Here’s part of a quote, which should resonate with every marketer. “Nowadays people know the price of everything.” Hard to argue with that, what with the Internet and mobile access, not to mention price-checking apps but, of course, today you can’t avoid mentioning them. The rest of the quote goes”. . . and the value of nothing.” Oscar Wilde. 123 years ago!
The quote came to mind at the announcement that General Motors will offer two years of free oil changes, tire rotations and vehicle inspections on most new vehicles to create – wait for it – consumer loyalty. No really, “loyalty” and “buzz.” The last-century equation for value was Value = Quality/Costs, but given the ubiquity of primacy-of-product and the outcomes of process re-engineering, that was adjusted to an updated late-century version: Value = Benefits/Costs. In this century, when brand can serve as a surrogate for added-value, it might reasonably look like this: Value = Benefits + Brand/Costs.
The GM promotion is for two years or 24,000 miles, and is for “scheduled maintenance,” so the GM timing may differ somewhat from our calculations below. And as GM brand perceptions vary significantly depending upon the consumer segment you’re talking to, we’ve only looked at the what the package might be worth, the practical “value” of car care assumed. Prices will vary dependent upon your location and your driving habits, but this is a pretty good rough estimate.
Service costs have been rounded up – just to give GM the benefit of the effort: Vehicle Safety and Emissions inspection: $40 X 2 years = $80.00. Tire Balance and Rotation: $15 X 4 (we split the difference between what has been conventional wisdom [every 3M miles] and the fact that you’ve bought a new car [every 7M miles]) = $60.00. Oil, Lube, and Filter Changes: $40 X 3 (again, last century they recommended this every 5M miles, but with new engine designs, automotive improvements, etc., manufacturers recommend every 7-10M miles, so we’re being a little compulsive calculating 3, but again, giving the frequency-benefit to GM) = $120.00
$260 for Loyalty
So about $260.00, or 0.006% of the cost of a 2014 Buick Enclave, as posted on the Motor Trend website. That’s what GM thinks will buy your loyalty. You think that’s enough? Or enough to swing on-the-fence car buyers to GM? We think that this is pretty much just an “added value” package and not a loyalty generator. Our experience is that most automakers are really good at promotions, but have never been very good at understanding loyalty.
GM CEO, Dan Akerson was quoted as noting the program is intended “to forge even stronger relationships” between dealerships and customers, based on the presumption that drivers who have their cars serviced at the dealership are more likely to go there for their next car purchase. That’s probably taken from some five-point scale rating they did, where 5 is “Extremely Likely” and 1 is “Not at All Likely.” Readers of these insights know how we feel about those in re predicting actual consumer behavior, but there it is.
Truth be told, beyond driving customers back to the dealership, these kinds of programs probably seek to close the perceived brand gaps between what consumers expect and what foreign competitors, like Toyota and Volkswagen, offer. But, alas, these programs ultimately become table stakes. Next time “3 years”? And for brands which can truly act as a surrogate for added-value, companies don’t have to make these offers. Consumers can do math and “brand” – and what it means – factors in very heavily in most categories, certainly automotive.
