Tuesday, May 27, 2008

Let's Refuel a Brand: Chrysler's $2.99 Gas Guarantee

I'm sure you've all seen a commmercial or two lately that mentioned Chrysler's new marketing campaign: "Let's Refuel America". Buy any new vehicle and Chrysler will give you a gas card linked to your Visa keeping gas at $2.99 a gallon for three years. My first thought, after filling up at $4 a gallon, was that Chrysler was willing to eat a lot of money to make sales volumes.

On closer examination, this is really a very clever incentive program. Whereas automakers typically give up the farm by offering hefty cash rebates or 0% financing to sell cars, Chrysler is betting gas will stay at a reasonable range (below $5) for three years and actually keeping more profit than it would with financing and rebate programs.

And they're targeting an area where they currently perform quite poorly. Gas prices are everywhere in the news, everybody is unhappy about the cost to fill up their cars, and Chrysler only offers gas guzzlers that no one wants. Even with traditional incentives, the first thing most consumers will be looking at in May is gas mileage. Since it will take a couple of years to get some new vehicles down the pipeline, Chrysler can direct attention away from the gas mileage of its current lineup and say, "but you'll only be paying $2.99 a gallon."

I just think it's a great experiment to take what consumers percieve as one of your greatest weaknesses, poor mileage, and morph it into a strength. They've managed to associate themselves with an issue that's recieving huge nationwide attention. By "doing something" about high gas prices, they may have rapidly entered consideration sets they never would have been in. And if consumers go for it, they'll make more money than on traditional incentives. Here are some early results.