Which would you choose?

[midjd]

Say your auto dealership is offering one of the following two specials:

1) Oil change for $35 with free roadside assistance for 120 days; or
2) Package of 4 oil changes for $85, no roadside assistance.

Which one would you choose? Which one do you think the average dealership customer would be most likely to choose?

(DH's employer is debating which one of these deals to offer and apparently DH has been put in charge of pulling the trigger). I'm assuming, based on the ambivalence of management, that the costs of and profit from both options are similar.

I am leaning toward #2 because most of their oil change customers drive newer cars and I'd imagine many already have some sort of roadside assistance - AAA or Onstar. But then, the typical consumer might hear "FREE" roadside assistance and jump on it. I told DH I'd get a second opinion from "the money people".

ETA - $35 is their regular price for an oil change.

[Rocky Mtn Saver]

Many insurance companies also include roadside assistance. I have AAA and also coverage through my insurance co. So if I were an employee, I'd find option 2 more tempting.

[movingforward]

I would pick #2 but I may not be average

[The Walk of the Penguin Mich]

May 23, 2012 10:26:20 GMT -5 Rocky Mtn Saver said:

Many insurance companies also include roadside assistance. I have AAA and also coverage through my insurance co. So if I were an employee, I'd find option 2 more tempting.

Option 2.

120 days is only 4 months. What is the likelihood of needing roadside assistance on a new car that is 4 months old?

BTW...I was offered free roadside assistance for a year after I bought my Subaru. Never used it.

[midjd]

LOL Almost, that's what I told DH when he asked me what I thought

RMS, good point on the insurance companies offering roadside assistance - I didn't think of that.

[frep]

I'd pick #2.

[midjd]

Some more info from DH -

The typical oil change costs the dealership $9. So on the $35 + roadside assistance, they're making $26 minus whatever it costs to tow a vehicle - if needed; on the 4 for $85, they're making $49.

Apparently the benefit of the roadside assistance is "so if they break down they'll be towed here instead of the nearest Ford/Chrysler dealer." Hmm, that could be a moneymaker (they charge $75/hr labor, the thieving bastards ). BUT, does it matter if it has money-making potential if no one is going to be taking advantage of it?

They obviously need a math/marketing person on staff

[Rocky Mtn Saver]

May 23, 2012 10:37:49 GMT -5 midjd said:

Some more info from DH -

The typical oil change costs the dealership $9. So on the $35 + roadside assistance, they're making $26 minus whatever it costs to tow a vehicle - if needed; on the 4 for $85, they're making $49.

Option 1 is clearly the initial money-maker for the dealership. At $26 profit per oil change, it would make $104 for four of them while only making $49 for the same amount of work with Option 2.

May 23, 2012 10:37:49 GMT -5 midjd said:

Apparently the benefit of the roadside assistance is "so if they break down they'll be towed here instead of the nearest Ford/Chrysler dealer." Hmm, that could be a moneymaker (they charge $75/hr labor, the thieving bastards ). BUT, does it matter if it has money-making potential if no one is going to be taking advantage of it?

I think the roadside assistance isn't going to be as valuable an asset as they think it will be, with all the established options drivers already have.

[quotequeen]

Why can't they offer both?

[steph08]

I would choose Option #2. I already have AAA so roadside assistance wouldn't mean anything to me.

[The Walk of the Penguin Mich]

May 23, 2012 10:37:49 GMT -5 midjd said:

Some more info from DH -

The typical oil change costs the dealership $9. So on the $35 + roadside assistance, they're making $26 minus whatever it costs to tow a vehicle - if needed; on the 4 for $85, they're making $49.

Apparently the benefit of the roadside assistance is "so if they break down they'll be towed here instead of the nearest Ford/Chrysler dealer." Hmm, that could be a moneymaker (they charge $75/hr labor, the thieving bastards ). BUT, does it matter if it has money-making potential if no one is going to be taking advantage of it?

They obviously need a math/marketing person on staff

Option 1 is best for the dealership.

Option 2 is best for the customer.

[findingdeadbeats]

I have State Farm and with my basic coverage they cover roadside/towing.

[Deleted]

I like option #2 myself.

[GRG a/k/a goldenrulegirl]

Add me to the list of readers with AAA (or, as YDS said to some other parents when he was about 5: "My mom is a member of AA", LOL). So, I'd choose Option 2.

But roadside assistance is a lot more than towing: helping with lock outs, dead batteries, empty gas tanks, flat tires, etc. So, depending upon how responsible/attentive the driver is, Option 1 *might* work in the customer's favor, too.

[midjd]

Thanks for the responses! (And DH thanks you, too). QQ, I asked why they couldn't offer both, and he said they'd lose money - not sure how that works, but he hasn't texted me back for a while.

It seems like his boss is pushing for option #1... shocking But maybe if DH can argue that they'll get a lot more sales with option #2, he might be swayed...

I don't think either one will be a huge flop, $35 is about the going rate in this area for an oil change anyway.

[The Walk of the Penguin Mich]

May 23, 2012 11:23:10 GMT -5 GRG a/k/a goldenrulegirl said:

Add me to the list of readers with AAA (or, as YDS said to some other parents when he was about 5: "My mom is a member of AA", LOL). So, I'd choose Option 2.

But roadside assistance is a lot more than towing: helping with lock outs, dead batteries, empty gas tanks, flat tires, etc. So, depending upon how responsible/attentive the driver is, Option 1 *might* work in the customer's favor, too.

AAA has all those services too.

