Sales incentives are a curious thing. I’m no automotive historian, but it’s my understanding that whilst incentives have always been around, they really kicked in in the US market after the September 11 attacks.
When those 19 bastards took control of those planes and did what they did, they sent a shiver right down the US economic spine. The market dropped significantly in the immediate aftermath and the response of the carmakers was to kick incentives into overdrive. With as many as 1 in 12 US jobs related to the auto industry and its fringes, combined with a lack of air traffic and subsequent lack of rental car demand, the importance of keeping the auto industry moving was imperative.
GM dived into the incentive game with gusto, offering 0% and/or cash to keep the metal moving. The upside of this was that the industry did keep turning over its inventory and economically, the US wasn’t disrupted as much as many thought they would be.
The downside is that for 6 years now, customers have learned to expect incentives from American owned automakers. That expectation goes so far as to have people holding out for months and months to wait for that better deal. Do they really help?
This is going to be an exercise in what you US folks call ‘armchair quaterbacking’, to an extent anyway. I know that executives are in a pressured position and have to get results somehow, but are incentives the right way to go about it?
First, you’ve got the reputational damage. Customers look, and they know. “Why have they got to offer that much off the car?” would have to be a fairly common question. You’ve also got the hit that re-sale values take as a result of heavy incentive buying.
Saab released the 9-2x as a way to get younger buyers into Saab and to a certain extent it worked (hey, Nevitz). But if any of those 9-2x buyers have stayed with the brand and traded up then they’ve taken an enormous hit to do so (hey, Nevitz) – and that’s because of the deep, deep discounting GM did during the Employee Pricing for Everyone promotion a few years ago. 9-2x values dived and a subsequent purchase of another Saab under those circumstances indicates a fair amount of commitment (hey, Nevitz).
The other reputational hit is the month-after-month listing of Saab as one of the deepest discounters in the US. They took the title again in September 07, with an average incentive of almost 20% of a car’s list price. That’s massive, and the only ones really benefitting are the consumers, but it’s a short term benefit and with the exception of long-term owners, I wonder if it’s really any benefit at all.
You see it different facets of life all the time. Careers, sports, education. You name it, and i’ll find an example where someone or some organisation has built organically on quality in order establish a lasting period of success. Massive incentives allow for some numbers on the company’s books to resemble those of a succesful player, but a study of the underlying circumstances will tell you that that’s not the case.
Saab needs to build on quality – in design, innovation, materials, safety, performance and reliability. They’ve definitely got a part to play in this.
But so do consumers. I’m not going to make any friends by saying this, but if I hear another complaint about how the incentives to buy aren’t big enough then I’m going to scream. I publish incentive information when it comes about because it’s there and people reading will have an interest in it. I never have, and never will, encourage people to wait for bigger incentives, thereby holding their dealer and Saab over-all to ransom.
My advice, and what I’ve done in practice (though in the second hand market only due to my own financial circumstances) is if you want a car, find one that you want that’s in your price bracket – and buy it at a fair price. Use the incentives that are available and negotiate all you like with your local dealer, but don’t get savage on the company or the dealer if their incentives aren’t as big as you personally imagine they should be.
A product is worth a certain price and the company has a responsibility to make sure that that product provides value at that price. The consumer’s responsibility is to assure themselves that that product is what they want/need. The fact that they’re considering it means that the price is in the ballpark, so if it meets your needs – I say haggle with what’s available at the time and then go for it.
Both consumers and Saab (and GM in general) need to take steps to wean themselves off the incentive drug. For Saab that means a quality product that justifies the price they’re asking. For consumers it means biting the bullet when the car is right and the time is right. It’s a long process, but I really hope it can come into being as life will probably be a lot easier for everyone when these things aren’t that much of an issue any more and Saab’s public reputation is more readily associated with that of a quality carmaker worth having a look at.