In the past month or so, I’ve heard a lot of Service Managers and Fixed Operations Directors express that they’ve resigned to the notion that prices dictated by their manufacturers commoditize their routine services – especially oil changes. In other words, their hands are tied – they must now compete on price.
To their point, it seems like oil change coupons and promotions are everywhere. I Googled “Oil Change Coupon” and found oil change services starting at $18.95, $10 Off, and even an oil change and tire rotation for $29.95. Does this suggest that oil changes are indeed a commodity? In the truest sense, a product is a commodity when purchase decisions are made on price alone.
As defined by Webster’s: Commoditize to render (a good or service) widely available and interchangeable with one provided by another company
Given this definition, oil changes fit the 1st part – they are widely available. Yet, I don’t quite buy into the notion that oil changes are completely interchangeable from one service provider to another. Here is why:
- 188,000,000 oil changes were performed by quick lubes last year – their average sell price for an oil change was over $38. (That’s $20 more than many manufacturer / online promos.) Thus, consumers are not buying on price alone.
- In an independent study performed by the Quick Lube Industry, consumers indicated that they selected Quick Lubes (in order of importance) for 1) Convenience, 2) Fast Service, and 3) Reputation. The same study indicated that consumers selected New Car Dealerships (in order of importance) for 1) Trust and 2) Reputation. Thus, consumers are not buying on price alone.
- Quick Lubes are #1 in Oil Change Market Share (27%) and New Car Dealerships are #3 in Oil Change Market Share (23%). Thus, consumers are not buying on price alone.
This tells me that dealerships may want to spend less time worrying about the sell price of their oil change service and more time promoting how their service is NOT interchangeable (and yes, be a bit faster too – or at least explain why their service should take more than 20 minutes). Yes, I understand that manufacturer promos with low priced oil changes must be honored. But, that does not mean that dealerships’ board prices must be lowered too. When a customer comes in with a low priced oil change promotion, dealerships should zero in on the value they can provide that the consumer cannot get elsewhere.