhance GM’s brand image, thereby achieving the goal of building brand loyalty. As stated above, GM has unfortunately labeled its’ brand image with connotations of being “cheap.” They did not intend to create this image but have with the discount sales promotions that they continually provide to consumers throughout recent years. By targeting to the new segment that was outlined above, GM will enhance its brand image for the following reasons. First, the people within this segment are always looking for deals and convenience because they have children. The lifestyles of full-nest families are such that they are very busy and for that reason they look for convenience as a top priority. With this promotion, GM is providing customers with many opportunities for convenience. For example, GM will inform customers when they need their next oil change so that they are not burdened to remember themselves. Thus this equals convenience! Another way GM will enhance their brand image in the minds of consumers is with money. Since the price of the maintenance program is already built into the sales price of the vehicle, consumers will not think that they are paying more for such a deal. When the consumers go have their oil change or routine tune-up performed by GM, there is no cost associated with the work. Thus, the consumers will think they are getting a great deal. This will result in positive associations with GM’s brand image. All in all, these benefits to the consumer will create a good image of GM which is precisely the purpose of the new promotion and segmentation.

New Positioning

An impressive positioning strategy is imperative to survive in corporate America. Not only does positioning help retain existing customers and help gain new customers, it paves the way for strong growth by creating and adding value to the organization. “Positioning is the process of creating a perception in the consumer’s mind regarding the nature of a company and its products relative to the competition. Position is created by variables such as the quality of products, prices charged, methods of distribution, image and other factors.” Creating an effective positioning strategy is certainly not the easiest task, but it can be achieved in several different ways. In specific, GM’s unique selling proposition was their employee discount pricing strategy, “You pay what we pay and not one cent more.”

Among the GM brands such as Cadillac, Hummer, Saturn and Chevrolet, several other quality vehicles have been designed to create and add utility for consumers. One of the impressive additions General Motors has incorporated into the design of their vehicles is the addition of OnStar. With OnStar’s improving technology, a significant and new service has been added to their portfolio of in-vehicle communication, which automatically performs numerous “diagnostic checks on four key GM vehicle operating systems: the engine/transmission, anti-lock break, airbag, and OnStar." OnStar equipped vehicles are programmed to send diagnostic results via email, providing consumers with reports such as remaining oil life and recommended maintenance reminders, in addition to their portfolio of safety, emergency services, road side assistance and stolen vehicle location assistance.

GM’s “Employee Discount for Everyone” promotion allows people to purchase selected vehicles at the same price as employees. Aside from the fact that this one low employee discount price allows consumers to avoid the unpleasant negotiation process, many other benefits are present. Typically, when products are sold at such low prices, consumers associate this low price with low quality. However, a recent interview with a Chevrolet manager, Keith Reynolds, likes to think otherwise. When asked the question, “What are the core benefits that comprise the value proposition?” Reynolds responded by saying, “Being a manager within the General Motors Corporation, the ‘Employee discount for everyone’ provides consumers with two core benefits. Not only are we trying to deliver consumers with extremely low priced vehicles, we are delivering them a combination of both low price and great quality!” After interpreting Reynolds’ statement, everything makes sense. In California where the state’s average gas price for regular gasoline is $2.72, some automotive consumers may find it necessary to offset these high gas prices with GM’s employee discount promotion. Furthermore, with OnStar’s report being sent via email to subscribers, there is an extra sense of peace of mind provided for customers when driving their vehicles. “OnStar’s Vehicle Diagnostics is exclusively for GM customers and enhances GM’s commitment to its Total Value Promise.”

GMs’ Total Value Promise’s main objective is to create and add value for both General Motors Corporation and consumers. Part of GM’s Total Value Promise includes creating innovative features incorporated into GM vehicles, while delivering low prices. When GM ran their employee discount promotion through several advertising mediums, they not only captured the attention of consumers, but competitors as well. In a sense, GM had the first mover advantage. When their campaign was launched in June 2005, numbers revealed that their sales in June were up 41% from the previous year. Ford and Chrysler could not afford to simply sit back and watch GM lure domestic customers. This value pricing strategy basically forced Ford and Chrysler to release similar programs in July to eliminate excess 2005 inventories and to prevent GM from capturing market share. Having first mover advantage does have its pitfalls. Although a corporation may possibly have a secure position, often times they do not devote sufficient resources to keeping it. Although GM originally set its expiration of the promotion to be September 6, 2005, they extended the promotion to early October to survive the war of discounts, moving even more vehicles, including less sought SUV’s, from their inventory.

