DaimlerChrysler Corp.

Author:Guy Cunningham, Judson Knight, Rebecca Stanfel
Pages:383-394
 
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1000 Chrysler Dr.

Auburn Hills, Michigan 48326-2766

USA

Telephone: (248) 576-5741

Web site: www.daimlerchrysler.com

EMPLOYEE PRICING PLAN PLUS CAMPAIGN
OVERVIEW

The Chrysler Group, based in Auburn Hills, Michigan, was the American subsidiary of DaimlerChrysler, responsible for the sales, marketing, and manufacturing of vehicles from the Dodge, Chrysler, and Jeep brands. In 2005 one of Chrysler's key competitors, the General Motors Corporation (GM), had planned a major sales initiative that combined price reductions with rebates and promised to make the price of GM vehicles extremely competitive. In an attempt to head off this move the Chrysler Group developed its own program, Employee Pricing Plan Plus, slated for June 2005. The initiative combined regular rebates (cash-back programs for consumers purchasing vehicles) with 4 to 5 percent discounts on the factory price. This led to price reductions of thousands of dollars for certain vehicles.

To spread the word about this new program the Chrysler Group asked its primary advertising agency, BBDO Detroit, to develop a campaign that would alert a wide audience to the steep discounts on Chrysler vehicles. BBDO decided to reach into the automaker's past and bring back Lee Iacocca to serve as the company's spokesperson. Iacocca, who from 1978 to 1992 served as president and then as chairman of Chrysler Group's predecessor, the Chrysler Corporation, had starred in a number of successful television spots on behalf of the automaker during the 1980s. The new spots, however, featured Iacocca in situations unfamiliar to those who remembered him from earlier campaigns. Instead of seriously addressing the camera, Iacocca informed consumers about the Employee Pricing Plan Plus through onscreen discussions with entertainers, his granddaughter (played by an actress), and a television set. One particularly memorable spot featured Iacocca playing golf with gangster-rap pioneer Snoop Dogg. The campaign also used print ads, which did not feature Iacocca.

The campaign was a success. July 2005 sales increased 32 percent over the same month in 2004, convincing Chrysler to extend the Employee Pricing Plan Plus until the end of the model year. Sales for the entire year were up about 5 percent.

HISTORICAL CONTEXT

The Chrysler Group was a subsidiary of the Germany-based automaker DaimlerChrysler. Headquartered in Auburn Hills, Michigan, the Chrysler Group was responsible for selling vehicles in the Dodge, Chrysler, and Jeep brands. It was created following the 1998 merger between the Chrysler Corporation and Daimler-Benz. Daimler-Benz itself was formed in 1926 through the merger of two German automakers. While Chrysler had been struggling when it joined forces with Daimler-Benz, by 2004 the company was reporting solid sales growth. That year the Chrysler Group sold more than 2.2 million

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units of its Chrysler, Jeep, and Dodge vehicles, a 4 percent increase from the previous year. The best-selling Chrysler Group vehicle in 2004 was the Dodge Ram pickup, 426,000 of which were moved that year.

The Chrysler Corporation was founded in 1925 by Walter P. Chrysler. Along with the Ford Motor Company and the General Motors Corporation, Chrysler was known as one of the "Big Three" U.S. automobile manufacturers that dominated the international automotive industry through much of the twentieth century. By the 1970s, however, Chrysler was in serious trouble, and it reached near bankruptcy in 1980. The company was saved from bankruptcy in part by a 1980 bailout from the federal government that was engineered by Chrysler's new top executive, Lee Iacocca.

Iacocca became president of Chrysler in 1978 and chairman of the company one year later. In addition to securing federal support, he made substantial changes to how the company operated. He streamlined its management structure by removing many of the company's executives, and he cut costs by negotiating with the powerful United Auto Workers union to institute a reduction in wages and benefits.

By 1983 the company was making enough of a profit to repay all of the money the U.S. government had loaned it in 1980. The company introduced the first minivan in 1984, creating a new market that Chrysler continued to dominate through the beginning of the twenty-first century. Iacocca also became Chrysler's most visible spokesperson, appearing in a long string of television commercials in the 1980s. Most of those spots ended with the executive's famous catchphrase: "If you can find a better car, buy it." He retired from the company in 1992.

