Archive for August 18th, 2009

C4C … here’s the “incremental analysis”

August 18, 2009

Most reports tout the Cash for Clunkers programs as a runaway success.

In fact, about 250,000 C4C deals were transacted in a week or two – fully utilizing the budgeted $1 billion – at an average rebate of about $4,000.

But …

Marketing promotions should always be evaluated on an incremental basis.  That is, how many sales were induced over and above what would have happened any way.

Car authority J.D. Power and Associates thinks that most of the cars purchased through the C4C program were simply sales that would have happened this year but were pulled ahead a few months. The company thinks that as few as 20% of the cars bought in the program are really new sales to the market. That means that as many as 80% of the cars would have been sold this year anyway. Edmunds.com, which tracks vehicles pricing and buying data, agrees. They say: “when the public thought that the program would cease after the first billion dollars was spent, they rushed to dealerships.By Aug. 20, we could be back to pre-clunker sales levels.”

So what ?

Well, from a marketing analysis perspective, the full cost of a program should be assigned to the incremental sales.  So, the $1 trillion should be allocated across 50,000 incremental car sales (20% times 250,000).  That’s about $20,000 per incremental sale. 

Recast, phase 1 of C4C took 250,000 clunkers off the road by, in effect, giving away 50,000 new, more fuel efficient cars.

Worth it? 

You decide.

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See Business Week, Cash for Clunker Interest Slows, August 14, 2009
http://www.businessweek.com/autos/autobeat/archives/2009/08/cash_for_clunke_10.html

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What to Do About Pre-existing Conditions

August 18, 2009

Ken’s Take: Last week, I had a couple of posts on this topic. I think this idea – from a Univ. of Chicago finance prof – may be the Rx …

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Excerpted from WSJ, What to Do About Pre-existing Conditions, Aug.  13, 2009

If you get sick and then lose your job or get divorced, you lose your health insurance. With a pre-existing condition, new insurance will be ruinously expensive, if you can get it at all. This, the central defect of American health insurance.

The bills being considered in Congress address the pre-existing condition problem by forcing insurers to take everybody at the same price. It won’t work. Insurers will still avoid sick people and treat them poorly once they come. Regulators will then detail exactly how every disease must be treated. Healthy people will pay too much, so we will need a stern mandate to keep them insured. And this step further reduces competition.

Private, competitive insurance markets are a superior way to solve the pre-existing-conditions problem, and the only hope to lower costs.

A truly effective insurance policy would combine coverage for this year’s expenses with the right to buy insurance in the future at a set price.

Today, employer-based group coverage provides the former but, crucially, not the latter.

A “guaranteed renewable” individual insurance contract is the simplest way to deliver both. Once you sign up, you can keep insurance for life, and your premiums do not rise if you get sicker.

The right to future insurance could be transferrable to another company, for example, if you move. You could have the right that your company will pay a lump sum, so that a new insurer will take you, with no change in your premiums.

Full article:
http://online.wsj.com/article/SB10001424052970203609204574316172512242220.html

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Ken’s Take II: The rub I see is that people who permanently lose their jobs also lose the employer’s subsidy towards health insurance … and, the full price of a guaranteed renewable individual insurance contract might be out of reach for most people.  Think COBRA.

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Marketing to retiring boomers …

August 18, 2009

For many Boomers “aging is not about the inevitable end, but rather about the evolving self.”

It seems this age group is redefining retirement as “a time of growth when identity is broadened, expressed, and completed through consumption.”

Researchers scoured the current literature on aging and lifestyle, observed seniors in a wide range of communities and life situations, and concluded that a boomer retirement is:

  • A dynamic life stage full of self-evolution and identity work.
    Marketing hint: Emphasize making a mark, leaving a legacy (take heed, nonprofits).
  • A culture in which “identity experimentation” is increasingly acceptable and common.
    Hint: Keep it in mind as you market that those in this age group are rediscovering their true selves. “It’s finally time for me!”
  • A culture that emphasizes staying busy and traveling.
    Hint: Forget frailty. Assume they’re tough and ready to explore!
  • A time when consumers favor consumption.
    Hint: Don’t rule out any product as not fitting this generation. They’re ready to buy—once they’re shown a little respect.

Don’t treat today’s seniors like they’re old and frail. Instead, market to them as the vital, active individuals they think are.

Extracted from: Marketing Profs, Now Is the Time for Me, Baby!, July 29, 2009

Source: “Consumer Identity Renaissance: The Resurgence of Identity-Inspired Consumption in Retirement,” by Hope Jensen Schau, Mary C. Gilly and Mary Wolfinbarger. Journal of Consumer Research, 2009.

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