November 25, 2007   

HOOK PRODUCTS: DUMPED PRODUCTS THAT MAKE YOU PAY THE FULL BILL (THE MIDAS CASE)


José Ignacio Gafo Gómez-Zamalloa

Hook products have been used for a while. The rationale is simple: You sell an attractive product under its cost, get the customer to your store and get him purchasing other high priced items that will more than offset the money you lose with the promotional one.

It has usually been applied to products. However, it has been extended to the Service Industry, where Midas is. Midas is a car maintenance centre with a fast service and reasonable price positioning.. To foster the demand, they announce attractive promotions for specific services such as oil change.

Attracted by this fantastic price (only 30€!), I brought my car yesterday to get the oil changed. Upon receiving the car they told it would be ready in two hours max. and that they would give a maintenance check for free. And guess what? After one hour and a half they gave me a call and informed me that during the maintenance they had found that two of the wheels + two filters needed to be changed. After being confirmed that I did not have a chance, they went ahead with these unplanned changes.

The total billing accounted for 350€! Not a bad deal for Midas, that got me as a client to change my oil, and had me paying for other pricey and profitable services as well.

Am I going back to Midas? I am not sure about it. I am really scared that next time they will tell me I have to change the other two wheels! Anyway, to give me some piece of mind, they gave me a promotional loyalty card with five free spaces. They put a stamp in one of them and told that after four more visits I will get an oil change for free. Not a bad business for them for, when I go for this oil change, I am sure they will find again something unexpected…

Midas promo.jpg

Looks like they have studied Marketing. However, I am not sure if they will end up having me as a loyal customer.

Thoughts and comments are welcome.

Think Different!!!

Ignacio Gafo


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Posted on 25 November 2007 in Pricing, International Marketing, Customer development and retention, Product Management

Comments

While the general strategy is interesting, the secret lies in how its all communicated to the customer. There is nothing worse that having a consumer feel that they have been suckered into business something they did not expect.

First of all two hours to wait for an oil change seems a bit much...one thing is if they actually need all that time. Its another thing if they simply taking advantage of the consumer to see what more business they can make.

The promotion needs to be transparent...from the first moment you know you are getting the oil change and free check up as a combined offer. Then you know what you are in for. Its a different story if they tell you that even though you came in for the oil change, they will do a check up for free.

A big opportunity for Midas here is to compete on maintenance with the car dealers that tend to be really expensive.

As I said before...the idea is powerful, but success comes down to how its communicated and executed with the consumer.

Posted by: Steven Posner at November 26, 2007 01:21 PM

Absolutely agree: Communication plays a key role for keeping the customer satisfied and handling expectations. If not, this will generate sales in the short term, but would destroy brand value and customer loyalty.

Posted by: jose ignacio gafo at November 27, 2007 12:23 AM

If I were Midas I would try to build trust with my customers first.
In our advertising balloons business we get a little different situation. Clients purchase a product that we believe, having 30 years experience, is not the right product for their intended usage. Our approach is to give the client our advice while telling them straight forward that we know it's their money and we respect their decision if they want to continue with that purchase.
Once the purchase is made, if we feel that the life time value of this new client is sufficient, we will offer for their next purchase to upgrade them to the product we think is really right for them. If it is a current client we will often send an upgraded product with the current order.
If you believe in your product, your knowledge of your business and the client's application you can truly build clients for life.
Build trust with your clients and TRUST your clients. Do we ever feel like someone has taken advantage? Sure! But, the vast, vast majority of clients over the past 30 years have shown that this works.

Posted by: Johnny Mulder at January 12, 2008 07:20 PM

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