With the employee discount, General Motors made it possible for full nest families to own a SUV at an affordable price. While gas prices this year hurt the sales of SUV’s, the promotion acted as a catalyst that aided in the sales of these large vehicles and moved them into the ownership of thousands of full nest families. Although GM was trying to create an opportunity that benefited consumers, this promotion may have affected GM’s brand image in a negative way. This promotion may have been the beginning of many promotions to come from GM. Because consumers were exposed to such an amazing promotion, they might find it necessary to wait until GM offers another similar promotion.

GM is positioned as a corporation that provides vehicles that are well crafted. They want to continue to be positioned as a corporation that supplies consumers with vehicles of complete value in the areas of service, safety and price. The employee discount promotion was used for many purposes. It transferred thousands of vehicles from GM inventories to the ownership of consumers. Moreover, by attracting millions of people to its showrooms, GM was able to highlight many of features uninformed consumers. Often times, it can be difficult to attract people to showrooms with promotions such as their 0% financing, so GM thought it was necessary to go above and beyond in order to attract people with their extremely low priced employee discount promotion. Because of the brand awareness that this promotion generated, it has made a significant contribution to the overall brand strategy.

The “Employee discount for everyone” is absolutely new to this economy. General Motors has attracted and welcomed customers into the GM family with such an amazing pricing strategy. With the repetitive advertisements ran on various mediums, people have made it to GM showrooms and GM has been able to highlight the special features that they have to offer. However, GM may possibly have used the wrong positioning strategy. Rather than using price charged to attract consumers into showrooms, GM should continue to build brand equity by continuing to improve the quality and features of their vehicles to differentiate them from their domestic and foreign competitors. By highlighting the amazing features that OnStar has to offer and by comparing these features with other SUV’s, GM might be the first choice in consumers’ evoked set. With such a strategy incorporated into their overall branding plan, GM would sell their quality vehicles at a premium. The Total Value Promise is certainly a step in the right direction. OnStar’s Vehicle Diagnostics is offered exclusively for General Motors Corporation. Among the eight brands, the Total Value Promise applies to only thirty out of the seventy-six models, but it is expected to be available in every model by 2010. In order to survive and succeed in such a demanding economy that we live in today, it is absolutely necessary to supply consumers with the products of tomorrow, today.

New Goals or Objectives

The main objective is to sell as many current year models as possible. However, GM needs to maintain a brand image of quality while selling these vehicles. Thus, discounting is not acceptable because it creates a reliance on price cutting by the consumer. In other words, frequent discounting ultimately leads to consumers relying on price slashing in order to purchase the vehicles. The long term effects are tarnished brand images and negative associations such as poor quality.

New Messaging

As previously stated, the objective to sell as many vehicles as possible is the main goal of the redesigned sales promotion. However, the promotion must also build brand image and brand loyalty. With that the new sales promotion will be titled “Don’t worry, the maintenance is free.” The idea is that GM now offers maintenance at no additional charge.

The words “Employee Discount for Everyone” are very catchy to the ear. However, it only motivates buyers on the basis of price. The new promotion will send a message of convenience and value. In the long run, the consumer will return to the dealership on a regular basis which builds a relationship between GM and the consumer. Every time the consumer is in the service department they will be given a latest model loaner car. This will enable the consumer to experience the latest GM model vehicles in privacy and without the pressure of a sales person. Superb customer relations with the service department coupled with the experience of latest model vehicles will create a very powerful and loyal relationship between GM and the consumer. The idea here is that ultimately the consumer will return to GM when they are ready to purchase another vehicle and hopefully they will purchase without being motivated purely by the price tag.

The loaner vehicles will act as a catalyst to keep the consumer cycling through the awareness, knowledge, liking, and preference stages of the hierarchy of effects. Every time the consumer borrows a vehicle they will cycle through these stages until they are ready to purchase another vehicle, in which they will be lured into the conviction and ultimately purchase stages. Unlike the “Employee Discount for Everyone” sales promotion, this promotion utilizes a rational appeal.

In the recent years, domestic auto manufacturers have suffered immensely when it comes to damage to brand image and brand loyalty. GM is no exception to this assertion. Recent media news has reported that GM is cutting its’ workforce by thousands of people and this is further proof that GM successfully accelerated sales by about six months. If GM continued to manufacture at the rate that it had been, they would end up in the same situation as June 2005, overstocked and few customers. Much of the negative publicity to domestic auto manufacturers, including GM, is linked to poor quality and dependability, all of which can be overcome by this maintenance sales promotion.

New Creative

Please see the attached creatives.

New Media Choice

After the “Employee Discount for Everyone” sales promotion, the goal was to create a new campaign that would allow continued success of the last promotion without deteriorating brand image. Following this, was the creation of the new sales promotion “Don’t Worry, Maintenance is on us” with the idea of targeting our media selection to full-nest families. The goal was to create a sales promotion that would attract full-nest families and persuade them to purchase our vehicles and services being offered.

