Lube Strategies to Succeed in Tough Times

The fast lube industry is not getting a pass on the difficult economic times. The cost of goods sold, particularly the price of bulk motor oil, is increasing every time you turn around. That’s not surprising given the almost daily rise in the price of crude and the skyrocketing price of gasoline at the pump. As if that wasn’t enough, consumers are faced with rapidly increasing food prices, in part due to the added cost of transportation from farm to market. The only thing that seems to have gone down lately is the value of our homes.

How is all this affecting the lube industry? The answer for most lube operators is simple — flat or declining car counts and lower margins on our basic product: the Lube, Oil & Filter (LOF).

With the cost of living increasing more rapidly than wages, consumers are being forced to make decisions on where to put their limited dollars. For most Americans, commuting to work by car is a necessity. That means filling the tank with gasoline, which has hit the $4-per-gallon mark in many places across the United States. Although motorists may be able to cut back some on unnecessary travel, the basic work commute still commands the most gasoline dollars.

With gas prices going up, what do families do to reduce the amount of money spent on transportation? Often, they may cut back or delay basic car maintenance. If it’s a choice between getting to work or auto maintenance, the winner is getting to work. Consumers rationalize that auto maintenance, such as oil changes, can be put off for another month or two. After all, many have already extended oil changes well beyond the old 3,000 mile mark. Intervals of 4,000 miles to 6,000 miles have now become much more prevalent, particularly in low- and mid-range income areas.

To find out what fast lube operators are doing to weather this economic storm, we went directly to the source. We asked Automotive Oil Change Association members to share some of their ideas, and we received quite a few interesting responses.

In the past, fast lube operators were hesitant to implement frequent price increases. They would normally hold the line through several oil price increases from their suppliers and then bump up their base price to bring their margins back in line. Lately, however, quite a few lube operators report that they are much more likely to increase their prices more frequently. They note that with consumers experiencing an almost-daily barrage of increasing gasoline prices, fast lube customers seem to be more accepting of price changes for products related to oil. The media has made everyone aware of the price of a barrel of crude and its relation to other petroleum related products.

Another survival technique is to expand service offerings. More and more fast lubes are getting into tire rotations, transmission service, brake repair and other higher-profit services. These are services that are necessary and valuable to the customer and help increase that bottom line. You’re doing your customer a favor by providing a thorough vehicle check, including letting them know the services that are recommended or required by the OEM and offering to perform those services while they’re in your shop. Customers often reject these services on first presentation, but operators report that many customers return within a short time to take them up on their suggestions.

Fast lube operators need to educate customers about the gas-mileage benefits that many of these services can provide. To help them do this, AOCA recently provided its members with press releases and standardized advertising for online and print media. These media kits remind consumers that regular maintenance helps save on gasoline and that they can get “Professional Service at their Convenience” at their local AOCA-member lube center. These and other upcoming media campaigns are designed to help drive new business to our members to help offset the lower car counts and increased cost of goods.

Once you get those customers in, you want them to keep coming back. Lube operators are coming up with quite a few ways to do this, including several different types of loyalty cards that give a free oil change after a certain number of full services or offer discounts on maintenance services that will be required in the future.

One of the things we didn’t see from the operators’ responses was a decrease in the level of service lube shops are providing customers. We thought we would get some feedback saying that to hold their price on the LOF, operators were dropping such things as vacuuming, windshield cleaning, and top-off services between services. But our operators virtually all agree that first-rate service is the main reason their customers keep coming back, and they have no plans to cut back on the level of service. Give customers the VIP treatment, and they’ll become customers for life.

The price at the pump and the cost of goods are likely to continue to rise, so fast lube operators have to think of new ways to counteract these trends by offering more services, creating customer loyalty, educating consumers about the value of their services, and pricing their products and services fairly.

Steve Christie is executive director of the Automotive Oil Change Association. Learn more about the AOCA at www.aoca.org.