US:New Ford tactic: Sticker slashing
New Ford tactic: Sticker slashing
'07 models will also get more standard features
Bryce G. Hoffman / The Detroit News
Ford Motor Co. is shifting its marketing approach by lowering sticker prices on several 2007 model vehicles and adding more standard equipment to some cars and trucks.
Like General Motors Corp., Ford is trying to find new ways to reach customers other than fire-sale discounts that hurt resale values.
The changes were outlined in a letter Friday to dealers from Al Giombetti, president of marketing and sales for the Ford, Lincoln and Mercury brands.
Giombetti also told Ford dealers their profit margins will be reduced on some vehicles. The changes will be rolled out over the next few months, though some changes will be immediate.
This morning in Dearborn, for example, Ford will announce it has decided to add more standard equipment on its new Ford Edge crossover vehicle, which debuts this fall. Full side-curtain air bags and roll-stability control will now come standard on the base model.
"Being competitive in today's marketplace requires competitive content and competitive pricing," Giombetti wrote in his letter to dealers, a copy of which was obtained by The Detroit News. "We believe we have an outstanding plan to stabilize and regain sales and market share."
The lower base price makes sense in an era of online comparison shopping. Giombetti said 75 percent of new vehicle buyers use the Internet to price vehicles, but only 15 percent look up what incentives and other discounts are available.
He also noted that other automakers have started adding content to their vehicles with little or no price increases to make their cars and trucks more attractive to consumers.
"In light of this situation, we need to continually evaluate our content and visual pricing," Giombetti said.
GM cited similar concerns when it lowered prices earlier this year. Ford is following suit, at least with its 2007 model vehicles.
Ford will drop the manufacturer's suggested retail price on its Ranger pickup $1,000 for super cab models and $590 for regular cab models. Giombetti said that will make the Ranger the lowest-priced compact pickup on the market today.
Ford is also reducing the MSRP on its Escape Hybrid SUV $1,000 in an effort to shrink the gap between the hybrid and the standard versions of the popular sport utility vehicle.
The company hopes that will encourage more consumers to step up to the hybrid model -- particularly in light of recent tax incentives for hybrid purchasers.
The automaker also plans to add more features to the base model Five Hundred and Freestyle in an effort to make them more attractive to consumers.
While Ford will bear some of these costs itself, it also is reducing the margins on a number of vehicles, meaning that dealer's will absorb some costs.
Not all dealers are happy about that.
"They're putting too much on the dealers," said Kenny Shreve, of Kenny Shreve Ford Mercury Inc, in Mcleansboro, Ill. "We can't structure deals anymore."
Shreve said Ford has already cut margins on many of its vehicles, leaving dealers with less room to negotiate.
"Ford is trying to go to one-price selling," he said. "We all know Saturn tried that, and it didn't work."
But Ford believes its new pricing strategy can be a win for dealers, too.
"The full package of all these changes will improve our business and dealers' business too by creating a better value for the consumer," said Ford spokesman Jim Cain. "Last year, when we adjusted margin on the F-series, we actually saw dealer grosses improve slightly."
Ford also plans similar pricing changes for its Mercury and Lincoln brands.
The new pricing scheme represents a departure from Ford's previous strategy, in which features were gradually stripped from older vehicles to allow for deeper and deeper price cuts. That hurt residual values, which also hurt Ford's brands.
Ford wants to craft a simple pricing strategy where the transaction price more closely matches the vehicle sticker price. The plan also calls for Ford to give its customers more in the way of standard features.
The automaker is doing just that by adding roll-stability control and side-curtain air bags to the Edge. The lack of those features had been seen as a deficiency in an otherwise promising vehicle by several product analysts.
"This vehicle is bold looking, it's a blast to drive and we're not going to go to market with only five bullets in our six-gun," said Cain, who confirmed the changes to the new crossover. "We are looking to make our vehicles a better value for customers, improve residual values and break out of the old business-as-usual mind-set."
Other changes are also in the works.
During the same meeting with dealers, Ford unveiled a new "Bold Moves" advertising campaign, the details of which will be officially announced later today.
As The News reported last week, that campaign features a new slogan and a new Ford anthem performed by Kelly Clarkson that will premier during tonight's airing of "American Idol."
It also includes a series of commercials focused on "everyday people" making some bold moves of their own. Ford is also planning a reality television show that would challenge aspiring designers to come up with a hot new concept car.
"This is not a short-term campaign," Giombetti told dealers. "It is a long-term initiative designed to strengthen our brand, emotionally connect with our customers and make the most out of our marketing activities."
Ford is also encouraging dealers to focus on core vehicles like the F-series pickup, Escape SUV and Fusion sedan in their own advertising.
All Ford dealers will be briefed on the new campaign and new pricing scheme later today.
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My next Ford.....