My readers and friends will express no surprise that I draw my example from the world of automobiles, a frequent topic on this blog. Let’s examine a claim by critics of hybrid cars, that the fuel efficiency of these cars will not amount to a cost savings sufficient to cover the added cost of hybrid technology.
Before we dive into the numbers, I’ll make two points:
- The critics have it right, and
- So what?
Calculating average fuel costs doesn’t take an advanced degree in mathematics. The Environmental Protection Agency can do it for you, if you like. The math involves dividing the average number of miles you drive per year--most Americans drive between 12,000 and 15,000--by the combined MPG of the vehicle (I use city MPG for worst-case scenario) to get the number of gallons used. Multiply that number by an average fuel cost and voila, you get your fuel cost per year. Then multiply that number by the number of years you intend to own the car and you can see total fuel cost. For funzies, you can also factor in depreciation and the cost of pine tree air fresheners
You find one in every car. You'll see.
For most everyone, the numbers will show that a Prius or an Insight will still cost more overall for five or so years than a similarly-sized car. Similarly, the hybrid versions of the Fusion or the Sonata will cost more overall than the four-cylinder gas versions.
Let’s use this kind of math to settle another question: does it make fiscal sense to buy the eight-cylinder Camaro SS instead of the six-cylinder Camaro RS? After all, time is money and the SS will absolutely smoke (read: outrun) the RS in the all-important 0-60 MPH sprint 4.6 seconds to 5.9 seconds. The SS also costs $5,265 more.
Let’s say that on a typical workday, you accelerate from 0-60 MPH four times each way to and from work. That equals 40 bursts per week. Multiply 40 by 50 weeks per year to get 2000 bursts. Multiply 2,000 by the difference between the 0-60 times for the SS and RS and you get 2,600 seconds or 43.3 minutes. From there, all you need to do is multiply the resulting figure by an estimate of your salary on a second-by-second basis (or, for that matter, your own estimate on how you value your time) and...
By now you should well realize that I have created an absurd example. No one buys a Camaro (SS or RS) to save time. Yet the numbers that car buyers use allow consumers to draw this conclusion.
On the other hand, while drivers do buy hybrids to save gas, many have no particular interest in saving money overall. Clearly, many hybrid buyers made their choice so that they could demonstrate environmentalist values. However, many other buyers see hybrids as a way to lessen dependence on oil, period. To put it another way, they have made an economic choice to reward auto manufacturers rather than oil producers.
What should marketers take away from this discussion? Marketers need to look at the data they have and determine whether they tell the story they need to hear. Assuming that the data tell the right story may lead to incorrect or irrelevant conclusions.
Also, I have no data to prove this, but Camaros kick ass.