Marketing Lessons from Car Shopping

So, in my new life, I am doing a lot of shopping.  I needed a new apartment, new furniture, and a new car. My old car was practically falling apart on me… but I haven’t been able to afford a new car till now.  So, one of the first order of business was to go car shopping.

I am clueless about cars!  So, when forced to do some research… I started with consumer reports.  Then, I looked at dealership websites, etc. However, I never really know what anything costs…

In the age of Internet, consumers are truly empowered… or at least they think they are  Reading a third party authority allowed me to narrow down what kind of car I may want.  However, nothing really compares to actually driving the car and actually looking at the car.  So, it is very disconcerting the consumer reports had to warn people against not doing a test drive.  Third party validation is obviously very important in this process.  While I may research online with consumer reports, dealers will also show you consumer reports, kelly’s blue book, etc., if the reviews are good. These third party validations reinforce their selling proposition…

I found that car dealerships are truly masters at marketing.  First, they keep the MSRP low, but anything you’d want would cost a fortune.  In addition, cars that are on the lot often have options already included, that you did not ask for, but you’d have to pay for.  Lastly, there is almost always limited inventory (except for cars that no one would want), thus there is always this sense of urgency.  From my experience as a salesperson, this is about as perfect as you get in order to squeeze the most from your customers…

In addition, car manufacturers are very good at managing their lines. I have found that several models are based on the same “foundation.” However, the luxury model may have a few extras, but it may essentially be the same car as the economy model.  Nevertheless, having a board line of models, car dealers can trade up or down a customer in order to close the sale.

It is also quite obvious that car manufacturers have quite a bit of knowledge regarding their customers. As gas prices skyrocketed in the last few years, the Toyota Yaris and Honda Fit launched in the US.  The US consumers who have always believed in “bigger is better” is now believing “smaller is cheaper…”  However, as you look at these fuel economical cars, you would soon realize that they are not necessarily the best deal.  Given that high fuel economy is the current buzzword, these particular models are positioned to fill this need.  Therefore, these particular models are always in high demand.  In turn, these particular models do not come with it extra incentives. For example… a Toyota Corolla has the same fuel economy as a Toyota Yaris, but the Corolla has 0% financing.  Whereas, the Yaris as something around the 6-7%.  In the long run, that interest difference means a lot of $$$.  But, the Yaris sticker is cheaper… yes, that’s before all the options…

VW Rabbit

So, you now may be wondering, what did I buy…?  Well, I bought a VW Rabbit.  It was basically $2000 more than a Honda Fit that I was considering, but the Rabbit offered a 0.99% financing. In addition, it is a safer car, generally speaking.  And, it’s cute.  You can’t really put a price on that! ;)  You have to give it to the Germans for creating very fun personalities around their cars.  Little details like the Rabbit logo just give it that extra something that sold me the car!  It is not about logic. It is not about financial responsibilities.  It is just about fun!  (Hmm… I wonder how would VW classify me as part of a consumer segment…)

Photo credit: Keegan Jones

Published June 21, 2008

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