Wednesday, May 19, 2010

What Do Retailers Need to Do to Grow the Lube, Oil, and Filter Business (LOF)? or, Why Can’t the Industry Handle This Layup?

David Carlisle


I love quick service. You don’t have to be a brain surgeon to understand it. Every vehicle needs to have its engine oil and filter changed during the warranty period. It’s the first opportunity a customer has to choose; a Clint Eastwood moment.

“You've got to ask yourself one question: 'Do I feel lucky?' Well, do ya punk?”

Will they choose a dealer (I was trained by Saturn and prefer to call them “retailers”), or will they go to an independent? Many choose an independent. They’ve been trained that dealers are more expensive and that they lie, cheat and steal. Misinformation works against the dealer channel. Lubes, oil, and filters are commodities and priced accordingly – low margin items. But, they represent an opportunity for up-selling – into higher margin maintenance and repairs.

Let’s take a step back and adopt a retailer perspective to Clint’s question. It is interesting to understand where auto retailers are not looking for growth. If you ask them, they don’t have much hope for powertrain and lubes/oils/filters (LOF). Jasper (and all the other independents) and Jiffy Lube (and all the other look-alikes) sit on these segments, respectively, and dominate. Retailers generally don’t feel particularly bullish about these businesses. It is just the opposite for CE/Ag retailers – they stick to the basics. These are self-fulfilling prophecies.
Time Out:It is interesting to contrast Auto (and HT, which looks just like auto) with CE/Ag. CE/Ag retailers are into the basics: powertrain (including reman) and LOF. I can understand powertrain, but, LOF?? This I can personalize. Why do I go to my tractor dealer for my motor oil, filters, and all fluids? They brand that stuff, they make me feel it is the best stuff for my equipment, and they make it easy to buy – easy at the dealer or easy online. They merchandise it. By the way, I have talked with my tractor OEM’s NASPC Steering Committee member about this. He said that I was doing and thinking just what they wanted me to do and think. He smiled knowingly.


When we asked over 3,000 retailers, across all relevant segments, how they intended to grow their parts business in 2010 (unaided), there was scant mention of (LOF). As discussed at the conference, for CE/Ag this is basic, and this industry excels in the basics. That explains CNH’s bar in this chart (with red bars). Looking at the chart, the Ford and Mopar bars are interesting. Here’s what we heard from them.
What Ford Dealers Said About LOF Growth in 2010:

“Quicklane promotions; advertise & push mechanical; promote power train-leads to good labor and sales volume for parts with additional sales of installation parts.”
“Quick lane-eminence parts a lot of the growth is in non-Ford vehicles where we are sourcing from other suppliers.”
“Wholesale parts sales maintenance repairs quick lane”
“Larger quick lane!!”
“Sales blitzes and training class; mechanical shop and body shops. Quicklane marketing.”
“Quicklane advertise drive specials”
“Tire sales, wholesale visits, inexpensive oil changes”
“Scheduled maintenance; try to retain first oil change customers by having car salesmen push our advantages. Service repair; be competitive with parts pricing to try and retain sales, and get customers back from previous ownership.


What Mopar Dealers Said About LOF Growth in 2010:

“I expect repair at our facility or IRFs will provide any growth. As the public learns our parts and service are comparable to the IRFs we may have a chance, provided we can accomplish an oil change in less than an hour; our repair parts are comparable in price to the aftermarket in many cases, as long as we can get them.”
“We plan to use the express oil change service to drive more service work on maintenance of customer vehicles; be more pro-active in recommended services.”
“Quick lane service, buy one get three free to keep them coming back; aggressive marketing of tires and quick lube services to bring customers into our shop.”
“We are now stocking tires. We are selling hard on CSC oil change contracts. We are trying to grab more wholesale. We are actively seeking fleet business.”
“Drive lane sales on group parts i.e. wipers, filters, oil changes. Targeting drive lane maintenance.”
“We are trying to increase oil changes with lower prices, to create more traffic in the service lane, and we are trying to increase our wholesale with more frequent calls to our customer.”
Here’s what I see in the above comments. Ford retailers have a brand and approach for LOF, and Mopar retailers have the insight and desire for an approach. Nobody else is doing much thinking about it.

The big question: Is any of this important? Is there any there there?

