You perform oil changes to make customers…so you can sell fuel and fluid maintenance services to make money! This is a profound business strategy that, if implemented properly, will have a dramatic impact on your fixed ops bottom line in 2014.
There are roughly 450 million oil changes performed annually on the 249 million cars that are on the road. Oil changes are by far the number one service performed in the US, thus providing the easiest opportunity for initial retention; but there’s virtually no money to be made when doing them.
Fuel and fluid maintenance services are highly profitable and provide long-term sustainable retention. In other words, oil changes are the “gateway” that opens the door and lays the foundation for all other preventive maintenance services.
National Oil and Lube News recently published their annual Independent Fast Lube Operators Survey, and there are some interesting takeaways. NOLN’s survey looked at over 4,400 lube centers in all 50 states. That’s a robust sampling of the independent “quick lube” segment of the automotive industry, thus it gives us an accurate and insightful set of facts.
Fewer Cars, More Oil Changes
Year-over-year fast lube traffic declined 1.6 cars per day (from 39.4 to 37.8) while oil changes increased by 1.0 oil changes per day (from 31.9 to 32.9). While it’s no surprise that a large percentage of the cars at a lube center have an oil change done while they are there, it is notable that the percentage keeps going up. Fewer cars, yet more LOFs…interesting.
Less Miles Between Oil Changes (sorta)
Consumers drove 4,601 miles between oil changes compared to 4,574 miles the previous year. Granted, that’s a small increase of 27 miles, but check this out: vehicles equipped with oil monitors drove 248 fewer miles between oil changes (from 5,321 down to 5,073). Despite all the extended oil drain hoopla, most folks still let common sense prevail, and the 5,000 mile drain interval remains the standard.
I may be reading too much into this, but I also think it means that when the free OEM “two oil changes a year for two years” deal ends or the “two oil changes in 25,000 miles” deal ends, then most people hit the quick lube about every 5,000 miles.
Oil Change Prices are Up!
The average price of a standard, full service oil change increased by only $.41 last year to $37.95, while the price of a synthetic, full service oil change went up $6.10 to $70.76. That’s a whopping 10% jump.
Here’s a shocker: only one third of quick lubes offer some type of low-cost, bare bones, basic oil change! Contrary to popular belief, fast lubes aren’t “giving it away”, they aren’t the cheapest guys in town, and they aren’t stealing your customers with some stupid-cheap pricing structure.
The takeaway for dealerships, I believe, is to quit obsessing about oil change prices and focus on building value for the customer. Some examples of value include: experienced technicians, OEM-approved oil and filters, complimentary roadside assistance, lifetime engine warranty, free car wash, etc. And don’t forget your comfortable customer lounge, clean restrooms, free Wi-Fi, gourmet coffee, bottled water, HD television…and all the other amenities that make for an enjoyable customer experience.
Annual Revenue Up, Net Profit Down
Fast lubes saw a slight annual sales increase of almost $10,000 to $764,990, but saw their net profits drop a dramatic 2.3 percentage points, from 13.9% to 11.6%. Wow. A bigger top line and a smaller bottom line. So how did it happen? I honestly don’t know. But here’s a lesson dealerships can learn: oil changes will drive your hours per RO, your effective labor rate, and your revenue per RO down…unless you use oil changes as a means to discover the vehicle’s maintenance needs and offer to perform those services on the vehicle while it is in your shop. I repeat: oil changes are the gateway to all other maintenance services.
Fast Lubes Aren’t Pursuing Fleets
This one absolutely floored me. Only 9% of fast lube annual sales came from fleets. Unbelievable! Almost all small and mid-sized fleets outsource their maintenance and repair work; especially fleets with less than 50 vehicles. So if the fast lube industry isn’t going after the fleet business, who is? Are you going after fleets, Mr. or Ms. Service Manager? If not, then here is your growth opportunity for 2014—go get the fleet business! (As always, if you need any help just let me know and I’ll connect you with one of my colleagues in your area that can assist you in building your fleet maintenance business.)
Finally, let me remind you that fast lubes are not the enemy of dealerships, dealerships are not the enemy of independent garages, and garages are not the enemy of tire stores. There is enough business out there for everyone to succeed and grow. Last year, over $66 billion worth of unperformed maintenance was left on the table by dealers, garages, tire stores, and fast lubes. What a great opportunity!
My special thanks to Tammy Neal for giving me permission to quote from the NOLN Fast Lube Operators Survey.
