Auto giant GM will be lowering sticker prices for ’06, on the heels of its Employee Pricing for All program. For years, GM was happy to skim off customers who were willing to pay close to sticker price, while offering incentives when necessary. For the past 5 years, however, customers have guarded their wallets more closely, and the SUV craze has slowed (especially for GM’s relatively old line of SUVs). GM countered by boosting rebates and offering 0% financing. These discounts have effectively ruined GM’s chances of making sticker price credible. Meanwhile, internet shoppers, looking at list prices, may perceive a GM vehicle to be more expensive than a competitor. So GM is trying to bring down sticker prices, to narrow the gap between list price and actual price, a move long overdue.

This is another example of unintended consequences of pricing policies. “Price high, selectively discount only when needed” sounds like something straight out of a pricing text book. However, it also creates intense focus on pricing for buyers, who are happy to wait for “summer sales events”, and the very obfuscation of the real price can hurt the company when buyers have better information from other makers. Pricing isn’t a one time decision, it’s a game that requires looking several moves ahead.

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