We’ll all end up with extended warranties and after-market undercoating

Thursday, October 26th, 2017

We are witnessing the collision of two megatrends that have permeated our daily lives — the widespread use of video, and persuasion:

The appeal of Khan Academy is immediately obvious to anyone who has encountered barriers in learning, like taking a college class taught by a graduate teaching assistant for whom English was a second language. The website has helped my children for years.

But there are other messages that people want to put in front of us, many aimed at separating us from our cash.

I recently bought my younger daughter a used car. Her current ride, a Ford F150 4×4, had developed rust, which never ends well. So we quickly found a replacement. (Yes, it’s another F150 4×4, but it’s what she likes.)

I wrote a check for the difference between vehicles, but still had to sit down with the dealer’s finance manager.

At one point my daughter asked about the thick, black device that he seemed to be using as a desktop. He told us it was a computer monitor and cost $18,000, and that a third-party sold it to the dealership, not the parent company automaker.

When operational, it will display the different things consumers can add to their car purchases, like warranties and dealer add-ons.

I thought about this, and asked if the display simply showed documents, or video? He answered the latter, and that all buyers will be required to watch it.

Bingo.

Now I knew several things.

The dealership had contracted with a third-party to provide a presentation for each after-market possibility, like warranties, that had the highest probability of success. There’s no doubt that such video presentations, like candidate Trump’s election musings and the videos on Khan Academy, are full of the persuasive language described by Scott Adams.

I’m also certain that this language has been tested in focus groups and used in beta-test situations nationwide to prove its effectiveness. Why else would a dealership shell out almost $20,000 for a display system that will do the same thing the finance manager is supposed to do?

I explained to my daughter that the point of the system was to guarantee that the selling process had the highest chance of success, and to ensure that it wasn’t left to the skill level and whims of each finance officer.

I also told her the eventual goal was to cut headcount, which reduced payroll. I said all of this as we sat with the finance manager filling out forms.

He assured me there was no way to get rid of finance people. The dealership was much too busy.

Those were famous last words from a guy who never presented me the option of an extended warranty on a used vehicle.

That screen, and those videos, are intended to replace him and persuade me.

Technology is bringing the best sales techniques to every situation.

As consumers, if we don’t continually educate ourselves on what we need and what we can decline, we don’t stand a chance.

Meaning we’ll all end up with extended warranties and after-market undercoating.

Comments

  1. Kirk says:

    Actually, meaning that we’re going to hit the point of diminishing returns on this sort of thing a lot more quickly.

    Think about it: All the billions of dollars spent on the advertising we have surrounding us each and every day, and what actually drives your purchases that you make, personally? I know, in my case, that every dime spent on advertising dishwashing soaps is wasted, because I generally always default to purchasing either the low-cost on-sale product, or buy the one I’ve come to trust for grease-busting–Dawn. the advertising doesn’t mean spit, and what makes up my mind is experience of having used Dawn helping clean up oil-stained animals. The rest of the advertising crap is just that–Crap. About all it accomplishes these days is alert me to something new, and you could do that with a printed newsletter, or by putting it in the store. The advertising is actually a detractor, because I’ve learned over the years that the higher the advertising budget, the lower value the product has.

    Just like this new “financial manager” robot, the jaded consumer is just going to sigh heavily, and ignore the bullshit. For the life of me, I don’t know where the hell they find these people in focus groups, because the focus-group-driven BS is so off-focus that it’s nearly insane. I mean, think about it: Who tells someone “Yeah, I’d love to spend about a day participating in your BS…”, or, “Yeah, I’d love to talk to you on the phone about my opinions…”. Generally, they’re idiots–The rest of us tell the telemarketers and clowns with clipboards to piss off, and get on with our own lives. Garbage in, garbage out… And, they wonder why nobody then buys their damn crappy products.

  2. Steve Johnson says:

    Kirk-

    I’d bet serious money that the data isn’t coming out of focus groups but out of A/B testing across dealerships in a test → refine → repeat cycle. Sure, before they were in the dealerships they needed to do some kind of focus grouping but the only real objective there was to persuade the dealerships to let them install the systems. Once they’re in they have access to live customers.

