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GM: Sticker Price Dynamite

W.D. Crotty
January 12, 2006

Wednesday, I was harping on the contrasts at GM (NYSE: GM  ) . Now I see it's tinkering with sticker prices -- also known as the manufacturer's suggested retail price (MSRP).

GM announced that it has reduced the sticker price on 80% of its 2006 models. According to the company, "This action allowed for clearer comparisons to competitive vehicles and pricing simplicity. It also enabled the nearly two-thirds of new vehicle buyers using the Internet to research their vehicle purchase and get strong MSRP comparisons."

Let's play a little Marketing 101 for a moment and let me prove that GM might not accomplish the desired endpoint.

GM's last marketing marvel to move cars in the U.S. was "employee pricing." It moved a lot of cars -- but not profitably. Marketing has consistently used cash-back rebates and other methods to render in the consumers' mind that the sticker price is of little meaning. In fact, one could say GM and its American brethren have, in their own right, bred consumers to expect rebates and/or cash back on purchases. And who's to say the consumer will stop expecting giant-sized portions of both?

Here is what GM thinks it gets with the new sticker prices: "Today's action allows us to ta