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Save the IBA!

October 11, 2010
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As a carwash owner/operator, you’re accustomed to having your distributor handle service and repairs, provide cost-effective chemcials, and perhaps even help build revenue at your carwash. But are you really getting “world class service?”

Specifically, does your distributor or manufacturer offer a marketing director to help you build your customer base and increase carwash revenues? They should, and I’m prepared to tell you why.

The most important differentiator:
carwash revenue
Over the last 25 years, the IBA market has matured and presented many unique challenges for carwash distributors and manufacturers to confront.

For instance, in its infancy stage (1985-1992), successful carwash distributors had to master the art of a competent installation. If a distributor failed at this first step, rarely if ever did he get a second chance to satisfy that customer.

As expected with something so new and exciting as a carwash (even if it was offered free with a fill-up), there were many technical and operational glitches which were overcome in order to create a happy and satisfied customer. But the most successful distributors persevered, and benefited enormously from this first learning opportunity, when most received orders for many more units throughout the glorious 1990s.

Then, during the “Golden Age” of IBA’s (1993-2001), the major IBA carwash manufacturers worked hand-in-hand with local distributors to build factory-trained and competent service organizations. With many new features and product enhancements (like tri-color foam, on-board blowers and wheel scrubs), IBA carwashes quickly became important and valuable profit centers for convenience stores and petroleum sites.

Satisfied customers now demanded prompt and professional technical service to troubleshoot and keep their carwashes open 24/7. The top chemical manufacturers also contributed to the popularity and growth of IBAs during this time. They researched and released specially-formulated products to clean cars safely and effectively in both touch-free and friction environments, and added some wow factors, like bright colors and appealing fragrances, to the end-user’s experience.

Thus, in 2007, with the benefit of more than 25 years experience, most IBA distributors can confidently install their customers’ carwashes, keep them up and running, and address most “wash quality” issues. This means, if a carwash owner has a service issue, he can contact the distributor’s service manager.

Further, if cars are not being cleaned properly, the carwash owner likewise can rely on his soap supplier for a solution to this problem.

But who takes ownership today for a carwash’s declining revenues?

Ahhh, there’s the rub! I wonder how many distributors actually have a full-time, dedicated marketing employee or an independent marketing consultant to serve their carwash customers?

Also, is it just a coincidence that, as IBA revenues have plummeted during the past few years, repeat orders for new units also are delayed or even cancelled? I wonder if distributors had balked at installing the first generation IBA automatics in the middle and late 1980s, could there have been any second generation IBA carwashes in the 1990s?

Lessons learned
If the IBA industry has learned anything during the last five lean years, it is that in today’s market, it is no longer enough to sell reliable carwash equipment, install it in a timely fashion, provide quality chemicals, and maintain and service the carwash when necessary. Distributors must also become increasingly responsible and accountable to their carwash customers, and to assure them that their carwashes at least reach, or even exceed, their revenue expectations.

The “world class” distributors of the future in the IBA market will excel by doing what is generally considered unreasonable to do or attempt to do. Uptime, throughput, and wash quality served their purposes admirably as defining buzz-words in the earlier stages of IBA carwashes. Now, the focus for a profitable future in the IBA market must be on carwash revenues.

A new revenue stream
For too long the IBA market segment has neglected the proper marketing of its product and service, and the resulting loss of revenue has negatively impacted all three stakeholders in this distribution channel. Indeed, the loss of potential revenue is staggering; it is no wonder that other products, notably, the express exterior wash, are entering and competing successfully (and mercilessly) against IBA sites.

As you consider the plight of each IBA carwash owner, distributor and manufacturer, you will recognize that all three suffer the same deadly malady — a shortage of sales and revenue due to the historic and conspicuous absense of a planned and executed marketing program.

To begin, I fear that most IBA washes at petroleum and c-store sites are operating at 70 percent capacity, or less. This means that IBA washes, which at one time were grossing $6,000, $7,000, or $8,000 a month, now are struggling to reach $3,000, $4,000, or $5,000 in carwash revenues.