  3. Phil B. says:

    About the focus groups. They are slanted to give the results that the researcher wants. For example:

    “If you were offered an extended warranty …”

    “I wouldn’t take it. I’m an engineer and can fix it myself.”

    “OK, but if you WERE to take an extended warranty, would you prefer option A or option B?”

    Hence the original “no thanks” is converted to “78.3% of people prefer option B when taking out an extended warranty, only 21.7% prefer option A”.

    How many originally said no?

  4. Kirk says:

    My point remains… Most of this crap is useless, out in the real world. Marketing, advertising, all of it… The results that they get are somehow transmogrified into success, and the idiot MBA types lap it up at corporate briefings galore, all the while wondering why their actual sales numbers are slumping. Now, if they went out and asked the guys out on the shop floor…? Well, then they might discover that the wunnerful, wunnerful new car model they’ve been pimping has a reputation with the public that’s in the toilet, and the guys in the maintenance shop are telling all their kith and kin to avoid it like the plague…

  5. HCM says:

    The idea is that your trust of Dawn is related to the dozens or hundreds of ads you have seen for it in your lifetime.

    Besides, even if ads don’t influence adults with established tastes and preferences (they do), they would still be incredibly valuable for gaining young customers who don’t have a favorite yet. People are more likely to choose a product they recognize over one that they don’t.

    And then there are people like my wife who can be regularly heard repeating advertising slogans as fact only to become incredibly embarrassed when I point it out. She isn’t stupid and she doesn’t believe the ads, but on some level her mind has associated Payday bars with caramel satisfying you now and peanuts filling you up for later.

  6. Few different discussions here.

    Sales reps are not always necessary for simple and inexpensive products. They are sometimes necessary for simple and expensive products (like high end purses or perfume) but they are usually necessary for complex and expensive products and services. You wouldn’t just use a video to sell someone an oil rig, for example.

    Video in particular is kind of a mixed bag. They’re expensive to produce and to test. They’re not responsive to questions and objections. The most valuable website in the US in terms of transactions uses minimal video and restricts how much merchants can use it.

    A/B testing is also not magic. If A/B testing were magic, Marissa Meyer would have succeeded in turning around Yahoo. It just encourages you to make incremental changes, but the cumulative effect of each ‘positive’ incremental change may not be sufficient to make something good enough.

    From experience with car salespeople there are enormous differences between the typical person and a superb sales person. You could probably replace the crappy ones with a video and a test drive (I believe this is what CarMax essentially does), but the good ones just know too much about overcoming objections that a canned presentation cannot actually do.

    What I think would be more likely to succeed would be to make more use of live webinars, streaming, and other live video sales. Canned presentations can be good to inform people and qualify them before you’re trying to sell them something, but one of the more important parts of sales is overcoming objections to make a deal.

    One reason why many car salespeople are crappy is that there are too many dealerships and too much split ownership because of the regulations on them. They get the people they can get (the mechanic’s sister, some guy’s cousin who is sober most of the time, etc.) rather than the people who are actually the best. In that situation spending $20k on some console that will help you make a few extra sales is super easy.

    The other issue with this might be that the warranties are a terrible product made redundant by most insurance packages which you are compelled to buy anyway. Experienced car buyers know this. I didn’t when I bought my first car, but now I know never to buy one again. No gimmick would actually get me to buy a warranty again.

    Re: the TV advertising of common cleaning products discussion:

    There are many reasons why these brands run big TV campaigns all the time. The main one, though, is that people are pretty indifferent to what they buy since most of them are commodity products. They want to be the last thing you remember when you thought about dish detergent. Some actually do have some legitimate product advantages also (Tide Pods are pretty great and work as advertised despite being really expensive). The most effective way to communicate about that is generally by TV ad.

    They are designed for the retail environment in which you have many choices and little information about which one is better besides price. People usually go shopping 1-3 times a week. The ads are there to remind you that when it comes time to buy toothpaste, if you’re indifferent about what to buy, you are more likely to remember Colgate and might even decide to try out the new tartar-buster with whitening.

