An analysis of Mazda’s pay-for-leads marketing strategy

At the top of my Yahoo email inbox today is a banner ad for Mazda’s latest promotion (at least here in Canada).

AaronHoos_BusinessWriterandStrategist_mazdabanner

The ad copy is compelling: It sounds like you can get a crisp $100 bill just for walking into a dealership and test driving a car. Of course there’s small print and it’s not really a surprise that there are tiered rewards up to $100. Still, it seems like an interesting promotion — clearly a way for them to pay for potential leads. But I was curious about the details so I looked a little more closely.

Here’s a brief overview of the contest: If you sign up and fill out a form online, they will email you another small form that you fill out, which includes a skill-testing question. Fill out that form, take it to the dealer, and test drive a car. Then, at the end of the promotion (on January 4) each entrant is “eligible” to win a “cash card” prize of $25, $50, or $100 (and it looks like everyone wins something). If you decide to buy a Mazda, you instead get ten times that cash amount off of your car’s price.

The reason for the promotion
This promotion is just a way for Mazda to buy their leads. Someone somewhere in their company has busted out his or her calculator and determined that it costs $X dollars to create so many leads and, of those leads, some percentage will buy a car. They also know that constant communication via email or letters can increase the likelihood of a lead turning into a sale. So they collect all of that information in the forms ahead of time and they’ve figured out how much they need to pay out per person to get a likely number of leads. And, they’re acting on the assumption that a pre-determined percentage of those leads will turn into sales. Somehow the numbers should all work out.

The math
Here’s an example of how the numbers work:

  • Let’s say there are 10,000 respondents and Mazda expects to pay an average of $35 per lead. If only 5% of those leads (500 is 5% of 10,000 respondent) buy $20,000 cars, Mazda will pay out $332,500 in cash prizes to the non-buyers and make $10 million from the buyers.
  • Here’s another example: Let’s say there are 20,000 respondents and Mazda expects to pay an average of $50 per lead. If only 1% of those leads (200 is 1% of 20,000 respondents) buy $20,000 cards, Mazda will pay out $990,000 in cash prizes to the non-buyers and make $4 million from the buyers.

So, the numbers generally work in their favor and as long as they pay $50 or less per lead (which they do) and convert about .5% of their respondents into buyers (which is likely) then they can turn a profit.

But will it work?
It has the potential to be a profitable campaign but I don’t think it’s a very good campaign. The reason is the campaign seems to have been unintentionally designed to attract people who are not likely to buy a car!

Mazda is going to get a bunch of people who are willing to test drive a car (with no intention of buying) just for the chance to win up to $100. (Without a doubt, Mazda expects some of these “deadbeat leads”, but I think this ad actually attracts those people instead of attracting people who are likely to buy a car).

Here’s why the wrong people are being attracted by the campaign:

Problem 1: Work-intensive effort
There is a lot of work for the chance to win; this isn’t just a scratchcard promotion like you see in a lot of stores now, where you scratch and win some small discount at the cash register. There are 2 forms to fill out (one online and the other by email), you have to test drive the car (which isn’t a huge deal), and you have to wait until the promotion is over before you get your money. This is automatically going to eliminate people who might have been compelled by the offer but then realize just how much work it is. Remember: This is a “zoom-zoom” demographic.

Problem 2: Low initial reward
The cash rewards of $25, $50, and $100 really aren’t very much. And Mazda, whose cars are often priced slightly higher than the low cost manufacturers, aren’t rewarding a lot of money to people. Which means their promotion is unintentionally designed to attract people for whom those lower dollar amounts is a reward. Their target market, on the other hand, likely won’t view $25, $50, or $100 as a compelling enough reward.

Problem 3: Diminishing returns
I also think this is a weak promotion because the rewards aren’t proportional: You get $25, $50, or $100 for filling out some forms and test driving a car. That’s okay if you want the cash and if you have a lot of time on your hands. But to get ten times that amount off of your car’s purchase — $250, $500, or $1000 — you’re not actually getting very much of a discount. In other words, you may get ten times more in terms of dollar value but the impact on your personal bottom line is proportionally less. $25, $50, or $100 for an hour or so of your time might be okay, but anyone with a half-assed ability to negotiate can get $250 – $1000 off of a car simply by asking.

Summary
A contest like this will attract people who have nothing better to do with their time who just want some cash and are willing to wait for it. The actual demographic of likely Mazda buyers won’t like the slow reward or the low payout and it’s not that much more of a reward than they would get if they just walked into a dealership as a cold lead.

Improving the contest
The contest can be improved with:

  • Higher cash payouts
  • Faster payouts
  • A more substantial return for people who end up buying Mazdas
  • Less work required to win something

I think the numbers can sustain it because I believe a more demographic-friendly contest has the potential to drive up lead-to-purchase conversion.

Aaron Hoos

Aaron Hoos is a writer, strategist, and investor who builds and optimizes profitable sales funnels. He is the author of The Sales Funnel Bible and he's a real estate investor and a copywriter for real estate investors.

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