GM announced yesterday that it would offer a “lifetime guarantee” on all of its Opel and Vauxhall cars in Europe (the offer extends up to 100,000 miles – which for my Dad wouldn’t be a lifetime – but perhaps that’s best kept for another blog) . This is part of a trend in the car industry to offer ever more generous guarantees or add-ons rather than compete on price.
Non-price competition is nothing new, but it’s likely that we will see more of it. Coming out of recession and with consumer demand still weak, companies will be looking to ways to distinguish themselves from competitors. However, with margins being squeezed by exchange rate fluctuations; supply chain weaknesses; and high commodity prices, companies will not want to have to compete on price.
It’s an interesting question as to whether these add-ons are a good idea in the long-term. Yes, a lifetime guarantee will help establish trust with consumers and provides a unique marketing opportunity, but there are potentially significant long-term costs. In addition this could lead to some kind of non-price arms race: the industry norm for a guarantee used to be three years, with five, and even seven year guarantees having been offered of late. Then again, if these kind of offers can spur on ailing consumer demand, perhaps they’re just what the doctor ordered.