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May 19, 2003 - Strategy Magazine
Special Report: Premiums & Incentives

Free car with $30,000 watch!

by Sara Minogue
page 11

On or around Sept. 11, 2001, cars in America went on sale, and stayed there.

Zero per cent financing offers and cash rebates have been widely credited with keeping the industry afloat. Individual car brands, however, have not profited from the discounts and a return to other types of premiums and incentives might be the answer.

"Competitively, the problem is that when you offer 0% financing rates, it no longer becomes a differentiator between brands and that can be very dangerous," says Chris Travell, a VP with Mississauga-based automotive and retail consultancy Maritz. "What we find is that other aspects of the sales experience take on more importance."

In December 2001, Ford of Mexico made an interesting study of a promotion designed to reclaim business to www.ford.com.mx after the October move of its central call centre caused sales to drop in what was Ford's largest online retail site in the world.

The promotion started with an e-mail to consumers who had visited the site and given permission to Ford to contact them. The message of the e-mail was in the form of a letter to Santa with a child requesting a new Ford car and a PalmPilot. He tells Santa not to worry about the Palm because if Santa bought the car online the Palm was free.

The promotion was attributed with 300 incremental sales.

"Nobody buys a $20,000 plus car because they're going to get a $200 PalmPilot," says Trish Wheaton, president of Toronto-based Wunderman. "But what it did do was serve as a tie-breaker between two or three parity options."

In other words - financial incentives will get people into the marketplace, but it takes a more unusual offer to get people to choose your brand. If you're in the market for a hot little import, for example, you could buy a Nissan or a Honda - but the new Mazda Speed comes with a free watch.

Test drives can be an effective way to get people into the showroom, and then give them something to take home. From walkie-talkies for the Ford Explorer to Serengeti sunglasses for Nissan Pathfinder or skis for the Subaru Forester, "what you want to produce is qualified traffic to an auto dealership," Wheaton says.

"With incentives it doesn't matter what the category. The objective is always balancing a qualified acquisition or lead versus someone who's just there to come and get the freebie. If you use the right incentive, you can see you've got a very qualified and involved customer who will continue to purchase if you're selling something that is continuity based. They'll stick around, they'll be loyal. That's what you want a good incentive to do."

Wheaton cautions against giving away just anything. After years of experience working on Time-Life books, she says: "You always knew you would get a bigger up-front response using a solar calculator or some electronic gizmo but you never got as loyal a customer as when you gave an affinity premium - something that had affinity to the actual product you're selling."

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