Branding: Just Ask...

Sylvia, a brand manager in Frankfurt asks:

What are your thoughts on the employee discount craze by GM and other auto manufacturers that took place in the US market? Do you think these measures will have a long-term impact on sales and market shares of these companies? Will these discounts and others like them be able to influence the market dynamics and halt the growth of Japanese auto sales?

Sylvia, thanks for asking. The employee discount promotion by GM and other USA auto manufacturers which began in 2005 is indicative of a fundamental problem in the demand for these cars. (Honda and Toyota have better met the needs of the USA market with their automobiles.) Price discounts never help brands. They may sell more cars in the short term but they erode the value of brands.

Any type of price promotion makes consumers more price conscious and less brand loyal unless the marketer is able to increase the perceived value by adding something of value to the offering for the same price rather than decreasing the price. While employee discounts and zero percent financing are valuable to consumers, they also seem to be somewhat desperate moves by the manufacturers.

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