When it Comes to Sales Strategy, Don’t Be a GM

I am amazed on two levels with the recent article I read, detailing General Motors plan to offer employee discount pricing. While this is certainly not new, nor original on GM’s part, it is disconcerting that America still allows this gimmick to work.

Let’s translate the real meaning of the phrase “employee discount pricing”. It actually means, “We aren’t selling as many cars as we would like to. Therefore, we are going to artificially and temporarily drop the price of our cars in the hopes that you feel somehow engendered to us, as if we are letting you in on something special. We hope that you don’t realize the only reason we are selling the car to you at such a price is because you didn’t buy the same one last week at a higher cost, and we also have to make room for vehicles coming out for next year that we will sell to other rubes at full price.” Is the crime that they do it, or is the crime that some people buy into it?

Pricing strategy is and always has been an important tool. However, there is, in my opinion, a right way and a wrong way. One right way is the model of Southwest Airlines–the famed B-school case study in delivering a no-frills service that has a singular mission of being the low-cost airline. (A Google of “Southwest Airlines case study” returns 193,000 results.) Another right way in the automotive industry is the newly-hyped Nano by Tata Motors. While, admittedly, they are struggling with profitability, Tata’s singular goal has been to build and sell a $2500 car in India. Both of these companies have built a strategy hinging on providing a low cost product–not a low quality product, but a low cost product.

General Motors, on the other hand, and I can’t leave out Ford or Chrysler in this since they will most likely follow suit, is using a tactic that not only belittles their clients, but illustrates a lack of marketing innovation. GM did not get where it is at by being a bad company nor does it have a bad marketing group. However, the idea of artificially lowering prices and making it somehow seem to be an exclusive club smacks of elitism and pandering, not to mention capitalizing on clients during a market downturn.

So–how can you avoid it in your sales strategy? One– if price is a tool, let it be an honest tool. You should be striving to lower your costs, which in turn, allow you to reduce your price. Don’t simply adjust your margin and slap a sticker on it. This is where you can affect repeat business-don’t sacrifice long term loyalty for the sake of one time purchasing. Two–grouping people (employee discount, frequent flyer, president’s club, etc) only works when you have ancillary value by being a part of the group. To illustrate– getting an employee discount is a great company perk and shows loyalty to the workforce. Passing that same discount to EVERY client not only takes the “additional value” away but now reduces your employee benefits, as they receive the same pricing as everyone else. Three–focus on right pricing. Market conditions do adjust and need to be factored in (especially in the auto industry), but if your product is of high quality, you are speaking with the right audience, and the pricing is set correctly, you should never have to worry about “deep discounts”.

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