Yesterday I was at Jiffy Lube getting my oil changed. Yes it was past the 7,000 mile point they told me I should get it changed at. I drive a lot and those miles just fly by. And I have a lot on my plate…
…sounds like a bunch of excuses right?
Well enough about my plight. Today let’s talk about the marketing elements at play here at Jiffy Lube. This is what I noticed while sitting in the waiting room for the 15 minutes while my car’s oil is being changed.
Three Choices/Price Points
The first rule to offering options is no more than three options should be offered. And they do a great job of that.
- Conventional (for most vehicles) – $37.99
- Synthetic Blend (Synthetic blend for enhanced performance) – $54.99
- High-Mileage (Specially designed for vehicles with 75,000+ miles) – $54.99
- Full Synthetic (Full Synthetic for premium performance) – $75.99
Now it is true that there were four options, not three. But the two “Specialty” options were the same price.
So how does someone go about choosing?
Let’s start with the low end Conventional choice.
If you came to get your oil changed, not a car buff, have a typical car, and just want an oil change, you probably go with the Conventional oil.
Why? Well you went there because you didn’t want to go to the dealer and get charged a mint. Jiffy Lube is a well known brand so you felt like you wouldn’t get ripped off. You probably didn’t know the pricing before you came in but were thinking probably getting it for $29.99. You had a little sticker shock with the $37.99…but when you read the board and saw that you could be paying $50 or $75 you felt okay about sinking the $37.99.
I’m guessing this is the choice of 75% to 85% of the people. That is because people who will choose the high end oil are not likely to come to a Jiffy Lube. They’ll go to the BMW or Mercedes dealership for their oil change (also probably because it is a leased car and all service is covered for three years).
So on to the Specialty price point.
Here we have the Specialty oil. A synthetic blend. this is kind of like the middle grade gas at your gas station. It gives you a basis of comparison and probably makes the company better margins. Why? Because oil cost is very minimal compared to labor (i.e. $14.97 for conventional vs $22.97 for 5 qts of synthetic at Walmart – $8 more. And for a synthetic blend assume $4). And the labor cost doesn’t go up with a better grade of oil. So in this case Jiffy Lube at a minimum (since I’m looking at retail Walmart oil prices vs wholesale prices Jiffy Lube can get) is getting an additional $17 less $4 = $13 profit for basically providing the same service.
So does anyone buy that? And what is the purpose of having this option if people don’t buy?
First off, some people do buy. They buy it because it says “Specially designed for vehicles with 75,000 miles”. That is the hook. People with high mileage vehicles don’t want their car to break down on them. Spending $17 extra to avoid a major repair bill is probably a good idea. Is it justified? Is the oil that much better? Probably not but I’ll leave that to you mechanics to sort out.
The other “Synthetic Blend” option references “enhanced performance”. That is to help the people on the low end choose the “Conventional” rather than going to another shop down the street. It makes them feel like they’re getting a deal since they don’t have a performance car. Or if they have a performance car or want to think they do then that validates them.
Alright. Now to the last option.
The major upsell. Now we’re talking “Full Synthetic” for “Premium Performance”. This is for people with sports cars that really work hard with high RPM’s. The oil cost is another $4 more. But the price went up another $21. Sol $21 – $4 = another $17 profit (or $17 + $13 = $30 more profit for no extra work!)
Now it is true, as I indicated earlier, that not many high end car owners will go to Jiffy Lube. But there may be a few takers. And much more than that, it helps people justify their decision on the lower two price points. Because they can say, “At least I didn’t pay $75 for an oil change!”
And that’s how it works.
So how could you use this in your business?
How many options are you giving your customers? If more than three, cut it back to three. Test different price points and assess the results. You’ll want to see what percentage go with each option and weight that against the profit margins on that option. Look at the whole picture before making a final decision on prices. Also try changing up the wording. Change the order. Change the colors and layout.
And after each test version, assess the results.
As you can see from the exercise, profit margins differ dramatically. If you’re not testing you’re leaving a lot on the table.
Go check out your situation now…and then come back tomorrow for another piece of this interesting case study puzzle…educating your customer.