May 28, 2008

$2.99 A Gallon

Filed under: Marketing Tactics — Robert John Ed @ 3:21 am

Guarantees are proven to resonate with consumers. Chrysler/Dodge/Jeep are now heavily pushing their guarantee for $2.99 a gallon for the first 12k miles for three years. That’s a pretty good proposition, considering gas prices are likely going to hit $4 per gallon this summer. Assuming they held value, that’s a potential for quite a bit of savings.

Looking at the models, here’s a break down of the savings assuming that over the next three years the price per gallon would hold at $4 (yes, this is theoretical, but my assumption is that this will probably be a conservative estimate, PS I did this long hand so I’m making no, ahem, guarantees):

Jeep Wrangler: 15/19mpg (avg. 17)
12,000m/17mpg = 705 gallons
705 x $1 savings = $705 per year
$705 per year x 3 years = $2,115 in savings.

Chrysler 300 LX: 18/26mpg (avg. 22)
12,000m/22mpg = 545 gallons
545 x $1 = $545 per year
$545 per year x 3 years = $1,635 in savings.

Dodge Charger SRT8: 13/18mpg (avg. 15.5)
12,000m/15.5mpg = 774 gallons
774 x $1 = $774 per year
$774 per year x 3 years = $2,322 in savings.

The funny thing is that you can probably buy these same vehicles at the year end clearance coming up around October or November. I don’t know how much the savings will be then, but I wouldn’t doubt they’d match or beat those savings. This particular guarantee has a safety bait to it; no matter how much gas goes up, the consumer is guaranteed the same price. Our minds work to ensure security. And that is why this promotion will work.

Car dealers and all other kinds of marketers have certain margins built in to their products. They have a certain amount of leeway in terms of pricing, and can alter it in any number of ways. Cash back, 0% financing, year end closeouts, employee pricing, etc.

But this gas prices are tangible. They are what we speak about every day. They are social objects (BTW Hugh Macleod is a good read; cool illustrator too). What does that mean? Well when you buy one of those cars, every single time someone speaks about how high gas prices are, the buyers will speak about their deal on gas. This can go one of two ways, either they realize it’s a great deal and spread the word or they realize it wasn’t that great of a deal and keep mum to avoid the discerning crowd.

It could go either way, but I have a feeling it will sell a lot of cars in the short term. What the auto industry really needs to do is focus on providing products and services with a more long term solutions to what consumers are looking for.

And lastly, someone has done much better investigative reporting than me and thinks it’s a better idea to just take the consumer allowance they offer concurrently.

PS (I can’t finish this post) Here is Chrysler’s blog…checkout the comments. Seems like people agree with the idea of more long term solutions.


1 Comment »

  1. Very informative, is there an
    alternative to gas car
    water powered car

    Comment by sean brown — June 9, 2008 @ 4:52 am

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