    Also, unlike some kinds of brand ads, the biggest and most effective companies in that space use coupons and get a lot of in-store sales metrics that are broken down by geography so they can measure if there was a significant impact by the ad. They have been doing this kind of tracking for decades – long before the internet existed.

  7. Watcher says:

    Years ago I worked on the fringes of advertising and product promotion, mostly local. What you learn is that product availability wins most of the time: you can tell a buyer that X is good (and there are very persuasive simple phrases, such as “New” which makes people sit up initially) but the biggest catch is having the product in reach.

    As soon as you move something out of reach, or into a dark corner, the product attraction disappears. There are limits to display, and even availability in some cases, but the more in reach it is the more it works. The company I worked for employed people to make sure each outlet was displaying the goods properly, even to the point of moving rival products aside.

    Yes, there is some brand loyalty, usually again on a reasonable level. If you believe that Y never lets you down or is true or the best value, that belief takes lot of shaking. But everyone as a cut-off point where even the most fierce brand loyalty crumbles in the face of steep price rises or when people have to go searching for the product.

    Sponsorship works because on a subtle level people think supporting a company that has put money into their team or sport deserves rewarding, but the sport or event is going to happen anyway.

    The layout of stores is done by very knowledgeable people. Essential products are often located at the back of the store, and families say will have to pass a lot of displays that beckon attention, not least of which is brightly packaged candy for children to reach. Once in a gasping hand, it takes some getting out of the grip and putting back.

    The question is always “what are they selling?” A long time ago someone told me that a big furniture business in my area who always advertised prominently wasn’t in fact selling furniture. They were selling credit, which made them far more money than a sofa which would wear out (or become sorry-looking and unfashionable) long before the credit agreement was ended. Hence back to the store for a new one. The advertising of course showed happy people, and it showed these people doing the latest things like flopping on the sofa to use their iPad or — as a reflection of current trends — would show a mixed-race couple ‘bonding’ on the sofa. The aim here was to put people in the scene because even the best photo of a sofa is just an upholstered shape.

    I know… you never thought for a moment that using a certain detergent actually makes people smile, but every time in the ad they grin like demented monkeys. Again, it’s people that count here.

    This connection with people is what sells, and people need to have it close at hand to buy it.

    One last thing here on this: if we couldn’t get a product to the customers when they wanted to buy it we knew they would say, ‘oh never mind I’ll come back later for it.’ But… they almost always never came back.

  8. Ross Mohan says:

    Also a certain amount of this is simple exposure to programming (this is why they call it television programming). If you hear something over and over again it’s likely to stick in your head. The rest of it: smiling people, appropriateness of time and place, fear, sex, are just persuasion accelerants.

    Part of what the unconscious zombie mind does is to accept and repeat patterns. This is not to say that most people are unconscious or zombies or that they don’t think, it’s that we can’t consciously focus on every stimulus, all the time, and so some things necessarily slip in below the conscious filters. Boom: you got a Payday undercoating for your Dawn 150.

    And as stimuli increase — newspapers radio TV mobile cable Etc — the defenses go down on average. As life gets busier and more fragmented – work kids life home friends family buying choices entertainment choices – your ability and willingness to marshal conscious self-educational energy for each of them diminishes.

    A picture is worth a thousand words yada yada yada but it’s also a lazy way to learn something. You don’t have to move your eyes, they are pulled. You don’t have to think about what’s being written (or God forbid, write it out, the horror…) you are encouraged sit back in an alpha wave haze, and let the goodness wash over you. Programming.

    Education is important. Active engagement is important. Equally important is restricting the inflow of stimuli. Limit TV cable advertising background noise even flickering website ads.

    Go for simplicity, quiet pacing, thought ( and thoughtful written discussion). You’ll be a bit of a freak (“What? You haven’t binge-watched DC Zombie Sportsball on TVTubeChan?!”) but things may get a bit clearer and better and calmer.

    There’s a limit to what we can do well. Prioritize accordingly. Respect the organism. Better results follow.

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