Simon Lock from AAMCO Transmissions in New Bern, NC writes:

“I enjoy reading your column and have seen some very useful ideas but now I am totally mystified. If I am following your LivingSocial deal correctly you are going to be doing oil changes for $5 each. I am having a hard time understanding how this really benefits you when your expenses before labor have to be around $15-17 for a 5qt change. So you have a loss of $10-12 just on parts per vehicle. Unless Milwaukee is significantly different from around these parts (Eastern North Carolina) you are not going to do that many up sells for additional work.
So the customer benefits from a cheap (well below market value) oil change (a definite win!!), LivingSocial does very nicely out of the deal because their upfront costs are minimal (a win) – you get an initial influx of cash (a win) but then it is going to take money from your pocket every time a coupon is brought in (a hit) and you keep on getting hit until the coupon runs out unless you can win a significantly larger job on each vehicle to make up some of the difference.
So would you like to expound in your next column on how this “deal” benefits you?”

Absolutely Simon! Thanks for asking! I’m going to share my strategy and then I’ll give you the update from our retail manager.
We did, in fact, run a promo on LivingSocial that offered customers the chance to purchase three oil changes for $30 with a 14-point safety inspection. There’s no question that we were going to lose money on this deal. I look at LivingSocial not so much as a revenue generator, but as a customer generator. This is all about exposure. It’s all about increased car count and increased interaction with new prospects.
Consider for a moment what it costs you now to buy, er acquire, a customer.

• How much do you spend in advertising?
• How many leads do you get?
• What percentage of those leads result in a sale?

If your shop is like most other transmission shops, you’re spending a lot more to get a car in your shop than you think.
We manage that cost down to the penny here at ETE, and I can tell you that it’s costing us less to bring a car into our shops with LivingSocial than it would with our traditional mix of print, yellow page, and radio advertisements. Essentially, by running this promo on LivingSocial we will touch 372 cars, which represents nearly 372 new prospective customers. You better believe that we planned to do our best to upsell additional work on the cars that need it, and that we were going to work our butts off to WOW our new customers with service. This deal only makes sense if we can convert some of the participants into customers.
That’s the driving force behind why we opted to offer a 3-pack of oil changes rather than just one. We’re hoping that seeing a car three times in a year gives us a better chance to establish a relationship than a one-time wham-bam-change-your-oil-ma’am coupon customer.
Take a look at the full details of our LivingSocial deal.
Now the reality, and the results, of the deal after 3 weeks: I talked to Vince, the general manager of our retail stores (Engine and Transmission Exchange) about the results of our Living Social experiment. While it’s too soon to tell whether the experiment was a success or a failure, here’s what Vince had to say:
First, here are the two types of people that we’ve seen thus far:

• New car owners – who have no chance of upselling because nothing is wrong with the cars
• Bargain shoppers – folks who take their car where ever they can find the best deal on an oil change

Our goal is to impress them with our shop, in hopes they’ll share their experience with their friends, and to provide them with the best possible experience, in case they need us in the future.
Vince feels we’ll be able to understand more about these customers after they’ve come in at least twice, as one visit is hard to create any relationship.
The good news is LivingSocial was not a big expense for us, so we’re only needing to land a few big customers to make it worthwhile.
If you don’t have in-ground oil change bays, it may be a bit of a pain as you’ll have to pull a car off the rack to do the oil change, costing you who knows what.
Though we’ve only performed 50 oil changes thus far, we sold 372 deals, so we have 1,116 opportunities to make a great impression on these customers.
Vince says (and we agree), “All we need is to win over a percentage of these deal-buyers and turn them into lifelong customers to make this experiment a success for everyone.”
The attitude around our shop has changed as well. Instead of complaining that “the phone isn’t ringing enough,” our center managers are talking to customers all day long.
Stay tuned: I’ll let you know how well they turn those opportunities into money in a future article here on Reman U.