Not too many years ago, the specialty underhood chemicals and additives SKU lineup consisted of a relatively small number of well-known products performing a restricted range of functions.
Today this product category landscape is filled in depth with a huge array of highly application-specific formulations taking up considerable shelf space in jobber showrooms. And yet, despite this product proliferation, there are some signs of market troubles in this category.
Bob McPherson is lead automotive specialist at NPD Canada, a division of the US-based NPD Group.
The company describes itself as offering “critical market intelligence on product movement and consumer behaviour in Canada… [and offering] definitive insight into what is selling, where, and why.”
McPherson characterizes the aftermarket underhood additives and chemicals market in Canada as one that has reached a plateau and is now witnessing pull-backs in marketing efforts by the major manufacturers of these products.
“This is a brand-oriented market and it is traditionally driven by advertising expenditures by the product manufacturers. In this product category, a strong marketing effort can boost sales by 30% to 40%.”
McPherson says that sales are being affected by the success of the new vehicle dealership sector in both retaining its new vehicle customers for maintenance programs and also in bringing back former customers into the dealership maintenance fold.
Strong maintenance-oriented relationships are replacing traditional aftermarket chemicals and additive products sales. In this equation, properly scheduled maintenance can equal additive and chemical redundancy. Within the broad specialty formulation products category, McPherson sees the growth trend line moving more towards specialty oils and appearance products.
“We are now seeing more and more four- to seven-year-old cars returning to the dealer level and also cars eight and more years old. And in many ways, the companies that control the oil-change business control the aftermarket repair business,” McPherson says. “In the past, the traditional aftermarket thrived because of the poor performance of the dealership sector in building a consumer base loyal to dealership maintenance programs.”
On the upside, people are keeping their vehicles longer and longer and increased vehicle longevity increases the market for chemicals and additives. Because the products respond well to marketing efforts, particularly advertising, jobbers can have some control of their sales destiny with these products. In choosing what to promote, jobbers can analyze the overall marketing support offered by the various brands and sell those brands with programs most favourable to jobber interests.
Increased vehicle longevity has also influenced the development of a relatively new product category in the chemicals and additives category–formulations and applications specifically designed for older vehicles, such as those with mileage in excess of 120,000 km. As vehicles age, they will exhibit different problems requiring different solutions. Products in this 120,000 km + category can range from engine treatments solving contaminant buildup problems, to compression restoratives, to specialized power steering fluid and problem-specific transmission fluid.
Chemicals and additives also respond well to suggested selling both with DIY and do-it-for-me (DIFM) customers at the installer levels. In addition, people buying specialty chemicals and additives for a particular problem are tipping business off to the fact that there may be potential for a larger sale in the possible need for repairs to fully solve the underlying problem, such as a leaking gasket or radiator. Generally chemicals and additives are maintenance-assistors, or solution-products targeted to solving specific underhood problems.
There is certainly no lack of products to promote in this category–everything from the well-known gas injector-cleaner additives, to products performing more of a mechanical function such as gasket-makers. The SKU range is vast, and in fact, the breadth of this product category may be causing consumer confusion, according to some industry research.
A major study by a top additives manufacturer showed that consumers do not understand these products very well and depend a lot on information and instructions supplied with the product, particularly on the packaging. Consumers need a lot of help in determining what underhood chemical and additive products can do, and what they cannot do. In addition to lack of information, automotive maintenance “myths” and misinformation can have a negative impact on product sales in the category.
Consumer cluelessness about antifreeze is an example. One of the problems is similar to the myth of the 100,000-mile tune-up-free driving period on a new vehicle, which has resulted in many consumers thinking they can virtually ignore traditional maintenance practices.
In the case of antifreeze, vehicle manufacturers are increasingly equipping their vehicles with long-life, or extended-life, antifreeze. However, consumers do not generally realize that when this antifreeze needs to be topped up, it needs to be replaced with the same coolant as the original installation. Otherwise the coolant life could be reduced to that of regular antifreeze, or worse.
In addition, the long-life product reputation is being confused as a product-wide attribute in the minds of some consumers, resulting in thinking that antifreeze changes can be postponed almost indefinitely. Lack of understanding on the required ratio strength required for the coolant is another problem.
Compounding this is the fact that vehicle manufacturers are not consistent from company to company in the colours they use to distinguish their original-installation long life antifreeze–it could be orange, red, yellow, blue, green or any colour they choose. There is a rainbow of colours, with the colours having little consistency between vehicle models. This lack of standardization is both an educational and sales opportunity for jobbers. Effective education can help the consumer make the right choice of product.
Brand-name antifreeze suppliers have done a good job in responding to the new vehicle application requirement challenges, developing a wide range of application- or vehicle-specific product. As part of this effort, they are also helping to educate the consumer that all antifreeze is not alike and that various vehicles require a specific type of antifreeze. All of the above factors present jobbers and installers with a good opportunity to better inform the consumer and thus help their sales in this category.
Aftermarket products such as brakes can fall into a good, better and best, or premium, category. This of course provides built-in “upsell” opportunities for jobbers and installers. In the case of underhood chemicals and additives, however, “premium” is not as strong an operating factor. Premium, in the case of these products, is more a matter of brand reliability and reputation, rather than being a good, better, best distinction. Among the well-branded chemical and additive products, the differences appear to have more to do with being application-specific than with the quality of the individual products.
As a whole, this product category features good margins and is responsive to effective marketing and in-store or installer-site promotional and merchandising efforts. As such, it is the type of market in which jobbers and their installer customers have always done well.
Dealer inroads notwithstanding, increasing vehicle longevity can represent a new opportunity in this category. As a rule, the traditional aftermarket has lost customer availability roughly in proportion to the increasing length of OEM warranties. This is evident as dealers capture more maintenance business as warranties have increased to five or more years for various components.
However, vehicle longevity, or the length of time consumers keep their vehicles, has increased to the point where the age of many vehicles is now well past any current or likely OEM warranty period, thus moving more and more vehicles into traditional aftermarket territory.
In addition, although OEM mechanical quality is one reason people are keeping their cars longer, new vehicle affordability is another reason. And with affordability becoming a new vehicle purchasing-decision issue, the current older vehicles on the road become an aftermarket opportunity.
Special thanks to the contributions of the following organizations in researching this article: NPD Canada, Valvoline Canada, Honeywell Canada, Henkel/Loctite, and Permatex.