Companies offering free gas to attract business

June 8, 2008 10:06:58 PM PDT
Two magic words are turning consumers' heads lately. Not "Get rich" or "Lose weight." Try "Free gas." Businesses from banks and hotels to golf-club makers and blood-donation centers are offering promotions that involve free gas ? generating more attention and goodwill from price-stunned drivers than traditional promotions might deliver.

For example, Callaway Golf Co. is giving away gas cards worth as much as $100 with the sale of certain drivers. Guests who book three nights through hotels.com will get $50 gas cards. And TCF Bank, based in Wayzata, Minn., is giving $50 gas cards to customers who open checking accounts.

The trend will grow in the short-term as more businesses jump on the free-gas bandwagon, predicts Baohong Sun, a marketing professor at the Tepper School of Business at Carnegie Mellon University.

"A lot of companies, when they make decisions they don't think independently," Sun said. "They'll jump into whatever their competitors are doing, so more companies are likely to mimic this strategy."

She expects the trend will fade by summer's end.

Some companies, such as sporting-goods makers, don't have obvious ties to gas prices. But others, such as hotels, have found that guests who arrive by car are especially seduced by the idea of a free fill-up.

Doug Symes, 48, knew he wanted to plan a summer vacation in Wisconsin Dells, a tourist hotspot in south-central Wisconsin. He debated staying at one of two resorts, and his decision was clinched when he heard that one, the Kalahari Waterpark Resort, offered a promotion that includes a free $40 gas card.

"The gas card wasn't the only thing but it definitely helped the decision," said Symes, whose hometown of Burnsville, Minn., is about a 225-mile drive from the Dells. "Gas is on everybody's mind, so it does get your attention."

Most promotions have been under way for only a week or two, not enough time for companies to gauge how effective they have been.

Reservations at Kalahari are up 5 percent this summer over last year, general manager John Chastan said.

"It's hard to tell how much of that is because of the gas card, but in general we're doing pretty good," he said.

But why use gas cards at all? Why not just take $50 off the product price ? or offer customers cash instead?

In theory, shoppers should react equally to a $50 discount and a $50 gas card. But buying decisions aren't always driven by logic, said Suzanne Shu, a marketing professor at the UCLA Anderson School of Management.

"The more the purchase feels discretionary, like staying at a luxury hotel, the more the gas cards have impact because people can use them to justify something they might not do otherwise," she said.

Also, people mentally allocate money toward certain expenses ? so when an expense decreases the additional windfall seems even more satisfying, Shu said.

Sun, the Carnegie Mellon professor, said gas promotions make the most sense when combined with products associated with driving. That might be why Chrysler LLC introduced an offer to subsidize customers' gas purchases for three years, with buyers paying $2.99 per gallon and Chrysler covering the rest.

The national average price for a gallon of regular unleaded gas reached $4 Sunday, according to AAA. Oil prices settled at a record $138.54 per barrel Friday after rising more than $16 in just two days on the New York Mercantile Exchange.

Summer promotions are nothing new to the Northern Ohio Blood Services Region of the American Red Cross. Blood donations can drop 20 percent in summer months as high school and college students scatter, so this year the group is offering summer donors the chance to win a gas card. The prizes are one $3,000 gas card and five $500 cards.

After the blood center's promotion launched this week, donations rose 6 percent over the same period last year ? although the number of days available for comparison is small and it's not certain the increase is due only to the raffle. But organizers say the early numbers are encouraging.

Even so, those two words might not retain their magic for long.

While consumers will always need gas, marketing experts say motorists will eventually tune out free-gas promotions if too many businesses offer them. Also, as the price rises far enough past the emotionally charged $4 threshold, people will again learn to accept the cost.

So take advantage of the deals while companies still see value in offering them, Shu said.

"I would say this type of promotion will only be effective in the short run," she said. "People will pay attention until they readapt to prices and then it won't be such a big deal anymore."


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