In 1995, however, the former savior of the company alienated many at Chrysler when he joined investor Kirk Kerkorian's unsuccessful attempt to take over the company. As a result, relations between Iacocca and the Chrysler Corporation, which later became part of DaimlerChrysler, were strained for much of the next 10 years. The market pressures that Kerkorian's takeover bid exposed later helped push Chrysler to merge with Daimler-Benz.

TARGET MARKET

On July 9, 2005, Chrysler introduced its Employee Pricing Plan Plus program. It was a very competitive mix of reduced prices and consumer rebates (through which customers could earn cash back from vehicles purchased) meant to compete with parallel sales that rival automakers—particularly General Motors—were offering that summer. The program was aimed at all consumers who were often more price-conscious than other buyers and especially at those younger than 49 years of age.

COMPETITION

In 2005 the General Motors Corporation (GM) was offering a major price-incentive plan through its dealers, reducing the prices of most GM vehicles. At the time GM was the world's largest automaker as well as the top-selling automobile manufacturer in the United States. Using the tagline "You pay what we pay," GM cut prices aggressively in an attempt to convince consumers that they would get a good deal on a GM car purchased in July 2005. This put the pressure on GM's rivals to match these low prices or get left behind.

LEE IACOCCA

During a career that lasted nearly five decades, Lee Iacocca built a reputation as one of the most successful executives in the automotive industry. Most of that time was spent at the Ford Motor Company, where he began his career in 1947. While at Ford, Iacocca helped develop the brand's signature Ford Mustang muscle car. He became president of the company in 1970 but was forced to leave that position in 1978 after a dispute with Henry Ford II, the son of the company's founder. Soon afterward Iacocca joined the Chrysler Corporation as that company's president. He became chairman the following year.

Chrysler's subsequent turnaround from near bankruptcy made Iacocca a major celebrity. His autobiography, Iacocca (published in 1984), topped the best-seller lists, and he became Chrysler's public face, starring in a series of commercials that ran throughout the 1980s. Iacocca's public reputation was so good that many people urged him to run for president of the United States in 1988. He declined. Instead Iacocca continued at Chrysler until his retirement in 1992. He angered many at Chrysler in 1995 by participating in billionaire investor Kirk Kerkorian's unsuccessful bid to take control of the company; the situation led to years of acrimony between Iacocca and an organization that many credited him with saving. Chrysler and its onetime hero executive finally patched things up in 2005, when Iacocca became the company's spokesman once again.

To counter GM, the Chrysler Group developed an offer that it dubbed the Employee Pricing Plan Plus. The program covered most Chrysler Group vehicles, including the Chrysler PT Cruiser and the Dodge Ram

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pickup. Planned for July 2005, the program featured discounts of 4 to 5 percent off the dealer invoice. Any existing rebates would also continue to be honored. The effect was steep reductions in sales prices. For example, the price of the Dodge Durango SUV was cut by up to $9,000 with a rebate.

MARKETING STRATEGY

The Chrysler Group decided to tout its Employee Pricing Plan Plus with a $75 million television campaign to run in July and August 2005. It enlisted advertising agency BBDO Detroit to develop the campaign. BBDO determined that the best way to introduce Chrysler's new pricing program was to turn to someone from the company's past. After a 20-year hiatus from television commercials, Lee Iacocca returned as the pitchman for Chrysler Group vehicles. Although he retired from the company in 1992, Iacocca was still closely identified with the automotive giant. He also maintained a high profile in his own right through his work with the Iacocca Foundation, a charitable organization that raised money for diabetes research. Iacocca had created the foundation in 1984, after the death of his wife. In 2005 he donated his entire paycheck from making the commercials to the foundation. In addition, the Chrysler Group agreed to become a partner of the Iacocca Foundation, pledging to help raise more than $6 million.

The campaign began with three 30-second television spots: "Desk," "Channel Surfing," and "Granddaughter." The first spot...

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