More than a quarter of the 4 million-plus households that own a GM MasterCard are more likely to buy a General Motors car or truck because they have the cobranded card, a consumer survey indicates.
Based on its survey of 6,000 households, Brittain Associates Inc. also extrapolates that half a million households which were planning to buy a GM vehicle intend to do so sooner. Of those surveyed in April, 263 households said they carried one or more GM MasterCards from Household Bank.
Incremental sales are vital to the program for GM, said Bruce Brittain, president of the Atlanta-based research firm. "Why else would GM do it otherwise?" he asked. "The only reason for GM to get into the credit card business is selling additional GM products."
While GM said the number of households who own a GM MasterCard is higher than the Brittain figure, it agrees with the survey's findings. It's own consumer surveys have found people who buy GM cars or trucks using rebates from the GM Mastercard tend to buy them sooner than they would have otherwise. The average cycle for buying a new car is five years.
"Also, we are extremely pleased with our assessment that substantial numbers indicate they would not have purchased a GM - would not even have considered it without this program," said Hank Weed, general marketing manager for the GM Card.
"GM has to sell more cars and speed the buying cycle," Mr. Brittain said. "Household has to get card owners who will use the card frequently and carry balances." The study indicates both strategies are working, he said.
According to GM, 150,000 buyers had used GM MasterCard rebates by the end of March. Based on the average rebate amount, $325, Mr. Brittain estimates that the program has cost GM about $50 million in total rebates to date. Mr. Weed did not confirm the $50 million figure.
"Clearly, if all the GM Mastercard owners who plan to use the rebate follow through, GM is looking at $1 billion plus rebate liability from the current card base," Mr. Brittain said. Incremental sales will have to surpass that liability to make the GM MasterCard program a long-term success, he added.
"I do know if all the people in our data base who currently have points outstanding come in tomorrow and redeem their points we would be happy campers," Mr. Weed said. "That would more than compensate any rebates we would give out."
GM reports it has more than 10 million cards in the United States. To date, some 180,000 have redeemed rebates to buy a GM car or truck. The no-fee card was launched in September 1992 with a variable 16.4% annual rate. Cardholders earn a 5% rebate on purchases, up to $500 per account year - or $3,500 over a seven-year period - toward the price of a new GM vehicle.
"Whatever we have spent in rebates we're more than pleased with the incremental sales," Mr. Weed said. "That's the reason we got into it."
