AMSOIL Magazine spoke with Executive Vice Presidents Alan Amatuzio and Dean Alexander about the new line of OE Synthetic Motor Oils and the opportunities it presents for Dealers.
AMSOIL Magazine: AMSOIL has had a reputation as an extended-drain motor oil company. Why is it now offering a line of motor oils recommended for OEM drain intervals?
Dean Alexander: AMSOIL is not exclusively an extended-drain motor oil company; it’s a synthetic motor oil company (The First in SyntheticsTM), and our extended-drain oils provide the absolute best value for consumers. AMSOIL OE Synthetic Motor Oils are intended as a door-opener for AMSOIL Dealers. There are many synthetic options on store shelves today, and 92 percent of synthetic motor oil customers are choosing synthetic oils recommended for 3,000-mile or OEM-recommended drain intervals. Whether it’s for the lower initial cost, warranty concerns, API certification or because they’re simply not yet comfortable with extending their drain intervals, that’s 92 percent of the market that we weren’t addressing.
Alan Amatuzio: OE gets us into that portion of the market that has been a more difficult sell, and once customers experience the benefits, it will be easier for Dealers to say, ‘If you like the performance of OE, perhaps you’d be interested in an even better AMSOIL product.’ Then, explain the extendeddrain benefits and cost-savings of switching to one of the top-tier AMSOIL synthetic motor oils.
In addition, we’re seeing manufacturers recommending longer and longer drain intervals. Most owners’ manuals now recommend drain intervals of at least 5,000 miles. In fact, Ford will recommend 10,000-mile drain intervals with its model-year 2011 vehicles. As OEM-recommended drains continue to increase, more people will turn to synthetics to protect their vehicle investments over these intervals. AMSOIL OE ensures customers’ vehicles receive excellent protection for the entire length of the manufacturer-recommended drain interval, whether it’s 3,000 miles or 10,000 miles.
AMSOIL Magazine: How does OE fit into the installer market?
Dean Alexander: AMSOIL OE is ideal for the do-it-for-me installer market, which includes quick lubes, car dealerships and other oil change centers. The installer market is growing fast, with an ever-increasing number of customers choosing to pay someone else to change their oil rather than changing it themselves. In fact, the do-it-for-me market is expected to account for 80 percent of oil changes by 2018.
AMSOIL motor oil has traditionally been a tough sell in this market due to its extended drain recommendations. Installers balk at offering 25,000-mile/one-year drain intervals that would limit the number of times they see their customers. In order to help Dealers penetrate this market, AMSOIL introduced the Extended Life (XL) Synthetic Motor Oil Program in 1997. XL Synthetic Motor Oils come with API certification and have recently been upgraded from a 7,500-mile/sixmonth drain interval recommendation to a 10,000-mile/six-month drain interval recommendation. By charging customers a premium for this high-quality, extended-drain product, installers have boosted their profits, despite seeing their customers less often.
Alan Amatuzio: While many installers have implemented very successful XL programs, many are still resistant to the idea of extended drains. A recent National Oil & Lube News article noted that 90 percent of fast lube operators continue to recommend 3,000-mile drain intervals to their customers. With this in mind, it’s not difficult to see why AMSOIL has sometimes been a difficult sell in the installer market.
The new OE line provides installers with another option and Dealers with another tool to increase their sales. The OE line eliminates every potential installer objection, including objections related to price, extended drain intervals, API certification, warranty concerns and frequency of customer visits. And by charging a premium, they make more money than they do on conventional oil changes.
AMSOIL Magazine: How do OE Synthetic Motor Oils measure in terms of quality?
Alan Amatuzio: AMSOIL OE Synthetic Motor Oils are formulated to the same high standards as XL Synthetic Motor Oils, but without the extra additive boost required for extended-drain performance.
Like the entire line of AMSOIL synthetic motor oils, OE provides outstanding wear protection and fuel economy; resists shear, thermal breakdown, sludge and deposits and provides easier cold-temperature starts and quicker circulation.
