With factors like cost, location, and convenience all influencing a customer’s decision, it can be hard to compete — especially in a market that continually seeks bottom-dollar pricing.
On average, the price for an oil change today can range from $20 to $100. Many of the lowest prices can be found at independent repair shops. These businesses can offer lower because they offset costs by cutting the quality of their technicians, parts, perks, and facilities — all things dealership service departments value most.
So, how do you stay competitive with businesses whose models are focused on cranking out quick, cheap oil changes? And, are there any customer retention strategies that can meet your goals while promoting satisfaction?
The answer is yes! But let’s start by taking a look at why discounts should not be your first line of defense against in an oil change pricing war.
Three Reasons Oil Change Discounts Don’t Create Customer Loyalty
One of the oldest and most-used strategies for filling service bays has been to offer discounts. But when your goal is to acquire and retain existing customers, this strategy may not be the best initial approach.
Here are three reasons why offering discounted oil changes may not be the best strategy for your bottom line:
1. It sets a bad precedent
Often, if you start your service relationship with a customer by offering a discount, there’s no going back. Your customer will expect that same price — or a lower one — the next time they are looking for an oil change.
If they can’t get the price they want from you, they’ll either hold out until you give them one — or worse, they’ll look for a better one somewhere else. Not only does this leave you with customers that return less often, but it could mean they don’t return at all. Neither of these scenarios is good for your business.
Adding another layer to this conundrum, offering discounts on oil changes can mean that two customers receiving the same services are paying different prices. This approach can leave you at the risk of dissatisfied customers.
For example, if a customer discovers via word of mouth you’re giving someone else a better price, they might leave you bad reviews that negatively impact your customer satisfaction index (CSI). They could also demand a discount for themselves or choose not to return to your business again.
2. It cuts into your profits
If you’re offering a discounted oil change service, the only way to get people to use it is by making sure they know about it. To get the word out, dealerships traditionally purchase mass media advertisements, print and distribute coupons, send out mailers, or post on social media. These costs can add up quickly.
Additionally, spending money upfront creates the need to recoup your investment with higher volumes of work. Thus, the biggest challenge to using this approach is ensuring you generate and maintain enough work to make the cost of discounting and promoting your services profitable.
Trying to recoup your investment with sales that have a smaller profit margin can have a cascading negative effect on your CSI as well. To begin, the volume of work you need to bring in to offset the costs rises significantly. That means your appointment books are fuller and less flexible.
It also forces your technicians to work harder and faster to keep up. If this isn’t managed effectively, it can reduce the quality of work, increase wait times, lead to mistakes, and ultimately to unhappy customers.
3. It doesn’t work for customer retention
Offering the best price for an oil change can bring many customers to your dealership, but it won’t necessarily keep them coming back. As mentioned earlier, many customers who don’t get the price they expect will not hesitate to take their business somewhere else.
The truth is, the kinds of customers who take advantage of special discounts do not value your services. They value a good deal, and that means they have no loyalty to your business whatsoever.
The next time they’re looking for services, they’ll most certainly price chase. If you’re not offering the bottom-dollar, they’ll hop to a business that is.
These “price hopping” customers do not bring any value to your bottom line — or help you meet retention goals put forth by vehicle manufacturers. So, the question becomes: Is it really worth spending your valuable time on customers who don’t necessarily fit into your “ideal” category?
Yes, discounts drive traffic. However, in these kinds of situations, it’s often easier to avoid setting the precedent that customers can expect a discounted price. In the end, it simply doesn’t make financial sense to offer discounts to customers in a traditional way.
In general, discounting services is not a good strategy for improving your dealership service department’s CSI or retention numbers — both important metrics to vehicle manufacturers.
But offering savings in a different way can work to your advantage. Let’s look at another strategy for retention.
Offer Savings and Create Customer Loyalty in a Different Way
Best practices for customer retention show the importance of establishing a new car owner’s relationship with the service department right away. In fact, getting a vehicle to your dealership and providing a superior customer experience for the first scheduled maintenance is the most effective strategy for encouraging customer retention. In fact, the best salespeople take their loyal customers to the service department directly and introduce them to the service manager and team the day they deliver their car.
In contrast to the discount strategies above, once this relationship is established, offering discounts to encourage customer loyalty and retention is much more effective.
For example, some dealerships offer their customers service incentives with the purchase of a vehicle. An example is a service like DriveSure, which encourages car owners to return for their first oil change and other services on a regular basis with benefits that expire every 150 days unless they’re renewed by getting their vehicle serviced at the dealership.
These kinds of technologies allow dealerships to offer savings that aren’t really a discount but feel like one to the customer. They also pair with other perks — like dealer-loyal roadside assistance and towing — that further incentivize participants to bring their business back to the dealership.
Offering discounts to encourage a relationship, if done properly, can also be used to reacquire customers. One example of this is recall marketing, where dealerships bring customers into their service departments on a recall and offer discounted services alongside the repair.
This approach motivates happy customers to spend additional money, but the discount in this scenario sets a different precedent. It isn’t packaged as a hook to get them in the door. Instead, it’s presented as a value-add that acknowledges the inconvenience and time commitment of coming in for a recall.
Then, if dealerships identify additional repairs or service needs, the customer can use that discount on the services at that appointment. This approach works best if the discount is offered when your customer base is notified of the recall — so it doesn’t appear as a way for the dealership to make additional money.
A major strategy for generating service and repair business has been to offer discounts. But, using discounted oil change services in order to encourage service department traffic or support customer loyalty programs has its risks. This strategy tends to result in low retention, less profitability, and a service department with poor service capacity and issues that ebb and flow with active promotions.
So, what can you do to stay competitive when your customers expect savings? Offering different incentives that feel to the customer like a discount can be a great strategy. One that changes the quality of the customers that come to your service department, helps you deliver great customer service experiences, and ultimately improves your all-important customer acquisition, retention, and CSI metrics.