Reach is the number of people, households, or businesses in a target audience exposed to a media choice or message schedule at least once during a given time period. Following this definition, the goal is to reach out to each member of out target, in this case full-nest families, and expose them to our message. By exposing each member of the family, including children, it would be more effective and attractive. The sales promotion message is aimed at fathers, mothers, and children during selected time periods. Take television advertising for example, children can be exposed to the product, in this case a GM vehicle, by placing ads in channels designed for kids, or channels such as MTV or VH1 for kids who are somewhat older. In addition, mothers can be targeted by placing ads during shows such as Oprah, Tyra Banks, Ellen, or other shows of this nature. Fathers can be reached by advertising on television channels such as ESPN, news channels, or other television channels of interest.

It is important that this sales promotion does not fall into the same mistake as “Employee Discount for Everyone.” Effective frequency refers to the number of times a target audience must be exposed to a particular message to achieve a particular message. This situation is crucial in achieving a good sales promotion. Too few exposures, and the advertiser will fail to attain the intended objective. On the other hand, too many exposures will waste resources. The “Employee Discount for Everyone” sales promotion, utilized too many exposures which created a great amount of waste. This new sales promotion will invest a good amount of money into advertising. However, in this new sales promotion, proper media will be selected to reach the segmented consumer as many times as possible. The “Don’t Worry, Maintenance is on us” sales promotion is not as large as the “Employee Discount for Everyone” sales promotion because the consumer is impacted more by price, something not being utilized as a motivator in this case. In the new sales promotion, the consumer needs to be reminded about what the product offers, convenience and quality. The “Recency Theory” does not apply to the “Employee Discount for Everyone” sales promotion because this campaign would follow more the three-exposure theory.

GM, as any other company, would promote this campaign using different types of media, primarily using television, radio, magazines, newspapers, and the internet. Different media will be used because effectively mixing media is an important part of designing quality sales promotions. The advantage of mixing media is that the commercial or advertisement can be different but at the same time transmit the same message. Most of the budget will be spent on television advertising because it is the media that involves the audience the most. Television offers advertisers the most extensive coverage and highest reach of any media. Television is also advantageous because of intrusion value, which is the ability of a media or advertisement to intrude upon a viewer without his or her voluntary attention. Even though television has a number of advantages, it also has disadvantages. There is greater clutter and people often channel surf, also described as flipping channels, during commercials. In order to avoid these two problems, commercials will be strategically placed at the beginning or near the end of the commercial breaks because here is where commercials have the best recall.

One area that requires a greater emphasis is the internet. Something the “Employee Discount for Everyone” sales promotion did was it encouraged excitement in dealer showrooms and cleared inventories. But most of all, new consumer online behavior was something that General motors did not expect. According to “Hitwise,” the online competitive intelligence service, the launch of GM’s employee discount program, helped increase the total market share of visits to GM’s web site by 477%. Today, because of the high consideration nature of car shopping, auto web sites play a tremendous role in the research phase. The use of internet has accentuated the online activity of new and existing car buyers where they can evaluate deals and search for local dealers. This is precisely why an emphasis on the internet is needed in the new sales promotion. The internet has become a powerful tool in the information search step of the consumer decision-making process. Full advantage of this internet situation is necessary and development of a web site with all the information including the maintenance program, prices of vehicles, and the location of the closest GM dealership among other things.

Another thing that the “Employee Discount for Everyone” sales promotion did not do effectively was radio advertising, not enough money was invested. Spending more money on radio advertising for the “Don’t Worry, Maintenance is on us” sales promotion would be more effective and create more awareness. A high number of people listen to the radio while driving a car, and what better way to promote a vehicle to people than through their car radio. Radio advertising has an advantage in that it helps the listener to remember the message by creating powerful imagery to aid visualization or by repetition. It is important to help the consumer move the ad from short-term to long-term memory. Having a high segmentation potential, it is imperative to identify specific time frames and/or programs where to advertise.

As stated before, companies choose to use different kinds of media because effectively mixing media is an important part of designing quality advertising. One thing to keep in mind is consistency, through assuring that all the advertising mediums deliver the same message and do not conflict with each other. This sales promotion is not utilizing price-off sales promotion like in the “Employee Discount for Everyone,” where it was not a problem to deliver a message of saving money through the different mediums. In this situation, the idea is to create a consumer franchise-building promotion. The main goal is to increase awareness and loyalty towards GM. The message needs to be clear and concise so that the consumer understands what is being promoting through the different media. Even though not all the ads are going to be the same, they should definitely transmit the same message.

