Increase Revenue 30% By Increasing the Frequency of Visits
September 2012, I was the moderator at a round-table discussion held during the Western Carwash Association’s convention in San Diego. The topic was “Monthly Wash Passes.”
Instead of just being a moderator, I prepared a 15-minute presentation with what I called “wow information.” My goal was to help as many operators as possible to think out of the box and consider how important it is to increase the frequency of visits by existing customers. This could be achieved by selling monthly passes among other promotions.
I started the roundtable with the following question: What is the biggest expense in the car wash business? To give you a hint, it is not your mortgage or rent payment; it is not your labor expenses; it is neither the interest payment nor the cost of your equipment. It is the time when no cars are at the car wash to be washed; it is the time when your employees are getting paid waiting around for cars to pull in; it is the time when your equipment is not washing cars and your register is not going “ka-ching.” When money is not coming in, your expenses become infinite.
Then I asked another question: What is the cost of washing five extra cars an hour? Because the fixed expenses and labor cost remain the same, the only cost to wash five extra cars an hour is the extra cost of water, power, and chemicals, which is no more than $1.35 per car regardless of what city you live in. I had someone at my roundtable say his cost is about 72 cents per car.
Understanding the answers to the two questions above is why increasing frequency of visits makes sense. Let’s say you offer a $20 wash for your monthly plan at $40 per month and the customer washes their car 10 times per month.
- Many operators cannot get over the fact that the customer took so much advantage of the plan and think they lost money on that transaction. The fact is, it cost about $13.50 to wash the car 10 times.
- Average customers, not on a plan, wash their car once every 2.5 to 3 months. Therefore, instead of collecting $20 from that customer every 3 months, as a plan member you collected $120. That is 600 percent increase in revenue from that customer.
- From the customer’s prospective it was $200 worth of car washes.
- If it weren’t a good deal, the customer wouldn’t have joined the monthly-plan program.
- The first people who join a membership program are the people who see the value of it. That is why the average visit per month will be high at the beginning. Then, as people join for the convenience of not paying per wash and for the ease of zipping through the wash fast, the average number of visits per month for all members will start dropping.
A flood cannot be blamed on one drop of rain but on all raindrops combined. The same is true in business: there is not one idea that can increase your business exponentially, but all little marketing ideas combined can.
The flood in this case is the frequency of visits and the raindrops are the ideas or the tools that will help increase the frequency of visits. Most automated pay stations can offer any of the following every time a customer pulls in to purchase a wash.
- Monthly passes with automatic renewal. Selling monthly plans without credit card information will not help increase frequency of visits. The monthly pass is for one car only.
- Family pass. It’s similar to a monthly pass. Some customers have mutiple cars at home and want to join the club membership but want a discount for a second and third car. This pass allows for it.
- Prepaid card with automatic renewal. Some customers have multiple cars but unfortunately don’t wash their cars as often — the monthly plan is not for them. However, they still love the idea of not paying per visit and getting a discount for paying in advance. This card is prepaid and loaded with a specific number of washes at a discount, e.g., 10 car washes for the price of seven. When the last wash is used, the card will be re-loaded automatically using the credit card on file. This is a great idea for fleet accounts: you get paid up front and they get their washes at a discount.
- Prepaid cards. Similar to the previous card except it is not recharged automatically. Typically the customer has to pay to reload the card.
- Cash cards. Similar to prepaid cards but it is loaded with a cash amount at a discount.
- Incentives for next wash. Offer customers a discount if they purchase their next wash today and give them a time limit within which to use it.
- Single wash cards. These are great for gifts, single-wash use, and fundraising.
- Incentives to come back soon or to bring a second car. The smart receipt from the automated pay station can print out a coupon to use within a certain period of time.
- Loyalty promotions. Offer customers reasons to come back and to come back more often, for example, 6th wash free, three-days rain check. It is easy to track each car and frequency of visits by tracking license plates or by adding a radio frequency identification (RFID) sticker to each car.
THE POWER OF AUTOMATIC RENEWAL
Would a membership car wash really work? Would it make more or less revenue? Let’s assume a car wash is washing 60,000 cars a year at $18 per car — 60,000 x $18 = $1,080,000 annual revenue. The 60,000 cars a year is equal to about 24,000 unique license plates or 24,000 customers. That means the customer base of that car wash is 24,000.
One day the owner of the car wash woke up with a bright idea to turn his car wash to a membership car wash only. Customers can wash their car as many times as they want for $10 per month with automatic renewal.
As you see in the two examples above:
- If all 24,000 customers thought that it was a great idea and joined the program then annual revenue will be $2,880,000. That is a 266 percent in-crease in total sales
- If only 12,000 customers thought it was a good idea to join the program, then annual revenue will be $1,440,000. That is still a 33 percent increase from current sales.
- What if the car wash owner allowed the other 12,000 to keep on coming to the car wash and pay per visit?
- That will be an extra $500,000. That is $2,000,000 annual revenue and 200 percent increase in sales
Average car washes promoting the unlimited plan with automatic renewal are generating above $30,000 per month. Some car washes that have been promoting the membership programs aggressively for many years are generating well above $1,000,000 per year for the automatic renewal.
RULES FOR SUCCESS
Customers have to see the value of the unlimited wash program with automatic renewal or they will not join, and it has to be risk free. Therefore the following rules must apply:
- If you offer a full-service wash on the program, the monthly fee is not to exceed two times the price of that wash.
- If you offer an express car wash on the program, the monthly fee is not to exceed three times the price of that wash.
- As the title says, it has to be an unlimited plan with no restrictions. Please keep in mind the first people to join the program will no doubt take advantage of it — and that is okay. Because we now know if the monthly plan is $40 and customers wash their cars 10 times per month, our cost is $13.50 or less, but from the customers’ prospective the 10 car washes are worth $200. That is a good value.
- Have simple and easy-to-complete paperwork with no fine print or conditions.
- Customer may cancel any time with a written notice. Your goal is to achieve membership upward of 30 percent of overall volume.
BEST SALES PERSON
Your automated pay station is your best sales person:
- The first screen should ask customers if they would like to join your monthly plan.
- The wash screen should include the option to prepay for washes at a discount.
- The last screen should offer the opportunity to purchase the next wash today at a discount.
If you track customers by license plates by using the RFID sticker or a loyalty promotion card, the automated pay station can recognize the vehicle history and:
- Address customers by name and welcome them back.
- Ask if they want their usual wash.
- Suggest an upgraded wash for customers to try.
- Remind them that it has been three months since they had their car waxed and that it is due today if they would like to have it done.
- If the customer’s credit card is on file then all upgrades will be automatically charged and there is no need for customers to take out their wallet.
Our goal is to have cars lined up all day, to keep the equipment and employees busy washing and cleaning cars, and to create a weatherproof business by promoting a membership car wash.