I think so. Let me give you a vivid example. Two weeks ago I took my pickup to my dealer (who I really like) to fix a tire (my tire guy told me to go to the dealer – he’s a tire zealot). A few months back I actually changed the oil and filter myself (you can practically walk under the truck). It took about 10 quarts of oil. I asked the service advisor how much an oil & filter service would cost. He said, “About $40.” Then he looked at my pickup and said, “That’s a Duramax diesel. So, it is around $80.” Seemed ridiculous. I said, “Don’t bother.” It wasn’t about the money. I had already had my fill of stupidity for that day. It is interesting that auto retailers astutely see huge growth in wholesale sales, where they are generally ill-equipped to do battle (need lots of help). Yet, they have given up on LOF where it’s mostly their very own merchandising stupidity (OK, and some institutionalized stupidity) that gets in the way of success.

Maybe it’s just me.


Nope!

I decided to conduct an internal extended-company mystery shop and offered to pick up the price of a LOF in exchange for a report of the experience. Here’s what we found out:
  • Some dealers just don’t get it and pretty much push customers out the door when they are seeking first-timer customer pay services.
  • Some dealers get it and do brilliantly (Ford and Honda, in particular).
  • Some dealers, and LOF chain operators, get it and abuse the opportunity by aggressive up-selling and gouging.
  • It really is very simple to do well here; however, greed and stupidity really can screw things up.
  • But, until this market changes (it will, soon) greed and stupidity really works … if you have “Quick” in your brand name.
Immediately below is a fairly typical verbatim trip report of what I got back. The customer, in this case, took a Honda to a Ford dealer for a LOF.
First attempt: Chevrolet
  • I picked this place because it’s right in my neighborhood
  • I drove up to the service bay, which is tucked in between all the cars on display. There is no visible parking for the service area.
  • I was greeted quickly outside. Unfortunately, the guy predicted an hour’s wait to get service and I couldn’t wait. He said they only had 1-2 technicians working on the weekends and were busy that day. They are fully staffed during the week. They could make an appointment for me next weekend or could see me during the week when they have more staff. They are not open Sundays. Forget it!
  • Advertised cost = $34.95
  • My overall reaction on all counts: Very poor! I will not return, even though it’s in my neighborhood.
Second attempt: Ford Dealer (non-Quick Lane dealer)
  • I picked this place because it was on my way to another appointment and it was Ford, which was supposed to be good.
  • Very clean, appealing facility with parking spaces for the service area and a desk behind which technicians smiled at me. Their dealership is attached. Also a comfortable waiting area with TV, complimentary coffee, and toys for the kids. (Much nicer than Jiffy Lube’s skanky waiting area.)
  • They took me immediately!
  • They predicted a 45 minute wait, but turnaround time was 25-35 minutes. I don’t know exactly because I went to get lunch and when I got back, it was finished. They did admit that it was on the slow side today.
  • Advertised cost = $29.95 + tax
  • Final cost = $32.68 with tax. I asked why the discrepancy, since tax was less than the difference. They said I needed a Honda-compatible filter, which was a bit more. They got it from Car Quest down the street.
  • Absolutely no up-selling.
  • They are open on Saturdays from 8-5, closed Sundays.
  • You don’t need an appointment for oil & filter change on any day.
  • They enrolled me in a free Owner Advantage Program. Among other benefits, after 4 oil changes, the 5th is $25 off. Also 5% of the money you spend with parts and service is placed in an account for you, up to $500. You may use these funds for future purchases within the parts and service departments. I’m sold!
  • Absolutely everyone smiled and said hello to me.
  • My overall reaction is that although this place is not that convenient for me, I would go back for the other reasons: trust, value, and cost. I didn’t feel like I was being hustled as I do at Jiffy Lube and it was a pleasant experience. (But I do like that free vacuum service at JL!)


