It’s amazing how so many companies have no idea of a customer's lifetime value. That number is generally greater than you think, particularly
for products that aren’t commodities. The value is so high, in fact, you
really shouldn’t risk it for short-term marketing stunts.
Yet, companies do this time and time and time again.
In
search of response rates, marketers try tricks and deceptive tactics to get
customers to react, and then believe that the 10% response they ‘achieved’ was
a rousing success. Meanwhile, customers who have already spent thousands with
you are walking away, never to return.
Case in point, a recent visit to Volkswagen (SouthTowne
dealership in Salt Lake).
I own a 2002 Jetta – I know, poor me. The car is not one of
VW’s best. Electrical problems abound, among other things. Everyone knows this.
Before this Jetta I have owned two other VWs. My lifetime value to them is
pretty high.
So, I receive a letter saying that VW is buying back 1999 –
2002 Jettas – offering to pay the basic MSRP when the car was new if customers
will buy a new or used car.
I know it’s a gaffe – but part of me, sucker that I am, thinks
that maybe, just maybe, VW wants these cars off the road. After all, the newer
models are superior and every time a potential VW buyer sees my car, s/he thinks, “VW made a mess of that model.” My car is bad advertising.
In the past, the way car dealerships rigged this kind of offer
was by deducting for every ding and dent and problem. Of course, this model has
problems beyond belief. But the offer from SouthTowne VW says the only
deduction will be for mileage. Remember, we’re talking 1999 – 2002 models so
there will be at least 50,000 miles on any Jetta that comes in – that’s less
than 5,000 miles a year.
So what’s the catch?
The deduction VW takes is the IRS standard mileage
deduction. OK, you already see the hook. That amount is 42 cents per mile. So
let’s do the math. A car with 50,000 miles – again minimal for this age –
retailed for $16,800. VW offers me that, minus 50,000 x .42. The result? Deduct
$21,000 from $16,800. Oops. I owe them money… they see the car as worthless,
but will still offer me ‘something.’
The insult is the 42 cents per mile deduction is calculated
by IRS to include the cost of the car, depreciation, insurance, repairs and
gasoline. What does the cost of gasoline have to do with the value of a VW?
Nothing. They know it and assume you don’t. “This is the standard deduction,”
Randy the salesman rants. Like his hands are tied by the IRS.
It’s just a flat
out carnival trick by VW: like guessing someone’s weight for a fee of $5, then
offering him or her a prize that’s worth $2 if you're wrong. The house wins either way.
As a marketer I went to VW just to see how they would pull
their cheap, slick rabbit from a hat. (Plus, IKEA is on the way.) Now I know.
Bottom line: that
marketing stunt cost them a lifetime customer. I will not ever return to the
dealership, nor will I ever consider another VW. Ever. Case closed.
So while their marketing consultant is talking about a high
response rate, VW corporate ought to be thinking about how many customers have
been chased away… forever. In my case, future business was worth at least one more VW
(I love the new Golf), which includes the $20K cost (at least) plus service for the
life of the car, etc.
Somewhere in Deutschland a VW bean counter is
wondering why they can’t grow the brand in America.
All the while, the 'marketers' at SouthTowne are patting
themselves on the back for a scheme that went so very well.
“Consumers want a new story... authenticity, not spin... participation, not propaganda.”
