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Wednesday, June 22, 2005

 

MarketShare 101

As the WSJ indicates, the deals at GM are stout. And according to the JD Power Information Network GM's market share does appear to be rising. But, is it really?

Back in the day (that day being my "agency" days) we used to analyze market share in partnership with our car company marketing and incentives clients. We found a phenomenon called, "pulling ahead sales." It means, you advertise such a great deal that you suck your future buyers forward. Then, when the deals abate, your sales and market share drop, because you didn't actually "conquest" any sales from your main competitors. And in this business, market share is everything. Because if you only steal future sales, at a discounted present market value, you do several horrible things:

  1. You cheapen your brand...anytime you talk price, you suggest that is all you have to say. Features, quality, benefits, etc. are crushed by the price message...clowns, balloons do not enhance your brand image.
  2. You sell the vehicle to someone who was going to buy it anyway...for less
  3. Many of your hard working salespeople get reduced commissions...and the salespeople can be the difference makers when the products are equal...so you stand to lose good salespeople who can no longer make a living by selling "mini" deals at $100/car.
Based on what I've read from PIN, as well as my personal experiences, my guess is that GM's strategy will have a nice short term bump but moves GM's problems into the "future." Is that a good thing? Perhaps...if new products can come in to save the day.

It's unfair to overly criticize GM...they have a huge glut of cars out there. They needed to reduce inventory and this will do it. On the other hand, they're certainly smart enough to know that this will not solve their long term market share problems. The only way to increase market share is to take sales from your competitor, not pulling ahead your own sales.

Of course, I have a perfect solution for this and am waiting...waiting...for a call back from Ford, GM and DCX. Please, Mr. Phone, won't you ring?

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