What do you do if you own a business that manufactures widgets that nobody wants to buy because a). their perceived quality is not good and b). their basic maintenance has become too expensive to justify? If you’re Chrysler, you offer $2.99 a gallon gasoline for three years, guaranteed. That’s right. Like a gas bank, your per gallon cost at the pump is frozen for three years at $2.99. Of course, there are caveats. You have to buy a new Chrysler and you have to have a valid Visa or Mastercard.
The way it works is this: they give you a special credit card that is attached to your account. This is your fuel card, recognized at 97% of all gas stations (according to Chrysler). Each year you are allowed to purchase a certain number of gallons of gas (87 octane unleaded gas – the cheap stuff) at $2.99 / gallon. They derive this number by dividing the average number of miles you drive by the average MPG of the car. So, you get 12,000 miles at $2.99 per year, and if you exceed that number, you pay full price. If you want a higher octane, you pay extra, but still not the full price, as long as you haven’t bought your share of cheap gas that year.
So you ask yourself, is this a good marketing strategy? On the face of it, it seems so. It certainly is an extension of the U.S. auto manufacturers business strategy for the past 60 years or so: look for the short term gain, make the next quarter profitable. There’s been no real long term strategy coming out of Detroit, except that gas is cheap and will always be so. And as a result Chrysler has a lot of inventory that no one wants. But, like a junky coming off a bender, the U.S. car-buying public is waking up to all of our bad choices over the years. We have an economy that is based on consumption and the cost of oil is placing that level of consumption out of reach.
In the short term, this campaign will probably drive the more easily frightened into Chrysler’s showrooms. But there are plenty of people who know exactly what kind of mileage they get in their current vehicle, and even the lure of (relatively) cheap gas is not going to sway them from trying to improve that mileage, or get off crude oil altogether. In the long term, Chrysler is just whistling past the graveyard. Deep down in their hearts, even those that decide to bite at this offer will realize that in three years they will end up with a $16,000 lawn ornament that no one will want to take off their hands. A better long-term strategy for consumers is to look into school, car or vanpooling, public transportation, or bicycling. A better strategy for Chrysler is to look beyond the next quarter and start to plan for when the demand for gas starts to exceed the supply. Which actually means planning for today.
Thanks to everyone who responded to our 2024 Predictions survey last month. While the sample size wasn’t quite the size of a Pew or Nielsen,