The gradual loss or shrinkage of $2,500 a month in carwash revenues is insidious and, unless corrected with effective and on-going intervention, can easily exceed the original purchase price of the carwash.

Thus, the downward cycle in new or repeat carwash sales starts here, at every underperforming carwash site.

The distributor’s role
Next, for the typical carwash distributor, he is challenged on too many other fronts to be actively concerned about the financial performance of his customers. But when the lifeblood of the IBA industry is threatened, because of declining carwash revenues for any number of reasons (e.g., old equipment, new or incompetent operators, aggressive competitors), the distributors also begin to struggle financially, and some may not be able to reverse this tragic downward cycle.

At the worst possible moment, service costs increase, repeat orders are stalled, and too many customers become slow payers. The mindset of this overwhelmed distributor is one of survival for today, not building for a more promising (and profitable) future.

In this dilemma, however, the experienced distributor knows in his bones, that the loss of carwash income at each of his customers’ sites, is also a loss in much-needed revenue for his company as well. Thus, distributors who could typically count on 12-15 new units a year per territory ($1,200,000 to $1,800,00 in equipment sales), now struggle to find 8-10 sales. How and when is that loss of $500,000 in income replaced?

Finally, the IBA manufacturers can not escape the recent and wide-spread trend of reduced sales and revenues. Certainly there are regional differences in the performance of IBA carwashes, but if Georgia is an indication of what can happen in a stagnant market, then IBA manufacturers should prepare for many more disappointing years and fewer sales in other parts of the country.

Looking at Georgia
Though Georgia may be an exceptional situation, the fact remains, that here in the Peach State, of the 1,000 IBA automatics which are now in the field, only about 700 of these units will be replaced in the future. This represents a loss of more than $30 million in equipment sales in one state alone for IBA manufacturers and their distributors!

As anyone can imagine, if this loss is repeated on a national scale, then this situation will have devastating consequences for the IBA industry, and the many companies which have served it so well in the past. This disturbing possibility no doubt delights, however, the express exterior manufacturers and their aggressive distributors, who are capturing a new breed of carwash investor, and are building IBA killer sites.

Recovering
Clearly, before IBA carwash sales can recover, the manufacturers and their distributors must combine forces, as they did in the 1990s, (when they trained a generation of skilled service technicians), and change their original business model, to adapt to the new market conditions.

In previous years, (from 1985 to 2001), successful distributors relied on only three revenue streams, and especially on the new equipment orders, to keep their companies solvent. Now, a fourth revenue stream, for marketing support, must be added, and will, indeed, become the driving force for the new, best-in-class IBA distributors.

Five years ago, in a November 2002 editorial in Professional Carwashing & Detailing, carwash consultant Steve Gaudreau used four major criteria to evaluate every distributor:
  1. Service before the sale;
  2. Installation capabilities;
  3. Training; and
  4. Service after the installation.
Since we have moved into a mature and significantly more challenging market today, one would have to add “dedicated and professional marketing support” to this list.

Gaudreau emphasized that the best distributor is the one who gives you the greatest chance to maximize your carwash revenue. This decision is really more important, Gaudreau concluded, than picking the “best” carwash manufacturer.

Moving into the last quarter of 2007, the pending IBA breakthrough is properly understood to be a major marketing initiative, designed to restore this largest but neglected and floundering market segment.

Just as an experienced service manager and a gritty accounts receivable supervisor were crucial to the earlier success of most distributors, now a new and specially trained marketing director becomes a valuable and indispensable member of the management team. But be forewarned, if you ignore or slight the importance of this new marketing position to the continued success of your company, then your competitors may indeed control your future.


Mike Perry has 28 years’ experience in business-to-business sales and consumer marketing. He is the owner of Total Marketing Concepts, a results-based consulting and marketing company for carwash distributors and operators. For a copy of his presentation, “Get Better or Get Beaten: Delivering World Class Service to the Petroleum and C-store Market,” contact him at: mpccws@aol.com, or 770-330-2490.

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