What’s New in Automotive Marketing? The Increasing Use of Non-Cash Marketing Offers

Each day I look forward to going through my mail, not email but the old fashioned kind I get in my mailbox at home and work. It’s probably an occupational hazard with me, where I just have to understand why Company A sent me offer B, and why Company C thought I’d respond to offer D. One trend that has caught my eye recently is the use of non-cash or non-traditional offers in marketing solicitations. Despite what Jimmy Fallon has said in his Capital One commercials about how nearly everyone wants more cash, there seems to be a movement toward non-cash offers. The impetus behind these kinds of offers is the assumption that the consumer’s perceived value of them is higher than the actual cost of the incentive and therefore the company making the offer can make more money if response is not diminished. For example, a consumer responding to a non-cash offer perceived to be worth $50, but that only costs $40, will generate more profit than a pure cash offer of $50, assuming response is the same.

Questions Surrounding Automotive Offers
In the automotive space, which is usually saturated with “cash on the hood” and financing deals, there have been a growing array of non-cash offers including free vehicle insurance deals, complimentary service plans, frozen fuel prices, and guaranteed future trade-in values. So
how do you know if these kinds of offers will work? A number of questions may come to your
mind, such as:

• What do consumers think about these offers? Is cash still king in the consumer’s mind?

• How can I as a marketer increase the perceived value of these types of offers when so much of the true value is in the future?

• Should I be recommending more of these types of offers and, if so, under what circumstances?

• Should I take a mass market approach or target specific customer groups?

I’ve been able to look at results from similar programs in the past and I have identified a few key insights that may help these non-cash offer programs succeed:

Quantify the future value. Seems pretty obvious, but anytime the consumer has to do math or calculate the offer they are receiving, your chances of success have to go down. Case in point – when I’ve looked at fuel price programs, those that have not been successful were because consumers didn’t know how much they would actually save. They could estimate mileage, and their MPG, but they have no idea how much higher gas prices will be compared to their guaranteed locked-in gas price. Plus, this is a lot of math to figure out from the mailbox to the front door!

Target the offer to specific segments. In a recent marketing program that iKnowtion analyzed, overall results indicated that the client’s flat cash offer outperformed a bundled services/options offer, even though pre-launch research indicated the bundled offer had a significantly higher perceived value. If we had stopped there, the offer would have been deemed a failure and forever relegated to the “ideas that didn’t work pile.” However, by digging deeper, we were able to identify a customer group where the bundled package outperformed cash. This was an important discovery because the actual cost of the bundled package was equal to the cash offer, but produced better sales results – higher sales volume on the same incentive amount when properly targeted. But how do you find the right targets? On to test and learn…

Commit to test and learn. In the above example, no one knew the right target for the bundled offer at the outset. A well thought out test plan allowed us to identify and track distinct groups and measure sales results of each of the two offer types for each group. Taking the time up front to carve out 6 separate customer groups allowed us to have 6 chances for success, instead of a just one based on overall results.

To learn more, take a look at a couple of test and learn links below:

IMPROVING MARKETING PEROFRMANCE THROUGH TEST & LEARN

ADVANCED DIRECT MARKETING TESTING

Automotive manufacturers can benefit a lot if consumers will respond to non-cash offers, since financial incentives are a huge expense for them. The experience I referenced here wasn’t enough to seal the deal on non-cash offers for my automotive client, but it left some hope that with the right targeting and approach they can work.

So while I’ve seen mixed results on non-cash offers, I’m really interested in your experiences with these types of offers. Seen anything intriguing? Know of any successes? Please post a comment below or reach out to me directly at gmiller@iknowtion.com.

Geoff Miller is a Marketing Director at iKnowtion.

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