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Pouring on the Premium

Pouring on the Premium

For many jobbers, keeping a varied motor oil offering in stock is viewed as a necessary burden, but a burden nonetheless. There are reasons why you should reconsider this attitude.

While market forces have driven profit in the bread-and-butter motor oil grades to razor-thin levels, oil changes continue to provide the most frequent and possibly most important point of contact between the car owner and the automotive service provider — and recent developments in premium motor oils and filters have boosted the profit potential in the category.

The Automotive Industries Association of Canada’s 2007 Outlook Study, conducted by DesRosiers Automotive Consultants Inc., reported that out of 2,500 light vehicle owners surveyed, 92.3% required an oil change during the previous calendar year, and some required as many as three changes within that period.

This data is echoed in J. D. Power and Associates’ Customer Commitment Study, which reported that lube/oil/filter service made up 43% of all service occasions in 2008, up 2% from 2007.

“The highest frequency of service for a vehicle is the oil change,” says Dennis Favaro, marketing manager for Valvoline Canada. “Installers use oil changes to drive traffic into their location. As a result, it drives other secondary services that aren’t related to the oil change that could potentially draw additional revenue for both the jobber and the auto service technician. It’s to the benefit of the jobber to market motor oil, rather than just supply it to the installer on an ongoing basis.”

The right marketing program can drive traffic and related sales of air and cabin air filters, as well as engine and injector flushes, alignment, tire rotation, and many others.

Current economic uncertainty has recently caused many consumers to hold back on routine maintenance, and drive less too, though the times are also seeing a decline in new car purchases, which is good for the independent service business.

“The oil change business generally maintained its volume due to increased car population and kilometres driven. However, this dynamic changed in 2007 and 2008. Consumers are driving less and thus their regular maintenance requirements are reduced as a result. We have seen this shift in the spark plug category already. And a similar shift is going to be required for the oil change category,” says John Hussey, western regional manager for Honeywell CPG.

Accompanying that trend in the marketplace is the rise of the extended-drain interval, which can push oil changes to every 15,000 km and beyond.

Many experts predict that synthetics are quickly becoming the wave of the future; not only will the trend to extend drain intervals become more commonplace, but the need for something better than conventional motor oil formulations may become increasingly crucial. In many cases, the synthetic formulation is a requirement of the extended drain interval.

“If you look at the trends over the last couple of years there’s a huge rise in synthetics,” says Marsha McLaughlin, marketing manager for Wakefield Canada. “But there’s also been a lot of miscommunication around synthetics as well. People are confused whether you can switch from conventional oil to synthetic. Will using synthetic void my warranty? Is synthetic only for new vehicles? There’s a lot of mix-up. I think there’s been a lot more education out there in the marketplace. People aren’t as afraid to switch. I think that’s what’s helping them rise in the marketplace.”

“The use of higher-margin synthetics, especially niche products, is a way many operators are maximized for profits while offering great value,” says Brian Shaw, manager of sales and marketing for Noco Lubricants Canada. “Say you’re dealing with a customer who comes into a shop for an oil change, and he’s got 15,000 kilometres on his car. If he’s looking to go long and extend the drain unilaterally past manufacturer recommendations, it’s just as easy for the installer to ask, ‘Why not look at a full synthetic or synthetic blend?’ These products will take the pounding from the engine and extend drains better.”

Of course, monitoring the purchase habits of the customer in the bay is one thing. Understanding the motivations of the retail consumer is quite another. The DIY market for motor oils is exemplary. Its one of those products sold into the aftermarket that, time and time again, lends itself to high sales at the retail level. And that doesn’t just have to be true of the mass merchandisers.

“On the retail side, it comes down to merchandising. How do you merchandise in your store?” asks Mark Reed, director of marketing for Shell Lubricants Ltd. “If you merchandise properly to a DIYer, your oil filters in particular should be relatively close to the oil that’s on display, in addition to other accessories. And it’s not just oil filters and cabin air filters. It’s oil change tools, drain pans, filter wrenches, drain plugs, funnels, etc. You can even merchandise within an oil set or even build an off-shelf display.”

While retail sales at the jobber level are typically low, there are several creative strategies that may help boost sales. Consider bundling related products together as a package. Selling air filters alongside oil filters with the corresponding oil type can act as a strong incentive to your DIY customers.

Educating the customer to make the correct decision should be the goal, whether you are addressing the DIYer in a retail environment, or providing the tools to your trade customers to do the same at the service counter. “It’s easier to market in-store to a DIYer,” says Reed. “It’s a little more difficult in the installer market, because you’ve got to do the training to the installer so that he has the knowledge to educate his consumers on why they should be using a better motor oil, like a synthetic or a high-mileage, or a brand name filter over a no-name filter. Installers are in a position to discuss the benefits to their vehicle directly to customers.”

Accordingly, jobbers should take advantage of point-of-purchase sales and educational materials so they can better arm their technicians with the proper knowledge should any questions come from their customers.

Favaro notes the unseen cost to jobbers in trying to save a buck when sourcing products.

“The real difference you’re going to see is the lack of sales and marketing support from dealing with a lesser-known brand,” he observes. “Value does not always equal price. If your support is lacking in these areas, you’re really not getting a good value.”

And, with the proliferation of options available, that need to educate is greater than ever.

“Toyota is going to 10W20 on a bunch of regular vehicles in the near future. You’ve got Ford, Chrysler, Honda, Mazda, and today’s Toyotas into 5W20. GM is still using 5W30. You’ve got Mercedes 5W30-5W40s, unique formulations of those called MST/HST. You’ve got VW in 5W40 with unique VW specs. And the list goes on,” says Favaro.

And then there is the issue of consumer behaviour. According to Mark Reed and surveys conducted by Shell Lubricants Canada, most consumers know to have their oil changed every 5,000-6,000 kilometres. They’re just not doing it.

“The OEMs have a vested interest to stand behind the claim in what that oil indicator light is telling them, because if they didn’t there would be huge warranty issues and long-term class action lawsuits due to engine failure. It’s conditioning consumers to extend their oil change intervals beyond what those companies recommend,” continues Favaro.

Also driving the trend towards synthetics in North America is the need for OEMs to upgrade their products to meet government standards. While vehicle engines, parts, and components are better than they were as early as five years ago, many governments and OEMs are driving consumers towards better fuel economies. Fuel economy, as well as lower emissions, is definitely paramount in the consumer’s mind from an environmental standpoint.

The
re is much to learn in the realm of the oil change business, and much to offer. Cultivate relationships with your installer customers, to inform and educate, as well as supply, them with dependable top-quality products, and you stand to reap benefits beyond those offered by the category alone.

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