Co. does not expect a newly launched partnership with online auction house eBay Motors to jeopardize its delicate image, but for now it stops short of offering bargain hunters the opportunity to bid on cars and trucks from its premium Cadillac division.
“Above everything else, your brand is built through market presence and word of mouth in our industry,” says Mark LaNeve, vice president-U.S. sales for GM. “More important than the consumer seeing every ad we run is for our dealers to sell one Chevy Malibu into a neighborhood full of () Camrys and ( ) Accords.
“Because then they see the vehicle – they see it in the (neighbor’s) driveway, at church, at the soccer games and at the schools – and they get asked, ‘Why did you buy it?’” LaNeve tells Ward’s during a conference call to kick-off the 3-week pilot program in California. “‘Well, it was car of the year and it gets better gas mileage than your Camry, Sam.’ That’s how you build a brand in this business.”
LaNeve says he is “not worried in the least” that allowing bargain-hunting consumers to bid through eBay for GM cars and trucks will erode brand image and lower vehicle residuals.
“An association with eBay is a brand-enhancer. What we’re trying to do with this promotion is provide customer convenience – make it easier for customers to shop.”
But at the same time, GM is keeping Cadillac out of the program.
“As a premium-luxury brand, they want to sit on the sidelines and watch this one play out,” LaNeve says. “They’re going to be cautious in this area, as they have been also in big GM incentive programs. They’ve tended not to participate.”
Incentive programs, which would include the eBay relationship because it combines a lower, fixed “supplier price” on the vehicles with a major advertising program, lure customers but often lower residual values and tarnish brands.
GM has been trying to raise the residual values of its brands by backing off incentives, and it has had some recent successes, such as with the new Malibu.
The auto maker also is fresh off a 39-day trip through bankruptcy and trying to reinvent its weary public image.
“It’s a leap of faith in some regards,” says Wes Brown, a principal at the consumer research firm Iceology.
“The perception of one person, who may be more prudent and might not care for the typical car-buying process, could be, ‘Great,ʼ” he says. “For others, who maybe don’t use eBay, it might be, ‘What are they thinking?’”
But Brown says it is worth the gamble.
“Whatever the negative perception about GM nationally, it’s 10 times worse here,” he says by phone from his Los Angeles office. “Outside of trucks, they don’t sell a thing here. So why not try something out of the ordinary. If it sells two cars here, it’ll be a successful program.”
LaNeve admits as much, saying GM’s weak passenger-car presence in the state, as well as California’s ranking as the nation’s No.1 new-vehicle market, played a key role in deciding where to first float the promotion. GM’s market share in the state is 13.5%, compared with its 19% penetration nationally.
“It’s a big market, incredibly hard hit from the recession,” he says. “It needs a shot in the arm, and it’s a market where we have underperformed in passenger cars. Anything we can do to augment our truck business…we think is good for us. If it works in California, it’s going to work anywhere.”
As for Cadillac, LaNeve thinks the brand will jump in later if the program proves successful. “I wouldn’t be surprised if they get in at a future phase.”
GM plans to spend “significantly” on the program, LaNeve says, and he anticipates the auto maker will take it to other areas of the country, especially key “conquest regions” outside of stronger selling areas such as the Midwest.
LaNeve also says GM won’t expand the program into markets where dealers might be uncomfortable with the concept, although he notes the eBay program does not affect dealer margins.
The partnership marks the first OEM-relationship for eBay Motors, known mostly for selling used cars but expanding in recent years to new vehicles in partnerships with individual dealers. The site sees 12 million car shoppers every month.
“This is the first time (eBay Motors) will help a manufacturer create a virtual showroom,” says Rob Chesney, eBay Motors vice president. “It will look very different than how our dealers are used to interacting with eBay in the past.
Dealers will offer vehicles that are in stock through the site, where the option exits to participate in an auction or use a “Buy It Now” feature allowing the consumer to pull the trigger on a sale immediately. Consumers also can negotiate a price at the site, bargaining as far as the final transaction price before completing the sale at the dealer.
For now, eBay is working exclusively with GM but Chesney says the program could be expanded to other auto makers in the future.