Finally, we need to determine which media are aimed at different points in the decision process. The first step of the decision process includes problem recognition. This is where persuasion is utilized to make the consumer believe that they need or want a vehicle from GM. This step of the decision process would be best suited with the use television and radio. By getting the consumer to watch or hear our commercials, intrusion value can be used to instill “need” within the receiver. Secondly, is the information search process. This part of the process is “key.” The use of the internet is applied at this point to help the consumer. Here, after the person has seen the advertisement on television or heard it on the radio, he or she can go online and start searching for information. This is why the development of a quality web site is imperative. Consumers can find all the information necessary regarding the new sales promotion. Next, the consumer goes through the evaluation of alternatives. This is where the use of media is applied. When a person is considering buying a car, he or she would use the multi-attribute approach. Here is where consumers examine sets of attributes across sets of products and brands. The use of all media possible is essential because we want the consumer to have GM in their evoked set when considering the purchase of a vehicle. The transmission of the benefits and attributes of our vehicles must be encoded in our commercials and ads. It is important the consumer has strong beliefs towards our brand and identifies the importance of each of the attributes being offered. After going through the evaluation of alternatives, consumers go through their purchase decision. The purchase decision is where to use television and the internet. The commercials and website can display the ease of physically making the purchase, showing the aesthetics of the dealership, or maybe the techniques that sales representatives use. Finally the post-purchase stage should not be underestimated. All media can be used again to address this step of the decision process. An effective IMC plan addresses post-purchase evaluations and the potential for cognitive dissonance. The advertisements and commercials can include satisfied customers giving positive testimonials or some comparative advertisements showing the advantages of our brand.

Evaluation of Plan

It has been said for many years that the easiest way to fix many problems is to prevent them from occurring in the first place. This is true for engineering, rocket science, and also for advertising design. If the advertisement or sales promotion is off course in the beginning, then it simply does not make sense to spend additional funding to develop a campaign that is doomed from the start. This is why pre-testing is needed before the sales promotion begins. When choosing which methods of evaluation should be used, it is important that they match the objectives being measured. In this situation, the objective of the sales promotion is to increase customer interest and recall of General Motors. In this case, the marketing team would measure awareness before and after the advertisements are run. This procedure is commonly known as pre and post test analysis.

It is important to identify which levels of analysis should be evaluated in the sales promotion. For the sales promotion “Don’t Worry, Maintenance is on us” the measurements at stake are evaluation of long-term results (brand awareness, brand loyalty or equity) and affective responses (liking the company and a positive brand image).

After having deciding what needs to be evaluated, it has been determined to use recall tests as our message evaluation technique. This approach involves asking the individual to recall what advertisements he or she viewed in a given setting or time period. Then in progressive steps, the subject is asked to identify information about the advertisement such as incentives being offered, product attributes, tag line, product name or brand, et cetera. In this circumstance, day-after-recall (DAR) recall test will be utilized. Here, individuals who participate in the study are called via telephone the day after the advertisement first appears. Since we are looking to measure brand awareness, we believe that this system is the most appropriate. We believe that this is a valuable test because we know that recall enhances the probability that our brand is becoming part of the consumer’s evoked set. The type of recall that we would use with the DAR is the unaided recall method. Here, we would prompt the consumer with the product category, in this case vehicles’. When the consumer recalls seeing the advertisement, the person is then asked to provide as many details possible. We believe that the unaided recall approach is the right choice because it identifies the number of times that an advertisement has become intruded in the person’s memory.

As previously noted, DAR will be used to evaluate our brand awareness, brand loyalty, or equity. The next measurement is that of attitude and opinion tests to measure affective responses. Attitude tests deal with both the cognitive and affective reactions towards this brand. They are also used to solicit consumer opinions. In these tests, the content and formats of attitude tests vary widely. Thus, a combination of closed-end questionnaire formats and open-ended question will be used. With the close-end questionnaire, the respondents are given questions with scales such as 1=highly unfavorable to 7=highly favorable. On the other hand, open-ended questions will allow the individual to discuss whatever comes to mind regarding some aspect of the product or advertisement.

So far we have devoted our attention to message evaluations. These techniques provide valuable insights into what people think and feel, but this is not all. We also need to have behavioral evaluations. Here, we would like to use a test market. The primary advantage of using a test market is that we will be able to examine several elements of our marketing communication program. If the test market is successful, then it is likely that the national campaign would be effective. As we know, test markets can be used to assess advertisements and promotions. We will use test markets because it is a cost-effective method that helps to analyze and make some changes before millions of dollars are spent on something that would not accomplish the intended objectives. Advertisements can be revised, premiums revised, and pricing policies revisited before a more widespread program is undertaken.