No Fountain of Youth for Olds - Company Business and Marketing

Industry Standard, The, Nov 13, 2000 by Dale Buss

The GM division has been a pioneer on the Internet, but that doesn't mean it's selling more cars.

FOR SEVERAL YEARS, OLDSMOBILE has milked the idea that it's freshening up its stodgy image by being on the cutting edge of Internet technology. Widely acknowledged in Detroit as a pioneer in using the Web to market its cars, the General Motors division enhanced its image in February when it became the first automotive brand with a site specifically for wireless users.

"Six years ago we started to move at Internet speed," Karen Francis, then Oldsmobile's general manager, said in a release issued at the company's wireless launch. "This pioneering digital effort with the wireless Web is exactly what our younger, tech-savvy consumers have come to expect - and we intend on delivering."

Francis, however, left her job three months later, and General Motors began to rein in Oldsmobile's experimental ways. As Olds managers were preparing to take the next step -- testing advertising on the wireless Web - bosses at GM recently told the Oldsmobile executives to wait until corporate-level decision-makers had formulated a companywide strategy for mobile-Internet marketing.

"They took the enthusiasm out of the troops," says Art Spinella, president of CNW Marketing Research, pointing to GM's reasserting more control over Olds' interactive marketing.

So it goes these days at Oldsmobile, where it's difficult to tell whether the new economy tank is half frill or half empty. Instead of being the poster child for the Net, Oldsmobile is becoming an unwilling example of how Net savviness alone can't overcome basic problems in a business.

Olds has counted on its online forays to revitalize its brand by helping cut the average age of its buyers. Since 1997 the typical age for an Olds buyer has dropped 12 years, to 49 from 61. Oldsmobile has created more Net-based programs, and more of its customers research their purchases online before making purchases than any other GM division. Peter Kosak, Olds' brand-development manager, says the Net remains "a powerful medium that resonates well with our key targets: younger, affluent and highly educated."

But the question is whether the change is big enough, fast enough. In the first nine months of this year, Oldsmobile sales were down 20 percent from the same period in 1999. That's more than double the decline of the other disappointing GM division, Buick. And focusing on younger buyers isn't a cure-all, says Tom Healey, a partner at market-research firm J.D. Power & Associates. "It's relatively easy to sell cars into that marketplace," he explains. "The hard part is to make money doing it."

One measure of Oldsmobile's desperation: Last month it became the sole GM division to offer deals with no down payment, no payments and a variety of no-interest incentives on its entire fleet through Jan. 2. Such an appeal, reminiscent of sales offered by bargain-basement furniture stores, is pretty much unheard of in the auto industry, even during downturns in the market.

Oldsmobile's Kosak maintains that this year's poor sales performance is merely a blip, largely attributable to overhauling its vehicle lineup. Models like Cutlass Supreme are being phased out in favor of newer ones like Aurora. And the company awaits updated versions of its Silhouette minivan and Bravada SUV. That means this year Olds didn't have as many models to offer consumers, though that could change in the coming months.

Still, the fact that Oldsmobile's sales, for now, are declining in a recession-like fashion underscores the limits of the Net today. And GM's reluctance to free Oldsmobile to do its own thing with its wireless initiative suggests that corporate strategists don't think those limits will be overcome anytime soon

The wireless Web "isn't there yet as far as reaching the masses," says one marketing executive, who spoke on condition of anonymity. "The big focus within GM as well as within Olds now is how do you impact sales. It's important that every promotion has a direct impact on sales."

Dale Buss lives in Rochester Hills, Mich., and writes regularly about the auto industry.