GMs marketing strategy surrounding their OnStar service
GM’s Onstar telematics system builds itself by successfully maintaining larger market share by venturing even into the Chinese markets and planning to expand globally. Although the company has variety of brand names like Chevrolet, Buick, Cadillac, Saturn, Daewoo, Opel etc. , the GMs Onstar’s satellite technology is the innovative technology and is considered to be the core competency of GM which was developed in 1996. Tracking any emergency situations like theft can be easily detected by this facility and it also provides support in interacting with the Onstar staff to clarify any issues at the press of the button.
Initially the Onstar’s market was totally dependent on the US market and now it is making inroads into more countries (Thomas, C. 2008). Target Market The Onstar’s service sector will be in direct touch with the customer choices, dealer behavior, customer service, financial and cost dynamics, alliances and competition and customer acquisition and retention. These six segments of the markets judged the long term profitability and the penetration of the consumer market.
The demographics of the company is based on the recruitment and staffing process which GM follows. Intelligent staff with well trained service in handling car emergencies and usually follows overstaffing keeping
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GM’s economical advantage was in making Onstar strategize on four primary elements namely progress of Onstar’s telematics functions, project and enter into the telematics retail market, acquiring new subscriber bases and retail partners and increasing the independence level of Onstar from General Motors (darden, 2008). The entire GM auto industry has been severely affected by the weakening US and the entire global economy, tremendous increase in the fuel prices, increasing social and political concerns.
To overcome these political problems, GM should think of getting into mass production by adopting the strategy of going into using alternatives to fuel vehicles like electric cars, fuel cell and the hybrid option (Thomas, C. 2008). The economic implications of the distribution channel were not very impressive for Onstar. With the commercialization of the Onstar business, a different perspective was considered where in the economic characteristics proved to be very different from the regular auto businesses (Slywotsky, A. et al. 2003). Product
Onstar is an in-vehicle telecommunication system which has since 2002 gone into a wireless system of providing an out of vehicle, a devise which has to be held in the hand (Jean, H. 2001). Onstar has focused on making its Onstar service an innovative service strategy in the area of telematics as a service provider subscriber (Koslowski, T. 2007). This service is a life saver especially in vehicle accidents which also provides valuable information on traffic, provides access to the internet, provides insights into crash notification and also helps in navigation purposes.
It provides security, entertainment, safety and productivity to the owners of the vehicle (Barabba, B. et al. 2002). Onstar deals with the technology of satellite and cellular technology where in the primary system of Onstar used the GPS (global positioning system), while the secondary communications system operated through the cellular network connections. Both primary and secondary systems provided value to their customers by their 24 hour service and coast to coast service (darden, 2008).
Demand innovation is the need of the hour for GM where there has been a shift from product innovation to demand innovation (Slywotsky, A. et al. 2003). Technology: While adopting the advantage of internet access, GM had to consider 3 important factors for this strategy to be successful. The first factor was the software package to provide back end support for the traffic on the web. The second factor was the incorporation of cross functional system where by all the technologies required by Onstar would function together. The final factor concentrated on the voice activated user interface feature (darden, 2008).
Providing great importance to the styling and the engineering effort has been the motto for Onstar (Slywotsky, A. et al. 2003). Price Offering a localized pricing strategy based on the domestic location has helped Onstar in their service provision. Skimming pricing and penetration pricing were both experimented where-in under skim pricing, certain higher model of GM were priced higher and lower model would be charged lower rate which would in totality balance the overall effect of price (Koslowski, T. 2007). This system incurred cost of installation which amounts to $600 for its customers.
Unfortunately the price and the cost of Onstar have not been very satisfying for the dealers (Slywotsky, A. et al. 2003). The various packages in price are available for Onstar. The safe and sound plan costs $16. 95 pm, directions and connection plan costs $34. 95 pm, Luxury and leisure costs $69. 95 pm (deloitte, 2004). Onstar faced price pressure from substitute products as well as complementary products like bus and rapid transit being real substitutes and gasoline, tires and batteries being complementary products (Thomas, C.
2008). Place Onstar was initially only existing in the US market and is now venturing into the Chinese automobile market there by generating the “first mover advantage” for the company. Thus its Chinese joint venture has made GM enter an enormously large and growing market (Koslowski, T. 2007). Selling the Onstar device through a third party retailers like stereo stores, electronic outlets like best buys and circuit city and discount stores like Wal-Mart which would in turn help in increasing the market share and the overall sales.
This method of third party sales helped Onstar in distributing the service to the existing 200 million vehicles and 70 % of new buyers (Barabba, B. et al. 2002). Online shopping channel has been very convenient for the online shoppers. Providing 24 hour connection to the customers along with wireless phone service has been the key navigation and convenience advantage for the users of Onstar (deloitte. 2004). Promotion Word of Mouth communication technique has been a great help in generating awareness on the Onstar service (Barabba, B. et al.
