Jumpstart Automotive Group

The truth behind vehicle incentives is that they don’t differ much in terms of the end goal — which is to create the perception that the manufacturer is discounting the cost of the vehicle. With every incentive program, the OEM has a set dollar amount it is willing to yield in the form of a promotion — whether it’s through zero percent financing, cash on the hood, or a 65-inch flat screen TV.

It seems all of the old and tired approaches to incentive programs simply continue to resurface without much innovation. Employee pricing, cash back, and financing incentives are old news. When everyone’s doing it — and in 2009, everyone was doing it – to the consumer it translates to white noise.

In 2009 Hyundai broke through that clutter with its Assurance Program, which promised the consumer the ability to return their vehicle if they lost their job. It resonated with consumers and was extremely timely — and most importantly, out of the box. The copycats followed but none enjoyed the impact that Hyundai felt from this ground-breaking approach.

The Cash-for-Clunkers program also proved that trading in your old car — typically a nerve-wracking process that rarely makes anyone happy with the end result — can be a good experience when structured the right way and positioned as motivation to purchase a new car.

I’ve been thinking about incentives for 2010, in the hopes that OEMs won’t continue to repurpose the worn out slogans and overused enticements. One of the greatest hurdles that the larger automotive companies are struggling with is loyalty. According to a Sept. 2009 study by ChangeWave Research, only 28 percent of Chrysler owners plan on buying another Chrysler vehicle, the lowest among all OEMs. Some of the surprises also at the bottom of the list include Mercedes and Volkswagen, while GM is in the middle of the pack at 53 percent. Toyota and Honda maintain the most loyal owners at 71 and 69 percent, respectively.

Specifically for General Motors and Chrysler, going through bankruptcy and dissolving vehicle brands has and will continue to have negative effects on their ability to entice return customers. Through well thought out and unique incentive programs, these brands might be able to gain back some of their lost ground.

GM could explore an incentive idea that spurs greater loyalty and gives them the ability to re-engage potentially disgruntled consumers through a valuable trade-in program. Similar to Cash-for-Clunkers, here’s an example of how it could work for GM:

• For owners of current or orphaned GM brands (Pontiac, Saturn, Saab, Hummer), GM could offer a guaranteed minimum trade-in amount, with a scale of these dollar figures based on the year of the trade-in vehicle. This would allow GM to continue to reinforce its guarantee on quality that it has been preaching through the current 60-day money back guarantee program, and would promote the fact that they’re serious about winning back disappointed customers and owners of former GM brands that have either been sold off or had their doors shut. Current GM owners are ripe for the picking from competitors, making a sound incentive strategy ever more important in 2010.

Chrysler has a perception gap it needs to fill, and while a similar loyalty program might be effective, Chrysler may be better suited to employ a conquest-driven format that encourages non-Chrysler owners to try them out. For example:

• For owners of competing vehicle models (these can be specified by Chrysler), guarantee a minimum trade-in amount if they purchase a new Chrysler vehicle, with dollar amounts also scaled by the year of the trade-in. This demonstrates Chrysler’s confidence in its own vehicles and a mechanism to capture new buyers who may not have considered Chrysler in the past. Ultimately this leads to winning back market share that Chrysler has lost in a big way in 2009.

Once again, the end goal of all incentives is the same — sell more cars by creating the perception that the cost is being discounted. If in that process a manufacturer is able to improve opinion of its brand, capture greater market share, or win back disgruntled or disenchanted customers, the rewards — as we’ve seen with Hyundai — can be abundant.

Have you experienced or heard about other incentive programs that are ground breaking and effective? If so, I’d love to hear about it.