Peter Drucker, the greatest business thinker of the 20th century, once said, “Marketing and innovation produce results; all the rest are costs.” I would change it to, “Marketing and value innovation produce results; all the rest are costs.”
Value innovation is a strategy of creating a new class within your industry where you have no competitors. Through value innovation strategy, you create a new service that has a higher perceived value in the eyes of potential customers, yet it costs less and it is faster to perform without constraint. It challenges the traditional approach to business strategy that is based on matching the competition strategy and improves on it possibly 5% to 10%.
The value innovation strategy is out-of-the-box thinking that encourages businesses to question the traditional way of doing business. In fact, it forces owners to look at other industries to get new and fresh ideas to implement or even to start a new value innovative marketing strategy that no one thought of. However, when implemented, it will change the game by attracting a new demographic group of clients that traditionally were never part of this industry.
Express wash effect
The carwash industry has always been an innovation technology industry, constantly improving the wash process and operation by introducing new software, equipment, materials, chemicals, services, etc. All these are innovations that the carwash industry desperately needed to improve customer satisfaction, dollars per transaction and frequency of visits; however, none of the above have anything to do with value innovation.
The one major value innovation the industry has seen in recent years is the introduction of the express wash format. Instead of competing for market share, the express wash was designed to create new demand and new market space within the industry, instead of combating competitors for existing market share.
Value innovation renders the existing competitors as irrelevant.
The express carwash format has invited many new demographics, such as teens, young adults and seniors, who could not previously afford a carwash on a regular basis to become clients. It also invited the attorneys, doctors and many other traditionally well-paid professionals who are limited on time, as well as car enthusiasts who love cleaning their own cars.
Value innovation defined
The definition of value innovation is a marketing strategy in which companies introduce a new technology, product or service for the purpose of:
• Creating uncontested market space
• Making the competition irrelevant
• Creating as well as capturing new demand
• Achieving higher perceived value at lower cost
• Redefining the industry buyer group.
Carwash equipment, chemical and software manufacturers have been working from an innovative marketing viewpoint. However, as individual carwash owners, what are your value-innovative ideas that challenge the traditional marketing strategies to introduce new services or upgrades with high perceived value at a lower cost and that are faster to perform to create value in order to attract new demographics that were never considered as clients of the carwash industry?
Due to technology, the internet and ease of transportation, the world has become essentially a small village, and as the leader of the developed world, the U.S. has been facing fierce competition to keep its leading edge.
What is the secret sauce that kept the U.S. gross domestic product (GDP) 60% higher than its closest competitor, China? For over 150 years, the U.S. has been the source of innovation in the world. A recent study by two individual companies — Boston Consulting Group and Statista — shows that eight out of every 10 leading innovation companies are U.S.-based.
Make competition irrelevant
The carwash industry should take note of these leading innovation companies and how they changed their respective industries.
Steve Jobs changed the world as we know it many times over by introducing several innovative products:
• iPhone became the fastest-growing obsession. It put a computer with internet access in every pocket. It transformed the way we take pictures and photos. We now can carry thousands of audio books, digital books and music on the same device. The iPhone became an extension of everyone’s life.
• App Store opened the door for many companies and individuals to develop and distribute their software.
• iPad has changed how we do business in many ways.
• iPod and iTunes have redefined the way people purchase music and saved the record companies from an inevitable doom.
Netflix changed the home entertainment industry. Hollywood Video and Blockbuster were both leading stores for renting movies and video games. They had a great business model for the 1990s, when they had a virtual monopoly on the market. But in the new century, the game changed when Netflix stole the market share by innovating. Hollywood Video and Blockbuster have been “netflixed.”
Netflixed is a new verb used by entrepreneurs. It means to have a previously successful business model destroyed by a new, innovative one. Netflix didn’t invent a new technology; instead, it innovated by changing the business model. Netflix created a virtual world and introduced the monthly subscription model with unlimited rentals without due dates, late fees or shipping fees. Netflix developed a personalized video recommendation system based on ratings and reviews by its customers.
Hollywood Video and Blockbuster kept the same old business model and did not innovate. Hollywood Video filed for bankruptcy in May 2010 and announced the end of operation and liquidated all its assets. Blockbuster announced bankruptcy in September 2010, and Dish Network purchased it in an auction in April 2011.
Note these other industry-changers:
• Starbucks created a culture around coffee.
• Ford Model T created a common car for common people after it was only for the elites.
• Southwest Airlines started with in-state travel to compete with car travelers.
• Tesla is not a car company; instead, it is a technology company that happens to manufacture vehicles to accelerate the world’s transition to sustainable energy.
• Swatch is the world’s leading manufacturer of high-quality, affordably priced Swiss watches.
• Cirque du Soleil created a class within the industry. It achieved its remarkable growth in a declining industry. Cirque du Soleil did not compete with the current and shrinking existing clients; it reinvented the circus.
All of these value-innovative companies appealed to a whole new client target market that was never considered to be potential clients and made the competition irrelevant.
Leaders who constantly react to what the competitors are doing become blind to new value-innovative marketing opportunities to accelerate their own cause. It’s like trying to win by playing defense.
The purpose of being in business is not to defeat the competitors but rather to be competing with oneself by outdoing what you have done in the past. As a value innovator, you don’t have to create a completely new service; instead, you can improve on an existing service. As a value innovator, you can borrow ideas and technologies from different industries to improve existing services, raise perceived value, lower cost and eliminate constraint.
Scoring with innovation
Hockey great Wayne Gretzky was once asked, “How can you be the best hockey player if you’re not the strongest or fastest player?” He responded, “Most players go where the puck is; I go where the puck is going to be.”
