The Tendo View

I was recently asked by a friend and former colleague to share my experiences trading in our old SUV under the Cash for Clunkers program. That article prompted me to think about the broader implications behind how a program like this is marketed to consumers, how transparent the administration has been in what it sets out to accomplish, and how less-than-transparent it has been in what goes on behind the scenes–a point not lost on the man-on-the-street YouTube journalists.

Let’s begin with the stated objectives of the program as gleaned from the official informational site .

“The CAR Allowance Rebate System (CARS) is a $1 billion government program that helps consumers buy or lease a more environmentally friendly vehicle from a participating dealer when they trade in a less fuel-efficient car or truck. The program is designed to energize the economy; boost auto sales and put safer, cleaner and more fuel-efficient vehicles on the nation’s roadways.”

From this, we can see that contrary to the hand-wringing of conservative pundits, the program is neither designed as a government hand-out program designed to create a welfare sate mentality, nor is it, as liberal, left-leaning and green minded commentators have criticized, a half-hearted and imperfect attempt to get the U.S. off foreign oil.

Rather, the program is designed at its heart to encourage those that have been deferring a new car purchase while the economy stabilizes to do what car salesmen in shiny suits have been telling us to do all along: “Buy now! These deals are too good to be true!  At prices this low—we must be craaaaaazy!”

One can argue about the merits of the government using incentive sales tactics to move metal, as many blame the incentive model and U.S. consumers’ having grown jaded in their response to escalating incentive opportunities, as the right tool for the job, given the collapse of GM and, very nearly Chrysler, on an over-reliance on incentive heavy marketing. But let’s table that discussion for another day. So too, should we table the longer debate about whether a country just recovering from a consumer debt-fueled mortgage meltdown is ripe for being funneled into more long-term debt in the form of car payments (even though the banks we bailed out would certainly welcome the influx of new borrowers taking on debt, this time with adequately secured collateral). If nothing else, there could be a future boon for the automotive reclaim and recycle sector (repo-men, to you and me).

What fascinates me about the current program is that both at the federal level, and at the consumer level, outreach has been certified, grade “A” quality viral marketing at its finest.

Consider the following. For a company to launch a $1B product or service offering, a traditional media mix would dictate anywhere from 10%-20% ($100-200M) allocated to a mix of print, radio, outdoor, and television advertising with some event marketing thrown in for good measure.

As best I can tell sitting on this side of the fence, the government did none of that.

Rather, they put up a site, reached out to the sales channel, and incentivized them to preach the gospel. And guess what–it worked like a charm. The car manufacturer and dealer organizations took the ball and ran with it, and they ran far and wide, essentially racing to the web as well as traditional media properties just as quickly as they could–in many instances, weeks ahead of program launch–asking, no, telling their constituent buyers that now was the time to  “Buy now! These deals are too good to be true!” You saw the car dealers running banners on forums. You saw them plugging discounts on Facebook. You even saw them engaging in a meaningful way–many for the very first time–on message boards explaining how the program will work and what kinds of deals consumers could expect to see on popular new, fuel efficient models.

But then, just as abruptly, came the backlash – also in the form of an online wave of activity. First came SEMA, the Specialty Equipment Marketing Association, the foremost lobbying group for the automotive aftermarket publicly lambasting the program for taking viable older cars off the road, and in theory anyway, killing the market for secondary parts by prescribing that the vehicles be destroyed, rather than disassembled and put back into circulation as remanufactured/reconditioned component parts.

Then, came the glimpse into the inner workings of the sausage factory in the form of YouTube videos showing what really happened to all those tens of thousands of once-loved driving dwelling members of the American family once they were turned in under the program. The squeamish should avoid doing so, but anyone else can search YouTube for “cash for clunkers sodium silicate” and see the death throes of engines that have been fed the government’s special blend of poison solution to ensure that they would never, ever run again. The videos are dramatic, visual, auditory onslaughts that have all the right ingredients for viral shock value – especially juxtaposed against the government’s stated “environmentally-friendly” message. Don’t think green fields and blue skies. Think belching clouds of smoke and mechanical mayhem.

And so the story goes. Like a clunker engine that has just been fed its measured dose of sodium silicate solution, just as the C4C program gasped its last breath late last night, the government poured in the fresh oil in the form of another $2B and revved it back to life. Let’s see where, and how far, it makes it from here.