TrueDelta

The theory behind market segmentation assumes that people have a certain set of needs and thus that when looking to buy something like a car can be expected to buy a specific type of product.

Reality isn’t nearly so clean. Although I continue to find market segmentation quite interesting (how might car buyers be grouped?), and believe there’s a role for it to play, the traditional view of car buyers’ needs as clear and unchanging just doesn’t hold up. Instead, people’s needs are often highly fluid, especially as they play out in the selected vehicle.

I learned this a  few years ago when someone asked me if they should buy a Subaru WRX or a VW GTI. He didn’t personally feel any need for a fast car, but he wanted something that his friends would think is cool and noteworthy. He arrived at a better solution without my help: a Toyota Prius. Which did fit his basic needs, demonstrates the unlikely alternatives that can result even starting with the same set of needs.

This month I came across a similar switch. Someone who’d been driving a large 425-horsepower Chrysler SRT8 swapped it for a tiny 70-horsepower Smart ForTwo. It’s hard to imagine two more different cars. Yet at this point I’m no longer surprised by such a switch; major changes from one vehicle to the next happen too often.

We’re all very busy these days. I know I am. So it helps to feel that there are companies that we can trust to provide good service at a good price. After all, who has the time to shop around for the best car insurance, phone plan, Internet service, doctor, mechanic, stock broker, accountant, lawyer, and so forth on a yearly basis?

Well, I’ve got bad news for all of us: if you trust that you’re getting the best rates possible, you’ll probably end up paying too much, even far too much.

Case in point: for the last 18 years I’ve used USAA as my insurance provider. They’ve always provided great service. And for a long time their rates were much lower than those for any other insurance provider.

In recent years I’ve noticed my rates climbing higher and higher. Each year I’d call them, and see what they could do about these ever higher rates, which was never much. A few years into this ascent I checked with a few other insurance providers, and USAA was still lower, but not by nearly as much as they had been.

Well, I’ve got to make some major changes in my auto policy. So today I called Progressive. And they came in nearly $1,200 per year lower than USAA. Even factoring in USAA’s roughly $100 per year “dividend,” we’re talking a difference of over $1,000 per year.

I then checked my homeowners, and Progressive’s partner came in over $200 lower (and the gap will widen to $350 come the first of April).

I was shocked. (I’m still in shock.) I called USAA to see what they had to say.

They answered the phone with, “Thank you for trusting USAA.”

My response, “Well, I did until today. And now I wish I hadn’t.”

They “did what they could” for me, and found a savings of $150 off their current rates. Not nearly enough.

Now, I don’t know if anyone at USAA is getting rich off of the steady increase in their rates. Technically they’re a non-profit owned by their policy holders. But clearly at some point along the way they lost control of their costs, a basic failure of management. Knowing how much their members/customers trusted them, they probably didn’t feel much pressure to remain lean. In other words, though I don’t think they’re crooks, I do think they’re mismanaged.

The end result is that in recent years I’ve been spending about $1,200 more a year than I should have been. Because I trusted them to keep their costs low, so they could keep my rates low. And I should not have.

I wish I’d checked other companies’ rates sooner, and urge everyone to do the same.

I just updated the list of the “most popular price comparisons” for the first time in four months. I’d update it more regularly, but it doesn’t change much. Not even this time, when there’s no overlap in the time periods covered between the old list and the new one. Of the five most common comparisons last time, four remain in the top five, and the fifth is now #6. The new member? Last time around it was #7.

Still, there have been a few changes. The BMW 1-Series and Cadillac CTS weren’t on the list the last time around. Now both are there–and both are most often compared to the 3-Series and Infiniti G35 / G37.

Also new to the list: the Chevrolet Malibu. It’s now commonly compared to three other models: the Honda Accord (#12), Toyota Camry (#21), and Ford Fusion (#39). For a long time GM had no models on this list; few people visiting the site cared to research anything it offered. Now, with the CTS and Malibu joining the Enclave, it has three.

Chrysler’s minivans had fallen off the list. With the redesign, they’re back on, both vs. one another and the Honda Odyssey.

Aside from the Fusion and the new minivans, Ford and Chrysler models are absent from the list.

In Consumer Reports, a 3 percent problem rate can count as “much worse than average” at the system level (electrical, cooling, etc.). That’s the lowest problem rate for which they’ll assign a solid black dot, if it also happens to be 45 percent worse than the average. In the case of a 3 percent black dot, the average problem rate for the system would have to be 2 percent or lower (145 percent of 2 percent being about 3 percent).

Guess what? For 2006 and 2007 models in the current CR results, the averages are ALL 2 percent or lower. So for these model years a problem rate of 3 percent or higher at the system level WILL earn the black dot.

For the entire car, the average problem rate for a 2007 is about 18 percent. (I say “about” because this was the average in previous years. I have not been able to find this figure for the current year.) So you can calculate (within a percent or two):

“much better than average” = problem rate under 10%
“better than average” = problem rate from 10% to  14.5%
“average” = problem rate between 14.5% and 21.5%
“worse than average” = problem rate between 21.5% and 26%
“much worse than average” = problem rate over 26%

There are a few ways you can look at this:

1. “Much better than average” cars have at most 40 percent of the problem rate of “much worse than average” cars. So in percentage terms, the spread is wide.

2. But what this translates to in absolute terms is the difference between one problem for every ten (or more) cars vs. one problem for every four (or fewer) cars.

3. In other words, nearly three in four owners can report no “serious” problems, and the model can still be “much worse than average.”

4. The difference between “average” and “much worse than average” is as small as 3.5 percent, about one problem for every 30 cars.

5. The ratings in CR would be more useful if they posted the above percentatges with their results. Even better, also provide the actual problem rate for each car–a number. But they do not, feeling that people are best served by giving them only red and black dots.

It’s like providing an idiot light instead of an actual instrument.

I started TrueDelta’s research because I wanted to see the actual numbers, not just the dots. And faster.

Data collection has ended for the fourth quarter. 4,985 responses were received, up from 3,600 in the third quarter and 2,835 in the second. (And the two quarters before those? 2,193 and 1,324.) The response rate remained about the same as before, at 41.5 percent.

This will enable us to post results for 92 model / model year combinations, and for another 95 with asterisks. Last quarter these numbers were 72 and 73, respectively. The numbers would have been 93 and 94, except I couldn’t get any of the 15 2007 Mustang owners who had not responded last month to respond.

So we’ve had some solid growth. Everyone who has been working to make this possible, thank you.

When the Vehicle Reliability Survey first goes out near the beginning of the month, over 1,000 people responded in the first two hours.

Now we’re at the end of the cycle, and I’ve been pushing to get six models that are just a single response short over the hump. Nearly 200 emails were sent this morning to panel members who own these vehicles. In response–nothing.

With each of these models, 24 owners took the time to respond. Now, for their work to result in a full result, with no asterisk for insufficient sample size, they need one more owner to respond.

For those who are curious, the models in question:

2002 Mazda Protege and Protege5

2003 Honda Odyssey

2006 Saturn VUE (two responses short)

2006 Suzuki Grand Vitara

2007 Ford Mustang

2007 Honda Pilot

2007 Saab 9-3

A couple other models are a couple responses short of being included even with an asterisk:

2007 Toyota Tundra

2008 Ford Escape, Mercury Mariner, Mazda Tribute

I’m quite frustrated that for these models I can’t seem to make it happen. Even when their response would make the difference between having a publicly visible result and not having one (asterisked results are only visible to members), these 188 members just won’t respond. Even though this is what they signed up to do.

As I said, I’m quite frustrated. Maybe another email tomorrow will do it…