Why Ford is Cancelling Its Huge Sales Event

Ford's much-hyped "Friends and Neighbors" sales event was a dud, say dealers. The company will end the program a month early. Image source: Ford

What's happening: Ford (F 0.66%) will end its heavily advertised "Friends and Neighbors" promotional campaign a month earlier than expected. Originally set to run through the end of the year, Ford will end the program and begin a new incentives plan on Dec. 1, The Wall Street Journal first reported on Friday.

Why it's significant: The program has allowed customers to buy most Ford models at discounted no-haggle prices. Most of the prices were in fact pretty good deals, within about $200 of dealer invoice.

Initially, the big program raised some concerns: Was Ford playing the old Detroit game of sacrificing profit to gain market share? But CFO Bob Shanks said last week that the program was more of a marketing push than a big discounting event. He said that the discounts weren't expected to raise Ford's overall incentive payouts -- in fact, Shanks said, they appeared to be down slightly since the start of the program.

Early data suggests that Shanks was right. TrueCar analysts said last week that Ford's average incentive payment per vehicle appeared to be down 0.9% in November, to about $3,360 per vehicle.

TrueCar also said that Ford's November U.S. sales appeared to be on track for a year-over-year sales gain slightly ahead of the overall market, although its market share may drop slightly from where it was in October. That suggested the program wasn't having a whole lot of success.

The idea behind the program, simply put, was to give customers the dealers' "best price" up front, without the need to engage in the negotiations that many customers find to be stressful.

It was a promising-sounding idea. But the Journal and Automotive News have both reported that dealers gave the program a lukewarm reception, despite the added incentives that Ford offered to dealers. Apparently, some customers found it confusing.

For its part, Ford said only that it was "updating" its plan based on feedback from its dealers, and that it would continue to be "competitive yet disciplined" on incentives.

What happens next: Ford is expected to begin a more traditional "Holiday Sales Event" on Dec. 1. That's unlikely to be a big blowout sale: Shanks and other senior Ford executives have made it very clear that the company plans to maintain its "discipline" on incentives in order to preserve its strong profit margins.

I expect Ford to maintain that discipline -- or put another way, I don't expect Ford's incentive payouts in December to jump significantly from November (or October levels). But presenting those discounts more traditionally, as holiday discounts, may have a better marketing effect. We'll know more after Ford's new campaign begins on Tuesday.