Wednesday, March 4, 2009

Nothing's Shocking

General Motors is considering a Hyundai-like Assurance program. After watching Hyundai keep their sales from falling through the floor, GM is the first automaker to smartly follow Hyundai’s lead.

I’ve been a big fan of Hyundai’s Assurance program from day one. To me, it was a compelling, unique idea that squarely deals with the elephant in the room – confidence.

The problem with the program is that it will attract copycats which will eventually lessen the benefit for Hyundai as other automakers follow suit. It is a classic temporary first mover advantage, because the concept is easily replicable by competitors. GM is the first to announce their copycat strategy. I’m sure others are not far behind.

Hyundai will eventually stop bucking the trend of drastically down sales, as they are currently acquiring customers from brands currently not doing an assurance program. But once others do the same program, the impact of the program lessens for all brands, since fewer people will defect to competitors for the reason Hyundai is now getting conquests. It no longer becomes a competitive advantage for anyone if all automakers end up doing an assurance insurance.

For example, if Chevrolet is willing to pay my payments, if I'm worried about losing my job and I wanted a Chevrolet to begin with, I won’t consider Hyundai as the only alternative. Eventually the conquests Hyundai is getting today from a very nervous, confidence-stricken auto buyers will decrease the huge boost Hyundai is getting from the assurance program.

The great news is that Hyundai Assurance is working. The bad news is that everyone else in the industry can copy the idea with little effort.

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