A healthy advertising budget is a necessity in our business especially, with today’s still-faltering economy and the increasing competition from every conceivable type of automotive service shop.
Running coupons in your local mailer filled with local business’ coupons is the most common method of couponing out there today for the quick-lube industry. Of course, the Internet has also opened up a slew of new and inventive possibilities for grabbing customers that could never have been implemented just a few short years ago. The thing to remember with any type of discount, given through any type of advertising, is the money you are giving off the price of your service is 100 percent profit. That is important to realize but many operators don’t make the connection. By giving a discount off the service, you are “buying” your customers.
For example, if your coupon discount is $5 off the normal price of $30 your customer is saving about 16 percent off the cost of their oil change. However, by attracting that customer to your shop and saving them 16 percent the cost to you may be much higher then you realize.
Let’s make a simple math calculation. For a $30 oil change, you use $22 for the products and services you need to perform the service. This includes the cost of the oil, oil filter and any extra ancillary fluids included with the service. Add to that, the cost of labor you have to pay your employees to perform the service. Don’t forget expenses such as your mortgage or lease payments and utility payments to keep the air compressors and lights humming along all day. Of course, you have to pay for water to keep the location clean. Speaking of clean, you need cleaning supplies, hand soap, floor-degreaser, shop towels, mops and buckets, brooms, dust-pans and trash-cans. Oh boy, trash cans! You need somewhere to dump trash so a waste removal service is another expense. You have to get rid of your used waste oil and oil filters, as well as your waste anti-freeze in a clean and environmentally friendly manner.
What about tool expenses? You need tools to do the work. Those aren’t free or cheap and they tend to have a never-ending habit of growing legs and walking out of the store when you’re not looking. Of course, things wear out and break down, air and oil lines split, metered nozzles quit reading correctly, flush machines conk out when you need them, compressor motors burn out, oil pumps seize up, plumbing backs up and toilets run and waste water.
Do you supply uniforms for your crew? If so, they aren’t free. Clean, presentable, uniforms —and an adequate supply of clean shop towels — are necessary. Don’t forget about your POS system. Quarterly fees, to keep the system updated and the computers and printers operating every day, can be a never-ending and expensive nightmare in our environment.
Don’t forget all your insurance and licensing fees and whatever other money-grabbing fees your town may demand. My new, most hated fee is in one of my locations where the city now charges a $155 per year fee for a fee-licensing permit. This fee allows me the legal privilege to pay the city for my local fees for my various licenses and permits needed for that location, which of course, carry their own fees.
I’m sure if any of you think about it for even a couple of minutes, you could each come up with several more expenses needed today to be able to provide your customers what they would like to think is just a $20 oil change.
Back to our original thought, you have given your customer a $5 discount off your $30 oil change, saving him 16 percent off what they would normally pay you for your service. Of course, that $5 is pure profit to you. All of the expenses listed above still cost you full price.
If your total profit on this typical oil change is $8 and you have to give $5 away to “buy” a customer, you have sacrificed a whopping 63 percent of your profit. The customer saves 16 percent and it costs you 63 percent of your profit. I am no genius, but even so, I have a cast-in-stone, never-ending, hard-and-fast, rule about this. If you rely primarily on coupons and discounts to support most of your business and to bring in a steady flow of fresh and/or repeat customers, you are in what I call the “Stupid Spiral.”
I call it stupid because you should not have to continually buy your customers. I call it the spiral because your business will eventually, spiral down the drain. The repeat customer is your most important customer. They are the ones who talk about your business to their friends and acquaintances, hopefully, making recommendations to come to you for service. Your repeat customers know what to expect and they like it.
The beauty of repeat customers is you don’t have to buy them with discounts. You have already earned them with great service on their previous visits. Earning a repeat customer costs you nothing except being a great owner/manager and making sure your crew is properly trained and treats your customers with the respect and care they deserve.
I know some of you are thinking your repeat customers scour the ads and mailers for coupons and bring them to you even though you already give them great service. You are correct. Some of them will do that but you can lessen that occurrence. Make sure each visit, every customer of yours gets such amazing, personal and friendly service so they will never consider going to any other location for service. You must also make sure these customers get something extra and special on every visit so they will be so overwhelmed by the outstanding service that any $3, $5 or $8 savings will seem too trivial for them to even care about it. These are the people who are going to rave about your shop to their friends and family. These are the customers who consider your oil change shop to be their oil change shop.
Of course, giving your customers this top-flight and impressive service has the extra benefit of increasing the confidence your customer has in your crew and your business as a whole, which makes all your extra service and parts sales more consistent. What better symbiosis could there ever be?
The absolute best part about giving your customers enthusiastic and impressive service is two-fold. Not only is it the most effective way to improve and grow your business, it costs nothing. No discounts needed to give great service. Instead, coupons drag a price-shopping customer to the cheapest oil-change he can find. Stop trying to prove giving away your money will earn you more money. That math doesn’t work!
The year 2016 is for you to be the best operator you can be. What are you waiting for?
I’ll see you again next month. In the meantime, make it happen!
KIT SULLIVAN is a partner in a multi-unit, Florida-based quick lube company. A 20-year veteran of the industry, Sullivan has more than 28 years experience in sales and management training. He is a member of the Society of Automotive Engineers and the Society of Tribologists and Lubrication Engineers. He can be reached via email: [email protected]