Marketing Efforts vs. Cost Reduction - Promo Wins For GM

Problem? "Of course, GM has long been desperate to sell cars. But last spring it was really desperate. The company had lost big money in the previous quarter, and its vehicles weren't moving off lots fast enough to make room for next year's models."(Schubert, 62)

Remedy? "We need an aggressive clean-up program" says Steve Hill, GM director of marketing.

Implementation? GM made employee pricing its nationwide clean-up program.

Results? "The most successful promotion in automotive industry history"! "Sales increased in June by 41 percent and in July by 20 percent... By mid-August, GM had reduced its inventory from 700,000--32 percent below the company's five-year historical average and the lowest level since July 1998...." Furthermore, "Hill believes that the employee discount campaign will have long-lasting branding benefits" (62).

Notes: The success of GM's employee discount promotion will definitely build some brand loyalty. Also, since they can trade-in their cars for newer models (for a price), GM stands to gain a few repeat customers. For the global marketer, the branding strategy beats any cost-cutting, sell-it-cheap strategy; afterall, once we customers get hooked, we'll buy it at any price!

On the other hand GM can cut costs but if people don,t know its products, they won't sell anything. Companies cut costs at the expense of employee benefits(healthcare), employee jobs(through outsourcing and production cutbacks), employee motivation(and consequently productivity) and employee loyalty. Instead, GM should focus its efforts on building its image as a company that promotes efficiency and reliability alongside its reputation for marketing unplain, stylish, and exciting cars. In short, cutting costs does not promote sales.

Source: Schubert, Siri. "How GM Made Us All Feel Like Family." BUSINESS 2.0 October 2005: page 62.