Warning signs about the imminent collapse of the R699 per month car deals were present months before the scheme reached breaking point.
This is according to a number of scheme members who told MyBroadband that the Satinsky Group – the company behind the deals – had been calling them up trying to get them to move onto the group’s commission-based plan amid declining monthly earnings.
The deal offered by Satinsky saw the group act as a motor dealership, offering branded cars with finance underwritten by South African banks, while subsidising monthly repayments through an advertising contract with Hong Kong based Blue Lakes Trading & Promotions.
Through these arrangements, buyers could effectively drive new cars from as little as R699 per month, depending on the model and contract signed.
However, the business model for the deal exists in two packages:
A mileage-based earn while you drive (EWYD) model, where scheme clients had to drive a certain amount of kilometers, and got paid monthly advertising fees accordingly; or
A commission-based earn while you own (EWYO) model, where scheme clients would get paid R3,000 for every other person who signed up to the scheme using their unique code.
At the start of July, Satinsky’s scheme with Blue Lakes as a partner broke down, leaving a lot of confused and angry clients on the EWYD drive model without their monthly earnings.
The EWYO model, however, remains largely unaffected, still being available as an option from the group.
Piecing the saga together retrospectively, it has become evident that the earn while you drive model was facing issues – even beyond those listed by vehicle and asset financer, WesBank.
A number of clients have also reported a consistent decline in earnings from the ad scheme over the past few months.
From figures supplied by one user, it’s evident that the scheme had a lot of ups and downs (despite consistent kilometer levels traveled), with a sharp drop off since the start of the year.
Speaking to the Independent Group’s Consumer Watch, Satisnky CEO Albert Venter effectively confirmed the issues, responding to queries about the decline in advertising fees since the start of the year.
However, the CEO blamed the declining fees on bad publicity and client fraud.
“A lot of bad publicity started happening,” Venter told Consumer Watch. “People started pulling their stickers off, and then sending us pre-dated photos to keep getting their fees, so we got fewer and fewer advertisers on board.”
More telling, however, was the group’s aggressive push to get clients off of the mileage-based contract – which started in 2013 already.
A number of Satinsky clients told MyBroadband that the group played out an aggressive marketing push since late 2013 to get users to change from a EWYD contract to the EWYO contract.
This push included SMSes, email marketing and phone calls “every other week” trying to convince clients that they were missing out on potential commission on the EWYO model.
The marketing pitch involved clients being told they’re missing out on commission as an x-number of people had signed up to the scheme using their unique code.
However, after querying details about possibly moving contracts, one client was told the transfer of contract to a EWYO model was one-way, with no option to transfer back to EWYD.
According to Venter, the commission-based option of R3,000 per month per new client signed up still exists – something which was not communicated to existing clients at all.
The new scheme would also see members punting other products like insurance.
However, user accounts of this scheme are also not positive.
According to another user, at least 3 people to his knowledge signed up for the scheme using his unique code as early as February – one SMSed in 4 times in a week – yet none of them received call backs on the deal.
No call backs, no signing up, no commission. Similar reports have also surfaced elsewhere.
The other option is the rewards scheme – a Satinsky-owned scheme called Accelerator Rewards – which offers discounts and vouchers.
According to Venter, over 4,000 people have signed up to the Accelerator Rewards scheme.
“If we can get 7,000 people signed up for this rewards programme, we’ll have the biggest car sales force in the country,” Venter reportedly said.
“We should have engaged more effectively with our customers,” Venter told Consumer Watch. “Lack of communication was the one mistake I made.”