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Strategic Management Class Presentation Outline October 11, 2000. Market Background DIFM Strategies. DIY vs. DIFM. % D-I-Y. % Installed. Quarts Based Total United States By Selected Time Periods. 12 Months Ending June, 1996 - 2000. Market Continues to Shift From DIY to DIFM.

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Strategic Management Class

Presentation Outline

October 11, 2000

  • Market Background

  • DIFM Strategies


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DIY vs. DIFM

% D-I-Y

% Installed

Quarts Based

Total United States

By Selected Time Periods

12 Months Ending June, 1996 - 2000


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Market Continues to Shift From DIY to DIFM

Factors Causing Shift From DIY To DIFM

  • Age - The aging population is more inclined to be DIFM’s

  • Convenience - Higher demand as less leisure time is available

  • Increased Installed Outlets - Emergence of new outlets and competitive pricing

  • Environmental Concerns - Public awareness on hazards of improper used oil disposal

  • Female Influence - Increased number of female drivers, decision-makers

  • Strong Economy - Increased disposable income decreases DIY activity

Conclusions

  • More Profitable Packaged Volume Declining While Less Profitable Bulk Volume Increasing

  • Less Brand Recognition / Influence in DIFM


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MOTOR OIL BRAND SHARE TRENDS

Installed Quarts

Total United States

12 Months Ending June, 1996 -2000

(0.5)*

(0.7)

(0.6)

(0.4)

(0.4)

(0.3)

* Share point change required for statistically significant difference between years, at the 90% confidence level.


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PURCHASES BY KEY CHANNELS - INDUSTRY

Installed Quarts

Total United States

12 Months Ending June, 1996 - 2000


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Quick Car Repair

LubesDealersGarages

Valvoline 17.8 11.3 15.3

Pennzoil 37.4 20.3 26.2

Quaker State 19.8 17.8 15.5

Castrol 8.0 8.6 10.2

Havoline 7.1 3.4 7.5

Mobil 3.0 4.2 7.9

Brand Share within Top 3 Installed Channels

Installed Quarts

Total United States

12 Months Ending June, 2000

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Top 10 Quick Lubes by Centers

(Fast Lubes Only)

Source: National Oil & Lube News, March 2000


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Top 10 Oil Change + Businesses

  • GM Goodwrench Quick Lube Plus 4500

  • Midas Auto Systems Experts 1500

  • Firestone Tire & Service Center 1363

  • Wal-Mart Lube Express 1200

  • Motorcraft Fast Lube 1000

  • DaimlerChrysler Mopar Express Lube 970

  • Shell Auto Care 900

  • Gemini Auto Service Center (Goodyear) 806

  • Penske Auto Center (Kmart) 660

  • Meineke Discount Muffler 622

SOURCE: National Oil & Lube News / as of March 2000


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Service Center Growth

630

584

574

519

474

455

422

407

360


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Strategic Management Class

Presentation Outline

October 11, 2000

  • Market Background

  • DIFM Strategies


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Motor Oil Company

  • ChallengeResponse

  • Slow Market Growth Grow market share in installed segment

  • and Shift to DIFM Improve bulk oil margins

  • Alliances with distributors / grow together

  • Outlets less Brand Loyal / “Controlled” Outlets

  • Switching Costs Low - Company-owned oil changes

  • - Franchised oil changes

  • - Mid-tier Program: Express Care

  • - Tougher Supply Contracts

  • Differentiate Understand the oil change business

  • - Offer solutions

  • “Family of Brands”



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Reasons for

Express Care Program

  • Accelerate Growth for Valvoline’s DIFM Business

  • Provides Offerings for Three Distinct Installer Groups: VIOC, Valvoline Express Care and the “We Feature” Program

  • Provides a “Branded” Program to a Customer Valvoline is not Currently Positioned to Sell

  • Competitive Program to Sell Against Texaco Xpress Lube, Pennzoil 10 Minute Oil Change and other Branded Independent Programs

  • Increased “Family of Brands” Purchases, Longer Term (10 Year) Contract, Consistent Marketing and Image Management of Independent Operators

  • Pulls Several Fragments into One Program


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Quick Lube - General

ChallengesResponse

Location, location, location Site Selection Models

Labor expense and turnover “People. Cars. Greatness.”

(Become a ‘Most Admired’ Company)

Benefits

New Hiring Methods

Offering new products and Convenience

services Ability to sell / focus

Trust

Trade-offs between price Constantly shop motor oil company deals

and brand Understand impact on customer base

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VIOC - Specifically

ChallengesResponse

Controlling Expenses Real-time Management Systems

Labor Scheduling

Internal Benchmarking

Investment Base Greater Percentage of Franchisees

Geographic Expansion Protect Existing Markets - 3 Tiers

Stay within Areas of Valvoline Brand Strength

Concentrate to Leverage Advertising

Differentiate MVP Program

Service / Trust

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Competitive Interaction

  • Protect Your Markets

    • Concentrate / contiguous

    • Fill out existing markets

  • Stay in Areas of Strength

    • Good distribution (cost advantage)

    • High DIY market share

  • Areas Where You Compete Head-to-Head

    • Service (Employee Friendliness / Recognition)

    • Trust

    • Best Location / Convenience

    • Promotions

    • Service (Product and Service Offering)


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