The annual fall Las Vegas based AAPEX (Aftermarket Auto Parts Expo) and SEMA (Specialty Equipment Manufacturers Association) shows feature thousands of parts manufacturers, tool vendors, equipment makers, custom cars/trucks/what is the hell is that? and other intriguing automotive-related accouterments, sufficient to make any mouth salivate. Besides that cargo, there are numerous workshops covering a multitude of topics related to all facets of the service and parts auto industry. Overwhelming is too scrawny of a word to describe this celebration of all things “car” in the 33-plus miles of aisles.
I attended an intense workshop which I thought would be of interest to my clients and readers titled the “2012 Aftermarket Outlook,” which was an overview of consumerism (i.e. customers) overall and related to the parts and service industry from 2008 into next year.
According to surveys and studies conducted by NPD (www.npd.com) consumers have migrated from a “defer spending” attitude in 2008, to some “renewal of spending” in 09, and are now in a completely different mode focused on “value” – where purchasing is made on a very measured basis. There is more consumer interest in closely examining what is being offered versus what is being paid than ever before, including researching almost every purchase beforehand.
However, when consumers perceive value in a purchase, they will spend easily. An example is the food industry where “value meals” are permeating all franchises, and consumers are happy to buy a $.99 hamburger (value), then load up on a high-priced (high gross profit) fancy milkshake. Regarding the auto service industry, the key driver is now packaging service, creating bundles which contain savings (value), especially related to improved fuel mileage. Also, owners are more interested in quality auto parts and materials than in the past, and they will spend more to get more.
Good news/bad news
The good news industry is automotive service and parts, because vehicle owners are planning on keeping cars even longer into the next couple years. The bad news is they will continue the trend to drive less miles unless the price of fuel drops substantially (would need to be in the $2 – $2.50 range). Independent shops will continue domination and see an increase in 2012 from 53 to 58% of the work performed, tire and specialty stores will grow from 15 to 19%, and DIY (Do It Yourself), mostly through a parts house, will jump to 15% from 9%. Unfortunately, NPD research says franchised dealer service penetration will continue dropping from 31 to 29%. Totals are over 100% because customers often use multiple service providers depending on the need.
Feeling the love
Consumers are getting very interested in rewards programs of almost any type. In fact, what the reward isn’t as important as the fact it exists is. They feel more strongly than ever that loyalty should be rewarded – a marriage of loyalty so to speak-and when they feel the love they will spend much more. Customers also like to deal with service providers who will help them do some of their own simple maintenance, demonstrated by the huge growth of work being done in aftermarket parts parking lots.
The bigger picture is that 56% of the polled people think another economic recession is ahead and that the current economic condition will persist into a lengthy future. The personal economic outlook is the worse in four years. 72% of us will be decreasing overall spending in 2012, with video games, toys, technology and high fashion taking a hit. Small appliance purchases will grow in volume as more people eat at home, along with athletic footwear, beauty-related items, lower priced clothing and auto service.
So what, Irene
What does all this mean for car and truck franchised service? The biggest positive impact on customer retention can be made by bundling services with a discount for older cars, and showing a package discount on required maintenance packages for the newer ones. An example is to show that individually priced, a basic maintenance package is $68, but as a package it’s $49, a saving of $19.
Some type of rewards program seems to be a must do now, even if it’s get a free-oil-change-after-five type of thing. There are many rewards program administrators who will do all the work for you. Initiating a 75,000 mile club featuring a 10% discount on those vehicles is another suggested approach. I would appreciate you sending me a note (firstname.lastname@example.org) of customer retention approaches you have had success with recently – put “Customer Love In” on the subject line.
I will share those in a future column and give you credit if you so desire.
PS: Leaving Vegas – outta money.