2002). Internet was considered to be the best source of communication where in GM tried to facilitate B2C ecommerce focused on promoting shopping online, B2B ecommerce which had an alliance with Ford and Daimler Chrysler for buying parts online and utilizing the communication advantage and rolling communication devices as an e-business objective (darden, 2008). Onstar has still date executed tremendous results in advertising campaigns to help effectively communicate their services to the customers by showcasing their Onstar brand (comcare, 2009).
The “GM Hot button” promotional campaign which was initiated in 2004 was a solution for building up traffic at dealer points which will ultimately result in increasing sales. Hot button was designed to be an integrated communication plan which adopted a system of POS – point of sale marketing technique of distributing material. For this campaign, Television, Magazine, Newspaper, Direct emails and Web was broadly used to increase the traffic flow at dealership location. Game play Call center was also incorporated in this campaign (penton media, 2007). Overall Marketing Mix Analysis
Onstar’s strategic move from being just a car feature to a service business was a strategy which would provide assistance in acquiring, developing and retaining customers and would collect a monthly subscription fee for the services they would provide to the customers. This Onstar service could either take the form of evolutionary approach or revolutionary approach. The evolutionary approach enters the initial market in a gradual manner adopting the value pricing mechanism. This strategy adopts limited marketing style and reacts to the alliances offering.
In contrast, the revolutionary approach takes the form of aggressive introduction and incorporates aggressive marketing by seeking alliances offerings and focusing on penetration pricing. GM would opt for the revolutionary approach as this would help the business to move faster as compared to the slow and cautious approach. (Barabba, B. et al. 2002). Onstar facilitated their business by providing advantage to their customers or users the facilities of cellular network, personal calling, internet access, GPS network and advertising, roadside assistance, emergency services, convenience and concierge services (darden, 2008).
Competition General Motors Onstar service doesn’t concentrate too much on competition but it strives to be a differentiator as compared to other vehicle manufacturers (Koslowski, T. 2007). Both telematics and Onstar were leaders and pioneers in the area of telematics industry. Honda and Toyota succeeded in acquiring Onstar through the process of licensing. Ford and AAA (American Automotive Association) were the biggest enemies for General Motors Onstar business (darden, 2008).
The domestic companies like Daimler Chrysler, Ford motor company, Honda motor company and Toyota motor corporation has been the major competitors for GM’s Onstar service (Thomas, C. 2008). Toyota has also rolled out their safety devices along with the add-ons to drivers assistance programs on the road which indicates a move towards competition. This has made the long time dominating Onstar face the competitive arena more stringently (GMA, 2007). CRM Onstar’s Customer relationship concept has been advanced by expanding their free service which in turn helps in increasing customer retention.
Another technique which Onstar has found essential is the automating and the repair services which will encourage CRM. Customer experiences are taken positively from the users and collaboration with the dealers will facilitate the process within (Koslowski, T. 2005). Although information technology is a very costly affair for maintaining CRM, CRM practices adopted by companies along with hi-tech technology will sound to be a perfect combination which GM has maintained with its innovation of Onstar service system.
Although adapting to the telematics system is not an easy task for the auto companies but it has been a step towards reaching the CRM objective where in the returning of the vehicle along with the customer data to the companies has shaped concierge services Allowing the seamless movement of customer data along with the partnering of the same up and down the channel is the art which GM follows (CBS Interactive Ltd. 2009). Conclusion Despite the success factor of the Onstar business, several factors spurned the managers as to whether the company should target Onstar as a service business or has it to be considered as an exclusive car feature.
Should the telematics business be a standard to be followed for all vehicles, Is the interdependence from GM worth the effort put by GM were some of the questions raised which required strategic decision making (darden, 2008. Onstar’s success will be determined by its neck of meeting to the needs of the customers and the formula for servicing these needs. This system of GM has provided a portfolio of services and is considered as a higher intensity profit center (Slywotsky, A. et al. 2003). References Barabba, V. et al. (2002). A Multimethod approach for creating new business models: the General Motors OnStar project.
Retrieved February 26, 2009, from http://www. scienceofbetter. org/can_do/success_stories/Interfaces/1526-551X-2002-32-01-0020R. pdf CBS Interactive. (2009). The auto industry and CRM. CNET News. Retrieved February 26, 2009, from http://news. cnet. com/The-auto-industry-and-CRM/2009-1017_3-917228. html comcare. (2009). Onstar. Retrieved February 27, 2009, from http://www. comcare. org/uploads/OnStar%20PR. pdf Darden. (2008). General Motors Onstar. University of Virginia. Retrieved February 25, 2009, from http://faculty. darden. virginia. edu/GBUS885-00/Documents/OnStar_rev0907a.
pdf Deloitte. (2004). OnStar: connecting to customers through telematics. Retrieved February 27, 2009, from http://www. deloitte. com/dtt/cda/doc/content/StanfordOnStarCaseStudy. pdf GMA network. (2007). Toyota to roll out safety, driver assist services. Retrieved February 25, 2009, from http://www. gmanews. tv/story/143122/Toyota-to-roll-out-safety-driver-assist-services Jean, H. (2009). GM to expand its OnStar service. All Business company. Retrieved February 26, 2009, from http://www. allbusiness. com/automotive/motor-vehicle-models-sedans/9416774-1. html