As a business owner, your job is to anticipate change in the industry and be ahead of the competition. None of the aforementioned companies likely organized a market research group to find out what product or service customers wanted and needed. Customers don’t know what they want until you offer it to them. Customers are not the experts in your field — you are. Customers are typically good at one thing, and you should really pay attention to it: complaints. Market innovation is born from truly listening to customers’ concerns, dissatisfactions and challenges, and then finding an out-of-the-box solution. If the complaint is an industry-wide issue, then the answer lies outside the industry.
Great leaders have a vision bigger than themselves. They have a drive to serve a greater cause than what their industry serves. As a carwash owner, you are not in the business to wash and clean cars. The carwash is a tool to create an enjoyable driving experience.
At a full-serve carwash, most ticket writers look inside the customer’s vehicle to see if the fabric is dirty and then try to sell an interior detail. But what if the inside is clean? Can you still sell an interior detail?
I have commissioned research that cost tens of thousands of dollars on the sick car syndrome. Yes, cars are major sources of allergens, mold, fungi, bacteria, dust mites and other contaminants.
The interior of a car may be the cause of many sicknesses, such as flu, allergies, headaches, eczema, sneezing, coughing, wheezing, drowsiness, watery eyes, chess tightness and more. Yes, vehicles are infested with allergens and bacteria that make people sick. We can educate our customers on these findings.
Interior detailing is not only about removing dirt and smells but also mainly about living a healthy lifestyle and protecting loved ones. We also invested in a portable ATP hygiene monitoring system to test and analyze the hygiene level of vehicle surfaces before and after we perform the interior steam cleaning. We even designed a certificate to give to each customer after the steam clean, certifying that the customer’s vehicle has been disinfected.
We promoted this service and educated our customers that interior steam cleaning is prudent for healthy living. We created a new market where there is no competition and attracted major demographics that were never considered as carwash clients before. The interior steam cleaning became a regular maintenance task performed once every few months for customers.
Because our process has a higher perceived value and a higher purpose, we charge three times more than our competitors, who still use shampoo or hot water extraction only. With proper training, the steam cleaning process takes less than half the time of a traditional shampoo to perform. Therefore, we saved 50% of the labor cost and eliminated a constraint.
Stop selling and start educating
There are many times during the course of interacting with your customers that you can stop selling and start educating instead.
Unlimited pass plans are a great example. I have trained my cashiers as well as my salespeople on how to sell our wash passes. One day, as I was walking by the cashier, I heard her and another salesperson trying to sell a wash membership to a customer.
The customer had just brought in her brand-new vehicle for our $25 wash package. The membership for the same package is $50 per month for unlimited washes. They were trying to convince the customer by saying, “For another $25 today you can wash your car as many times as you want per month, and you may cancel any time you want — no strings attached after the first two months.”
The customer was unreceptive, and the employees finally gave up. As the customer was getting ready to pay for her wash, I said, “May I ask you a question?”
“Yes,” she replied.
“When did you purchase the vehicle?”
“Isn’t it a great feeling every time you get in the car to drive?”
“Before you purchased this vehicle, what kind of car did you have?”
“Did you buy it brand new?”
“Do you remember how, when you purchased it, you had the same feelings that you’re having today?”
“What happened six months later? Did you lose that feeling?”
“The reason we developed this VIP membership is for new car owners like yourself, who enjoy their cars and want to keep them clean and shiny the way you have it today and five years from today. Every time you get in your car, you’ll feel great and say, ‘Wow, I love my car.’”
“Where do I sign up?” she replied.
What’s the difference between my approach and the cashier’s? The cashier and salesperson were trying to sell the customer logically. Logically, if the customer washes her car at least twice a month, she gets her money back. If she washes once a week, then she’ll be getting the carwash at half price.
But, all that doesn’t matter — because when you sell logic, customers build an invisible wall between you and them, and they feel you are trying to sell them for your own benefit and not theirs. I used an emotional trigger, and I painted a bigger picture than just a carwash.
The interior steam clean service is another opportunity to educate customers. Recently, when I was watching cars exit the tunnel, I saw a salesperson get in one car and drive it out. He told me that he was taking the car to the detail area to sell the customer an interior steam clean and he asked me if I would help him close the deal. I waited a few minutes, then followed him to the detail area. When I got there, the customer was ready to leave. I asked, “What’s going on?”
The salesman told me he had offered the interior steam clean to the customer at our regular price, which remember is three times higher than the competitors’, but the customer changed his mind and was leaving.
I asked the customer to wait for a second. I opened the vehicle doors to see the condition and how much work it would take us to complete the job. As I opened the back door, I saw a baby seat. I turned to the customer and said, “May I ask you a question?”
“Do you sometimes get in your car and after you shut the door and turn the engine on, feel as if you just got an allergy?
“You know the car is full of dust, and there are approximately 40,000 dust mites and dust mite droppings in a single speck of dust? That is the cause of your allergy. If you feel the allergy when you get in your vehicle, what about your child in the backseat?”
“Would you include the carwash price with the steam clean?” he asked.
I told the salesman to have the detailer start on the steam clean and make the receipt, but do not charge for the wash. Then I looked at the customer, shook his hand and assured him he would be very happy with the quality of work we do.
What happened here? It was no longer about cleaning the interior; it became about something much bigger: the health and safety of his baby.
When you educate customers and utilize value-driven innovations, everyone wins. What are you doing to attract new clients that are not initially interested in this industry?
AJ Rassamni has over 30 years’ experience in the carwash business. AJ is a speaker, consultant and author of two books written specifically for the carwash industry: “Increase Business 30% in 30 Days” and “Dirty Cars Filthy Rich.” AJ is co-founder of MyLoyaltyApps, CEO of Great American Carwash and the president of the Central Blackstone Merchants Association. You can contact AJ via email at [email protected] or text (559) 284-1919.