You may have seen this piece I wrote over 2 1/2 years ago, but I thought it begged rehashing because it could not be more applicable than right here, right now in the world we live. Looking back, I am not even sure I could say I would really see the day when GM would declare bankruptcy.
Winter 2007 —–
In 2005, General Motors decided to run what I believe is the most stupid, most brand-diminishing
promotion in the history of our world. With one swoop of stupidity, GM almost certainly
put a dent in its corporate brand and all of its automobile brands. I would have loved
to have been in the boardroom the day someone at GM came up with the idea to give
everyone “The Employee Discount.” Mark my words, the employee discount promotion will
go on record as the stupidest ever.
Do you know anyone who works for GM? If you do, then you know how special the employee
discount is for them. I used to live next door to a guy who worked for GM. His discount
was quite a perk for him, his friends, and his family. He was able to buy a few cars
each year and receive amazing deals on the price. He offered me the opportunity the
same year he purchased a few cars on behalf of other family and friends. So, in a
day and age when employee perks were rare and finding ways to delight your employees
was more difficult than ever, GM had a golden ticket with the employee discount. If
you worked for the company, you got to purchase a car at a price far below what the
average John or Jane Doe paid.
At least, that was the benefit to employees before the summer of 2005. GM must have
been in a situation in which its dealers were in sudden need of moving cars. I can
just imagine the scene where the genius marketing executive said, “I know, let’s give
everyone the employee discount. The price will be so low that those cars will jump
out of the lots.” This decision was probably made with a complete disregard to the
short- and long-term impact on employees of the company.
If GM was building a superior car and positioning its brand in powerful ways, it might
not have even been in the situation. But it was in the situation and giving away the
employee discount must have seemed like the best way out. I think it will turn out
to be the worst mistake ever and will take decades to recover from. If it ever recovers
at all!
Here’s why:
First, GM may have alienated its entire employee base, diminishing the value of one
of the best perks some employees are offered. By giving the employee discount to everyone,
GM was saying, “Hey employees, you’re not so special anymore. Anyone can have your
special perk.” At the very least, GM should have considered providing the 36,000 employees
(who just lost their 401k match) the opportunity to deliver the employee discount
through a more aggressive program. Maybe they could have offered them the same incredible
incentive to pass on to anyone they want. If I worked for GM, I could have walked
up to a stranger on the street and given them a coupon for $5,000 off a GM car. Then,
for each coupon used, GM could have repurposed the enormous ad budget and paid a bonus
to the employees. Or, at the very least, it could have lessened the decrease in the
401k. This would have sparked greater employee pride, put more money in their pockets,
and still led to increased car sales.
Second, GM probably alienated all of its most loyal customers. Why? Because if you
are the owner of a GM car that you purchased three years ago for $30,000 and expected
to trade in for $17,000, think again. Now GM might be selling that same model car
brand new for $24,000, in all likelihood greatly diminishing the value of your trade-in.
The negative impact on resale compared to the foreign competition will be felt for
years to come.
Third, I believe GM dramatically lowered the perceived value of its autos when it
participated in a large discounting activity such as the employee discount. It diminished
brand value across the board for new customers, old customers, and the most important
GM customer: the employees.
So GM, with one promotion, alienated its employee base and its existing customer base
on top of diminishing its total brand value.
Want more proof that GM is headed down the wrong road? In comparing November sales
from 2004 and 2005, GM sales were down 11.4 percent while Toyota was up 5.6 percent
— a 17 percent differential in one month. Is this an aberration or a sign of things
to come? If I were a betting man, I would not bet one dime on GM.
Why didn’t Toyota follow suit? Because Toyota is building superior cars that are perceived
to be more valuable in the minds of American consumers. That is why Toyota will soon
sit atop
the auto world with record sales in the years ahead while GM will be finding ways
to perform disaster relief from its own stupid promotion.
GM, a perfect example of how advertising and marketing can kill your brand!
An
