Sirius XM Wants Your Lemon

Before you go, we thought you'd like these...
Before you go close icon

Sirius XM Radio (NAS: SIRI) isn't just about reaching out to drivers of shiny new cars.

The satellite radio giant struck a deal with leading auto retailer AutoNation (NYS: AN) this week, offering free three-month trial subscriptions to anyone buying a pre-owned car with a factory-installed receiver.

This isn't a new strategy. Sirius XM has been working with individual carmakers for years to make sure their showroom sales teams have incentives to promote satellite radio on secondhand cars. There is no such thing as a permanently dormant receiver to Sirius XM. Every eventual buyer of a car that just happens to have a Sirius or XM receiver is a potential subscriber.

Three months is shorter than Sirius XM typically offers new car buyers, but the media maven knows what it's doing. That's more than enough time to sample the service and see whether it's worth paying for. One would also imagine that conversion rates are lower on used cars, since many of those buyers may be either tight on money or simply out to get more bang for their buck by aiming for a better car that they would not be able to afford as a new ride.

Inking a deal with AutoNation will make the free trials standard throughout its 257 showrooms. AutoNation's presence is larger than CarMax's (NYS: KMX) 107 superstores, though CarMax only sells used cars. AutoNation's specialty is new cars. Either way, Sirius XM has had a similar deal in place with CarMax for years.

This is a win-win-win situation. A car buyer who may not even know that a dormant satellite radio receiver came with the car can now check it out for three months without having to pay. Sirius XM has a shot at a cheaper lead than what it typically has to shell out for a new car activation, establishing direct contact with the new owner. Showrooms have a new incremental revenue stream.

Sirius XM has been growing its subscriber base at a slow yet steady pace since slipping for a few quarters during the recessionary lull of 2009. This week's AutoNation deal is unlikely to lead to an immediate windfall, but it keeps the satellite radio darling moving in the right direction.  

If you like to stay on top of what happens next -- and I'm guessing you do because you're reading this article -- how about checking outMotley Fool's top stock for 2012? Spoiler alert: It's not Sirius XM. However, it is a free report, but only for a limited time, socheck it out now.

At the time this article was published Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners