The classic example of chutzpeh (Yiddish for unmitigated gall) is when a man kills his mother and father, then pleads for mercy at his sentencing on the grounds that he’s an orphan.
Now America’s third-largest advertiser is updating it — by demanding that television networks give them an exclusive 20% discount on already deeply discounted ad rates while refusing to give discounts to their own customers.
Do as I say
As one of the biggest and longest-standing television advertisers, “General Motors already enjoys significantly lower-than-market pricing, a benefit accorded to advertisers who have spent on networks for decades,” notes Ad Age.
“They have a pretty low base to begin with,” one executive says. “They have been an advertiser since the dawn of time and they are a founding or incumbent sponsor on a lot of network[s], so they get a very low base.”
But even with those bargain-basement rates, maybe when your biggest shareholder (30%) is the federal government (of which the FCC, that regulates broadcasting, is part), you feel a special sense of entitlement to other people’s money.
That would explain why, in the upfront negotiations for next season’s network advertising time — when “both sides of the table agree pricing is on the rise…[and] most of the haggling is centered on the size of the increase” — Government Motors is, according to one ad-buying executive, “seeking cuts as large as 20% in the cost of reaching 1,000 people, a metric known as a CPM that is common in upfront discussions.”
Not as I do
At the same time they were demanding deep discounts from the networks, GM announced to the Detroit Free Press and USA Today their intention to maintain full sticker pricing on their own inventory, even at the cost of losing market share and sales.
“This month, [CEO Dan] Akerson told analysts that the new Chevrolet Sonic is selling at an average price of about $1,000 higher than competitors such as the Ford Fiesta, Honda Fit, Toyota Yaris and Hyundai Accent,” USA Today reported.
In addiiton to keeping their retail sales at full sticker pricing, they’re going to cut way back on discounted rental-company and other fleet sales.
Cutting off your nose…
If GM can’t get the networks to cave in to their little protection racket — and so far, none have — they may end up hurting themselves more than the networks.
If the television networks sell less air time now in the upfront negotiations, they may actually come out ahead later on. They can always unload the extra inventory in the later, “scatter,” market, where advertisers buy air time closer to air date and typically pay more for it.
Unless GM can somehow get its largest shareholder to repeal the laws of supply and demand, sticking to sticker price may very well cost them sales and share. But that doesn’t matter because selling at sticker price fattens the manufacturer’s profit margin on each car — even, on paper at least, all the unsold ones.
Of course, losing sales and market share are same-old-same-old to GM. As of this month, their market share, at 17.7%, is 1.9% less than a year ago.
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