Car Service in Review
Steve’s breakdown: Fair is the company and The Burnett Collective is handling the pitch so make sure your creds are up to date over there. Good Luck!
SANTA MONICA, CA: Upstart vehicle subscription brand Fair has launched an agency review as it prepares to go national and boost its marketing spending. The brand, whose investors include BMW, wants to hire a range of shops to handle creative, strategy, PR, branded entertainment and more.
“We are going to really scale and go big,” says Ed Brojerdi, Fair’s global head of brand. Brojerdi, the former CEO of MDC Partners-owned ad agency KBS New York, joined Fair in March after a stint consulting for MDC’s 72&Sunny on the Infiniti account. (KBS earlier this year merged with Forsman & Bodenfors, retiring the KBS name.)
Santa Monica, California-based Fair went live about a year ago and now operates in 22 cities across 12 states with 20,000 users. It plans to be national by the end of the year, with plans to go global after that. The brand next year plans to spend roughly $50 million on marketing, including TV, out-of-home, radio and digital ads. Up until now, Fair has used agencies on a project basis. The Burnett Collective is handling the review.
Fair is among several new players seizing on demand from commitment-averse buyers who are drawn to vehicle subscription programs that operate more like Netflix than the traditional paperwork-laden car-buying process. Fair buys used vehicles directly from dealers, then makes them available to users for monthly subscription packages that can be managed through a mobile app.
Pricing is a hurdle
Subscription brands are trying to carve space in the burgeoning sharing economy for people who might need a car for a few months but don’t want to be tied down with a loan. But the road to success is proving to be a bit rocky as brands figure out how to price and run their subscription programs.
Cadillac last week confirmed that it will temporarily suspend its nearly two-year-old program, called Book by Cadillac, on Dec. 1. The $1,800-a-month service covers New York City, Dallas and Los Angeles. The price includes insurance and routine maintenance and users can swap in and out of different Cadillac models. But the program proved more costly for the brand to run than it had expected, the Wall Street Journal reported last week, citing people familiar with the program. Cadillac plans to relaunch it after “hitting the pause button,” a spokesman told Automotive News.
Other brands offering or plotting subscription programs include Volvo, Jaguar, Lexus and Porsche, according to Cnet, which keeps a running list. Several third-party operators have gotten into the game, too, including Flexdrive, a joint venture by Autotrader-owner Cox Automotive and automotive services company Holman Enterprises.
For automakers, pricing remains the biggest obstacle, especially for new cars, says Mark Wakefield, global co-head of the automotive practice at AlixPartners, a global consulting firm. He says subscription programs are almost always more expensive than traditional car-buying. “The thing that will really accelerate it is if you find a way to do it without having a big premium,” he adds.
A ‘Fair’ marketing play
The average price for Fair vehicles is $350 per month, including a seperate insurance charge, according to the brand. Consumers can opt out at any time. But Fair charges a downpayment it calls a “start payment” that is usually about three-times the monthly payment. So ending after just a couple months usually does not make sense. On a recent day in Chicago, a user could sign up for a 2018 Subaru Crosstrek with nearly 9,000 miles on it for $325 a month plus a $1,300 start payment.
Every subscription service operates a little bit differently. Flexdrive, for instance, offers new and used cars for subscription terms as short as seven days that include insurance, maintenance and roadside assistance. A brand called Borrow that operates in Los Angeles specializes in electric vehicles, offering them for three, six, or nine-months terms.
Fair touts its ease of use. Transactions can be completed entirely in the app. In some markets, users can get their cars delivered for an extra fee. Fair runs what it describes as a “soft” credit check by asking users to scan in a photo of their driver’s license upon signing up. Some customers get their car delivered within a day, and “they’ve never left their office or their apartment,” Brojerdi says.
Fair’s marketing plays off of its name. “Get the car you want without taking out a loan. That’s Fair,” states one digital video ad.
Brojerdi says the brand will continue to leverage its brand name with a new campaign that it wants to get into market by early next year with its new agency team. Ads, he says, will contrast subscription car buying with the traditional approach that he says leaves consumers with “crippling automotive debt.”