This trip report shows that Ford is different … even for dealers who are not “Quick Lane”. Ford has about 500 Quick Lane operations launched that do it right. They have leveraged their e-Marketing prowess to merchandise a separate brand of quick lube operations that is not instantly infected by the negative “dealer is too expensive” reputation stigma. It is very simple: (1) call it Quick or Jiffy something so that potential customers immediately know what they are buying, (2) advertise price-points that are competitive, and (3) build it … and they will come.
Time Out: A key point about Ford’s Quick Lane is that dealers actually act like retailers (it’s not just marketing hype like a lot of other brands). Their dealers focus on and prioritize this business inside their shops. (If the dealer in the first Chevrolet example had this engrained into their business culture they would not have lost a customer.) Ford conducts national price advertising to change customers’ perception of the dealers. GM Goodwrench is also doing significant price position advertising. However, it seems that this strong Marketing message has not trickled down into Sales process improvement to the extent it has with Ford retailers. It’s all about integration – Ford is the master of integration.
Bottom Line: Listen to your dealers. VW does this a lot. Listen to what they say they can do – like wholesale. Then help them. Also, listen to what they say they can’t do – like oils, lubes, filters. Identify the barriers and figure out if they are self-inflicted. If so, educate your dealers and get your e-marketing team involved. Plan a merchandising scheme that provides your customers with the basics (trust, convenience, cost, and value) and run with it.

Bonus Section – Jiffy Lube Trip Report

My car was overdue for an oil change.

I chose to go to a Jiffy Lube … not far from my house. I had not used them in years. The last time I went, I was talked into an engine flushing that cost an extra $70, so I was leery of returning. I generally go to Sears Tire & Auto Center. The service takes about an hour and I spend the time shopping. Their advertised price for an oil change is $19.99 (no sales tax).

I called Jiffy Lube on Saturday late morning to confirm their business hours and the price of an oil change for my 2005 Nissan Altima. Their signature oil change is $35.99 plus tax, which includes 5 quarts of oil. I was told no appointment was necessary, but that Saturday was very busy and it was suggested I come in early Sunday morning. "The early bird catches the worm" was his closing comment.

Being a morning person, I arrived bright and early at the Jiffy Lube at 8:53 on Sunday morning, determined to be the first customer. The 3 service bays were open and, although they do not open until 9:00 am, I was taken immediately upon arrival and asked if I was there for their signature oil change. The technician greeting me was very pleasant as he led me to the small waiting area, he offered me coffee, magazines, even a stick of gum and turned the TV on for me. I had not been seated long when I was called into the service area to look at the computer screen. There were three levels of oil change of increasing price. Since my car had over 75K miles, it was recommended I get the premium oil change, which was the most expensive, at $51.99. I declined. I was then shown my air filter which I was told was in need of changing. I could not remember the last time I had that replaced, so I agreed to changing it for an extra $19.99. I was then asked about the condition of my wiper blades. I had been meaning to replace the driver side blade for a while so I asked that it be replaced. The cost was $14.99. I was asked did I want what I currently had for a blade or a better one? I chose to stick with what I currently had. I then returned to the waiting area and mercifully, after listening briefly to Newt Gingrich on Fox News, was again approached, this time about my antifreeze level. I was told it was very low, on reserve, and asked if I wanted it topped off. I declined knowing I have some at home and know how to fill it myself. At this point my car had been vacuumed, the windows washed, wiper blade replaced, oil changed and air filter replaced by 9:10. A total of 17 minutes from the time I arrived. As I went to pay my bill, I presented a coupon for $10.00 off an oil change. Although the coupon had an expiration date of 7/31/2010, I was told it had expired. The technician, with a wink, "made it work for me" and took the $10.00 off, again reminding me that he accepted it anyways. I was given two bracelets (no explanation as to what they were for) with the inscriptions "Matthew's Sight Fight" and "Matthew's Fight for Sight", a coupon for $10.00 off an oil change on any additional car and told I can come by anytime, free of charge to top off my oil or windshield washer fluid and I would get $5.00 off my next oil change as a repeat customer. I drove away at 9:16am.

My impressions: I felt that there was high pressure on the part of the technicians to get the job done very quickly. One of the guys already seemed stressed and I was the first customer of the day. I also felt very pressured as a customer to purchase additional services. Although the turn-around time was extremely fast, I did not find the experience pleasant. The price was significantly higher than what Sears charges and I am not pressured by up-selling there. I felt that the information I was being told about what needed to be done was questionable and my trust level was very low. Upon further inspection of my invoice, I had been charged $1.00 for the bracelets. I was not asked if I wished to contribute to this particular cause. It was merely tacked on to my invoice. Jiffy Lube was convenient and fast, but I will continue to go to Sears in the future.

Note: When I returned home, I opened the hood to check the antifreeze level. As I had been told, it was very low so I filled it. All the advertised services that come with the signature service oil change were performed, but nothing additional. The acorns that some woodland creature deposited on top of my engine and battery were left there and never mentioned to me.

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