[Jake 48]

#2

[shanendoah]

As a customer, here's my thought (mind you, I pay $100+ for my oil changes- stupid foreign engine that I love so very much)-
if I have roadside assistance through my insurance company and through the dealership, which card am I more likely to have in my car, in order to call for assisance? My insurance company.
Also, my car is most likely to break down on my way to work. My office is in the opposite direction from house than the dealership. So, I could have my car towed to the closest place and then get to work from whereever I am, or, I could have my car towed 20 miles south, and then have to find a way to get back that distance all in rush hour traffic. Again, I am most likely going to want to go to the nearest place.

So, if your DH's company is looking to make the most money from each individual transaction- option 1 is the best. Same price as a normal oil change, incredibly unlikely that the roadside assistance will ever be used- and if it is, more money for the company. But no one who doesn't already come to the dealership for oil changes is going to start coming because of this promotion.

But if the goal is to make more money through volume, then option #2, which might convince someone who normally goes to Jiffy Lube to come in to the dealership, is going to be their best bet. That might also encourage the person to become a regular customer of the dealership's service department, which is more money in the end.
Also, depending on what the restrictions are on the 4 oil changes (is it only good for a year, since every 3 months is the supposed recommended time between oil changes), people who buy the package might not actually use all of it, and that could also result in more money for the dealership.

It really depends on what the dealership is trying to accomplish with this promotion. As a customer, I know which one would actually be of interest to me.

[Abby Normal]

#2. The oil change is something your likely to do anyway, either at the dealership or someplace else. If buying the package saves the customer money, they'd likely buy it. Unless they are the type to do their own oil changs.

The road side assistance is a unknown. Meaning maybe you'll need it or maybe you won't. Since so many people have roadside assistance through other companies, I would find it unlikely people would buy it as part of a package.

While #1 may make the company more money per sale, I don't think they'd get as many package sales. I'd go for the higher probable volume.

[The Walk of the Penguin Mich]

One thing to consider too.....

I can get a $35 oil change anywhere (it is what my mechanic charges me). 4 months of roadside assistance would not compel me to pay the going rate at a dealership. But then, I hate going into dealerships anyway.

[GRG a/k/a goldenrulegirl]

May 23, 2012 11:41:15 GMT -5 The Walk of the Penguin Mich said:

May 23, 2012 11:23:10 GMT -5 GRG a/k/a goldenrulegirl said:

Add me to the list of readers with AAA (or, as YDS said to some other parents when he was about 5: "My mom is a member of AA", LOL). So, I'd choose Option 2.

But roadside assistance is a lot more than towing: helping with lock outs, dead batteries, empty gas tanks, flat tires, etc. So, depending upon how responsible/attentive the driver is, Option 1 *might* work in the customer's favor, too.

AAA has all those services too.

Right. Which is why I would go with Option 2 since I already have AAA coverage.

[Deleted]

If you can get me to come in for 4 oil changes for $85, you've probably successfully trained me to always come to you for an oil change.

If we have a 120 day relationship, then I can go anywhere next time. (Particularly when I figure out how cheap AAA is)

[midjd]

Thanks again for all the responses. Shaneandoah, I copy/pasted your post and sent it to DH

[Deleted]

People tend to forget about using all their "package" deals. So with Option 2, a good number of people may only use a few of the 4. I'm sure there are statistics on such things. Also, people may come every 3000 miles religiously to use their package oil changes versus waiting 4000-5000+. When you include the lock in you have with these customers, that is a nice revenue stream.

For myself, I go with Option 3 - I change my own.

[quotequeen]

May 23, 2012 11:25:45 GMT -5 midjd said:

QQ, I asked why they couldn't offer both, and he said they'd lose money - not sure how that works, but he hasn't texted me back for a while.

Did he maybe misunderstand and think you were suggesting they combine them in one offer rather than offering the alternative? That's the only way I can see it making a difference.

[midjd]

Yes QQ, you are right! Apparently that is what he thought I meant. He's going to suggest that to the boss tomorrow. (Offering both, not combining).

[Rocky Mtn Saver]

I also wonder if they are low-balling themselves with the 4-for-$85 deal. Where did they come up with that amount? If the changes would normally cost a total of $140, I would think that $99 might be a sufficiently-attractive offer.

[Mardi Gras Audrey]

I think Shane put it best. If they are looking to attract new customers, the package deal is the best. That will get people in and get their $$ up front. It will also give the service dept a chance to possibly upsell on the next few oil changes (Cabin air filter? Tire rotations? Engine air filter?). Because these people will be coming back for all 4 changes, that gives 4 times for upsales.

On package #1, most people who are worried about safety/need for roadside assistance would already have it through their insurance/AAA. I can't imagine that the thought of getting it free for 4 months would be an incentive for anyone to come in for an oil change. So, you would essentially be providing a free service to the regular customers. This would cost $$ without substantially increasing their customer base... bad business proposition

[Sam_2.0]

Do Option 1 with roadside assistance for 90 days (don't they want people to change their oil every 3 months anyway?). That way people can keep coming back every 90 days to keep their "free" roadside assistance active.

[The Walk of the Penguin Mich]

May 23, 2012 17:19:27 GMT -5 Rocky Mtn Saver said:

I also wonder if they are low-balling themselves with the 4-for-$85 deal. Where did they come up with that amount? If the changes would normally cost a total of $140, I would think that $99 might be a sufficiently-attractive offer.

I would go to the dealer for a $21 oil change. Since I get coupons all the time for a $25 oil change, then why would I want to ante up the $$ for 4 oil changes in advance?

With a $21 oil change, the dealer is still making $12 on it each oil change, plus whatever services they provide along with this (i.e. tire rotation). Not only that, chances are that the customer is not going to use all 4 oil changes, particularly if the oil changes have an expiration date.