In the wake of the September 11th attacks, George W. Bush famously told Americans to go shopping. The country was terrified, war was on the horizon and the last thing the government wanted was for fear to trigger an economic collapse.
To show its commitment to keeping the American economy afloat, General Motors launched it’s “Keep America Rolling” initiative. It offered 0 percent financing on almost all GM vehicles (except Cadillacs, the Corvette, the Saturn L100 and the then-new Saturn Vue). According to Tyson Jominy, Vice President of J.D. Power PIN Consulting, the auto market has never been the same.
Two elements, he said, made it different than anything else the market had seen before.
“[I]t was portfolio-wide, even on models that had no obvious, endemic challenges,” Jominy told Jalopnik by email. “Incentives had existed for decades but were used mainly on model year-end or particularly slow-selling models. This was different.” With the exception of the aforementioned models, “Keep America Rolling” was a blanket program.
Second, the scale, marketing and simplicity of the program was groundbreaking.
“GM was the biggest automotive advertising buyer in the U.S., if not the biggest ad buyer on earth,” Jominy said. “It was everywhere on a scale that had never been done before.”
Interestingly, the 0 percent offer was only for 36 months of financing. In a world where two-thirds of car loans are 72 months or longer, that may not sound like much, but it provided a way to buy a car you couldn’t fully pay for yet without an added penalty.
But, Jominy notes, incentives can be dangerous. Once you start, it’s hard to ever stop. With sales and stock price growth from this program, GM had to find ways to keep growing the business. Again and again, they offered wide-ranging incentives with catch names and easy-to-understand value propositions.
“Employee Pricing For All,” “$2002 for 2002″ and “1-2-3″ incentive programs all followed, throwing more and more cash at buyers to keep sales trending up. Competitors were forced to respond, offering competitive financing and cashback offers.
That arms race, which started in 2001, continues to this day. From Toyotathon to Happy Honda Days to Truck Month and Dodge Power Dollars, the trend of easily packaged incentive deals continues unabated. At this point, vehicles seem to be priced with large savings in mind from the beginning.
While “$2002 for 2002″ was an unheard-of level of manufacturer-supported savings, Jominy says that the average incentive spend on all new cars sold last month was $4,150 per unit or 10.5% of MSRP.
And, as Jominy notes, those kind of statistics are all available as a result of the rise of data analytics in the automotive sector. That industry, which shapes marketing, product development and incentive programs, basically owes its massive size and success to the incentive spree that was kickstarted by GM’s “Keep America Rolling” program in 2001.
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