Yesterday I was at the Hertz counter in Los Angeles and there were about half a dozen people in front of me in the line.
I was surprised (actually shocked) to see four of the six people in front of me choose the pre-paid gas option.
For those of you who don’t know what is pre-paid gas option, you pay for the entire tank of gas and you can return the car with an empty tank.
A quick side note: I know there are some nit-pickers who might be reading it. You can’t return a car with an EMPTY gas tank (you will need to get it towed, literally) so that is not the point of the blog post.
Now, the pre-paid option seems like a convenience option. But let us look at this in a bit more detail. You can drive about 300 miles with a full tank of gas. So if you want to make the most of the pre-paid option, you have to drive about that distance and return the car without filling the tank again. If you return the car with half a tank of gas, you literally paid twice the price per gallon on the gas. Pretty good for the car rental company.
After the first person chose the pre-paid option, I listened to the story with care. The story was well-crafted and staged:
There was a big board that showed two prices:
Average gas price in LA: $3.06 per gallon
Price with pre-paid gas option: $2.63 per gallon
There was another big board that said if you don’t take the pre-paid option, you would be paying a fee of $7.99 per gallon ( this included the re-fueling charge)
The agent would simply show the board and say that if the customer wanted to save money (?????) on gas, they might want to choose the pre-paid gas option.
It was simply brilliant piece of storytelling.
Really, there was no time to think. In a few seconds the customer has to decide whether he or she wants to take the pre-paid option and the entire story was staged in such a way that taking the pre-paid option made a lot of sense. The gas price was cheaper than the average gas price in LA.
The price shown was per gallon (around $2.63) but what was being charged was for a tank full of gas (around $45.00)
We can debate whether the car rental companies are using ethical practices in pitching the pre-paid gas option. Rather than worrying about them, it is best for us to be vigilant on the stories that we are being told to influence our decisions.
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Posted in the Business Models category.
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