THE LOWER COST OF OE SYNTHETIC MOTOR OILS IS LESS INTIMIDATING TO NEW CUSTOMERS, AND WILL HELP AMSOIL GAIN MORE NEW CUSTOMERS AS THEY TAKE THAT FIRST STEP FROM PETROLEUM OILS TO SYNTHETICS.?
AMSOIL Magazine: How is OE priced compared to competing synthetic products?
Dean Alexander: At $5.50 a quart retail [$4.20 wholesale], or $5.39 a quart retail [$3.99 wholesale] when purchased by the case, AMSOIL OE is more competitively priced with other synthetics on the market. This will appeal to customers who recognize the AMSOIL name, know its reputation for quality and have wanted to use the products, but have balked at the higher prices or extended drain intervals of the XL or top-tier line.
We all know many customers are driven by price. In today’s economy, price is especially important. That’s not to say price is the only determining factor. Products that combine value and quality, of course, are ideal. AMSOIL is introducing OE to protect the company and its Dealers from low-cost synthetics that are attempting to eat into our market share. People are moving up to synthetics, but many aren’t ready for extended drains. If they’re going to use a synthetic, it needs to be an AMSOIL synthetic.
Although AMSOIL sales have been strong and growing, and we expect sales to continue growing in the future, AMSOIL needs to diversify, offer greater opportunities for Dealers and take momentum away from our competitors. The lower cost of OE Synthetic Motor Oils is less intimidating to new customers, and will help AMSOIL gain more new customers as they take that first step from petroleum oils to synthetics.
Alan Amatuzio: Again, AMSOIL OE is a stepping stone to our top-tier extendeddrain products. Although the initial price is lower than the price of our top-tier synthetic motor oils and the XL Oils, our top-tier oils provide the best overall value to consumers.
For example, a vehicle specifying 5,000-mile oil changes requires five oil changes over 25,000 miles. Let’s say this vehicle takes five quarts of 5W- 30 oil, the customer buys at suggested retail price and performs the oil changes himself. The cost of 5W-30 OE Synthetic Motor Oil (OEF) works out to $27.50 per oil change and $137.50 for the five oil changes required over 25,000 miles.
If this customer upgrades to the top-tier AMSOIL 5W-30 Synthetic Motor Oil (ASL) with a 25,000-mile drain interval, his total cost of oi
l for 25,000 miles is $45.75. That’s over $90 in savings and doesn’t even take into account the cost of filters or time spent in the garage performing the oil changes.
Once OE customers are established, it is examples like these that will help Dealers later upgrade them to a top-tier AMSOIL synthetic motor oil. And that should be the ultimate goal. Experiencing all the benefits associated with the top-tier line is what develops loyal customers.
AMSOIL Magazine: How much profit are Dealers poised to earn on OE Synthetic Motor Oils?
Dean Alexander: When compared with other AMSOIL products, the profit margins are slimmer per unit, but the profit potential is much greater overall because OE customers change their oil more often.
Dealers earn $21.30 retail profit per case of XL, and they earn $16.77 retail profit per case of OE. Consider two customers who each drive 20,000 miles a year and have vehicles with five-quart capacities that specify 5,000-mile drain intervals. Customer A uses AMSOIL XL, with a drain recommendation of up to 10,000 miles, and changes his oil twice a year. The servicing Dealer sells the customer one case of XL a year for a profit of $21.30. Customer B uses AMSOIL OE, recommended for OEM drain intervals, and changes his oil four times a year. The servicing Dealer sells the customer two cases of OE a year for a profit of $33.54.
But that’s not the whole story. OE is going to increase Dealers’ earnings exponentially through all of the new customers it will generate. Not only that, but OE is a great choice for many of our current customers who already buy AMSOIL Motorcycle Oils, Formula 4-Stroke Oils, 2-Cycle Oils or filters, but aren’t interested in extending the drain intervals in their cars and trucks. In fact, a full 50 percent of AMSOIL Preferred Customers who made a purchase in the past 12 months did not purchase any passenger car motor oil. AMSOIL OE is a great stepping stone for these people to start experiencing the benefits of AMSOIL motor oil in all their vehicles.