What’s Something Worth?

What’s Something Worth?:

from Business 2 Community by Robert Passikoff



Here’s part of a quote, which should resonate with every marketer. “Nowadays people know the price of everything.” Hard to argue with that one, what with the Internet and consumer 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. Yikes! Talk about being prescient.
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 vehicle sales to create – wait for it – consumer loyalty. No really, “loyalty.” Oh, and “buzz,” because “tire rotation” is one of the hottest Twitter topics going! Nah, just kidding about Twitter. But not GM’s anticipated increased levels of 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, where 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, whichever comes first, 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 to give GM the benefit of the effort, so here goes: 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 recommendation: every 5M miles, but with new engine designs, automotive improvements, etc., manufacturers recommend every 7-10M miles, so OK, a little compulsive calculating 3, but again, giving the frequency-benefit to GM) = $120.00.
So about $260.00 or 0.006% of the cost of a 2014 Buick Enclave, as posted on the Motor Trend site. 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 real loyalty.
GM CEO, Dan Akerson was quoted that 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 readers of these insights know how we feel about those kinds of measures 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 kinds of offers. Consumers can do math too and “brand” – and what it means – factors in very heavily in creating loyalty in most categories, certainly automotive.
OK, that was cars. Different buying cycle and certainly different category loyalty drivers than, say, food. What about food? What’s the worth of food? Fuel, energy, nutriments, life, sure. Enjoyment too. But what’s it worth to you? That question is asked in light of Panera’s “innovative” opening of their pay-what-you-can cafes. There are no set prices, just recommended donations for – currently – one item: turkey chili in a bread bowl. The concept isn’t new, although the twist of “what-you-can” is a nod to markets struggling economically.
A study was conducted back in the late-1960s at a diner near Stony Brook University, and was more along the lines of “pay-what-you-feel,” but close enough to the current Panera program to comment upon. And to note that when it comes to perceptions of “worth” (at least in the food category) it would seem that consumers haven’t changed all that much in nearly 50 years.
Back then customers could order anything on the menu, so not limited to one choice. When the study was completed we found that 26% of the diners paid more than what the menu prices would have been. Fifty-two percent (52%) paid the price on the menu, and the remaining 22% paid less. In the interest of transparency, among those there were some – not many though – who paid significantly less, with the occasional penny left on the counter. Ah, those wacky consumers! Panera reports that 20% of customers leave more than the suggested donation, 60% leave the suggested donation, and 20% leave less – often significantly less.
So what does that say about consumers’ perceptions of “worth?” Different times, different food-choices, but very similar figures and findings. We’ll leave that to you to contemplate – for any category in which you are personally or professionally involved. But ultimately, as marketing efforts are not generally social-psych marketing experiments, it’s the behavior garnered in the marketplace that determines the success or failure of such efforts. As Evelyn Waugh noted, “your actions, and your actions alone, determine your worth.”
And those of your brand efforts, too.