Cheap Gas, Electric Cars and Customer Experience

Cheap gasEven if you sell a commodity, customer experience often outweighs price considerations. Just because the term Customer Experience Management (CEM) is  relatively new to corporate vocabulary, the power of “experience” is not lost on marketing professionals. The world of marketing is drastically changing, moving away from the hype of novelty and awareness-building through branding and advertising, towards  the creation of loyalty through great customer experiences.

 

As oil prices impact every element of the world economy, and markets expect the depressed levels to last for at least a decade, the future of alternative energy technologies being questioned. The sales of electric and hybrid cars  are dipping, seemingly in concert with oil prices, and auto industry analysts are trying to assess whether or not cheap gas will kill the demand for such vehicles.

It is important to remember that even at the near-record high of gas price, customer retention of hybrid vehicles was only 35%. Specifically Prius owners’ loyalty in 2012 was only 25%.

“Only 30.9% of hybrid drivers traded in for another gas-electric model in the third quarter of 2011, when gas prices were stable. But as prices at the pump surged in the final three months of that year, so did hybrid car repurchases, leading to a 40.1% loyalty rate.”

It is easy to see correlations between gas prices and sales of electric vehicles, but perhaps it is a mistake to take these as the causation.

It is true that sales of electric cars from Nissan (Leaf) are 20% down this year and gas-electric hybrid Chevy Volt’s are down 50%. However, the demand for Tesla Model S is stronger than ever and sales are up 35% during the first quarter of 2015.

Mining online reviews posted by customers, who have purchased these cars, reveal a much stronger correlation between customer experience and retention/loyalty than the correlation between sales of electric cars and price of gas. As the novelty of electric/hybrid cars and the social cache of environmentalism fade, the underwhelming customer experience these vehicles delivered to their owners, compels customers to return back to familiar, fossil fuel vehicles. That will continue until the electric cars sold provide better customer experience than conventional ones at the same or better price. The energy, that drives these cars, may be alternative, but it is not a substitute for the delivery of superior customer experience.

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2 Responses to Cheap Gas, Electric Cars and Customer Experience

  1. Dipti Sapatnekar says:

    Interesting observations Gregory!
    All my work in customer insight and customer experience is increasingly leading me to believe that products provide the functional fulfillment while its the people organization and processes that create customer engagement. It really doesn’t help for long to merely have a great product, if it’s not supported by people & processes that are fiercely customer-centric. Perhaps that’s where Chevy & Nissan are missing the point..!

  2. GregoryY says:

    Thank you for your comment Dipti. You offer an interesting hypothesis and I took a deeper dive into the results of market analysis mined from the online customer reviews. Unfortunately the results do not validate your theory in this case. According to customers neither Chevy Volt nor Nissan Leaf are viewed by them as a great product and they provide specific experiences that drive their opinions.

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