DaimlerChrysler Canada has followed the US operation into launching a programme that offers retail new vehicle customers the same financial savings as DC employees, plus up to an additional $C5,500 in dealer discounts on virtually all of its models.

"DaimlerChrysler is the first manufacturer in Canada to bring employee pricing to market," said the automaker's marketing vice-president Mike Accavitti. "Our sales are up through the first half of the year and we aim to keep that momentum going with more new product launches and best in-class offers."

DaimlerChrysler Canada June sales were up 12%, though volume was up only 0.3% for the year to date.

Most 2005 models are available in the so-called 'Employee Pricing Plus' programme but all 2006 models, the Dodge Sprinter (US version of the Mercedes Sprinter van) and the recently launched Chrysler 300C SRT8 sports sedan are excluded.

The programme is being supported by national advertising via television, radio, print, internet and local dealers.

Canadian auto industry consultant Dennis DesRosiers told just-auto that, although these programmes are effective in lifting sales, they have drawbacks. In particular, he noted that they lower margins, negatively impact residual values and hurt brand value.

DesRosiers said DCX has got a head start on Ford and GM though he expects the two 'Big Three' rivals to follow shortly.
 
Des Rosiers said this type of sales promotion is so effective because it is very simple for consumers to understand and they are different.

"Consumers have become numb to 'zero' and other incentive deals and with little to no differentiation to consumers they become quite ineffective," he noted.

"They are a good deal for consumers and consumers do respond to better prices. There is some 'game' playing with previous incentive programs and consumers saw through this which lowered the effectiveness of other incentive programmes, with this program it is more difficult to play games, they are closer to the 'real meal deal' you might say, simplifying a complex equation.

"Although a good deal for many consumers they will certainly lower resale values so if a consumer is dependent on a trade in for partial payment of their new vehicle then what they pick up on this programme they will partially lose with their trade.  But initially we expect consumers to react positively."
 
DesRosiers said, however that the downside of these programs for auomakers and their dealers is that they lower margins, negatively impact residual values and hurt brand value.

"How in the heck do these companies find a way to get out of this game?" he asked.

He added he was also concerned about new models.

"GM, Ford and DCX are bringing to market a record number of new models over the next year and these deep discount programmes will likely undermine this effort.

"How many consumers they steal from these models is uncertain but they will lose some consumer interest in their future product as a result of these heavy discounts. DCX has wisely restricted these discounts to 2005 models.

"It will be interesting to see how big a hang-over they will have after this program loses its effectiveness but in the meantime we expect consumers to respond positively which should help overall sales."