An innovative point-of-sale (POS) system to automate payments and process more cars … check. Longer tunnel and/or more advanced equipment to handle volume and wash more cars … check. More cars on a consistent basis … check?
In many respects, the professional carwash industry has clearly made equipment, process and technological advancements to handle high car count volumes. More folks are leaving driveway washing behind and opting for professional carwashing services instead. Now, how do you capitalize on that potential and draw more customers in while providing value to current customers to maximize your wash’s profit goals? Also, how much focus should be on acquiring new customers versus retaining existing ones?
Heavy carwash competition in many areas of the country is a real concern for operators. And, as veteran carwash operators know all too well, this is an industry that rides the highs and lows of the weather and the economy. However, as your customers and prospects become more familiar using subscription-based services, repeatable, consistent revenue is now being realized by many carwash operators.
We spoke with some experts in the industry to discuss how driving volume at your carwash and delivering value to customers can be achieved today. These experts helped us break down the costs of acquiring new business and how to increase your wash’s dollar per customer averages.
By the numbers
Smart business owners monitor key metrics when assessing the success of the overall business or a specific program. According to AJ Rassamni, owner of MyLoyaltyApps and author of “Increase Business 30% in 30 Days” and “Dirty Cars Filthy Rich,” there are specific numbers carwash owners and operators should be mindful of when determining ways to increase profits and ensure success of the business. He starts with the number four.
“A business owner should balance his or her efforts on these four levers: increase the number of customers, increase dollar per transaction, increase the frequency of visits and control operational expenses,” educates Rassamni.
Statistics show that acquiring a new customer can be as much as 25 percent more expensive than retaining an existing customer. Although focusing on increasing the customer base might be the hardest and most expensive way to increase revenue, continues Rassamni, it is fairly reasonable to assess your success rate potential.
“How much should a business spend to acquire a new customer? Is it worth it?” queries Rassamni. “To answer these questions, a business should first investigate the lifetime value of each new customer. The answer will give you an idea of how much repeat business you may expect from each new client and help you determine how much you should invest.”
According to Rassamni, once an operator identifies that number, he or she will understand how important it is to actively work on acquiring new customers and to automate the process. He adds, “Increasing online rankings and positive reviews are [two effective ways] to increase the number of first-time clients.”
Improving signage and the carwash menu are quick and relatively inexpensive ways to increase your dollar per transaction, note the experts we interviewed for this article. We will discuss some other strategies to build on your dollar per customer average later in this article.
We will also be examining another important lever, as noted by Rassamni — increasing the frequency of customer visits, also known as customer loyalty — and its merits.
“As for controlling operational expenses,” continues Rassamni, “adding equipment to speed up the process as well as save on labor and chemical expenses should be viewed as an investment and not an expense.”
In order to relate the impact of these four pillars on ensuring business success, Rassamni offers an income multiplier formula example. “If a carwash washes 10,000 cars per month, it makes $10 per car, and [if] each customer visits once a month, the total revenue is $100,000. Now, minus all expenses calculated at 80 percent, and net income is 20 percent, or $20,000,” he says. Applying a 10 percent increase to the first three modules, he continues, equates to a total revenue of $133,000, and subtracting $88,000 for operational expenses equals a net income of $44,000.
And, if customers are visiting more, they are likely to spend more money not only on additional carwash and detail services but also on additional profit centers, including vending and towel rentals.
Serving customers effectively to win their loyalty in many industries — from entertainment to janitorial services — comes down to one factor: convenience. Professional carwashing is no different; today, customer convenience is king, and operators shouldn’t dillydally when improving it at their sites.
Simply put, says Judy Kansa, who is the senior account manager at DRB Systems, the more customers a carwash has on its monthly plan, the more money it will make each month. “Once customers have the RFID tag on their windshields and they are paying a monthly amount to the carwash, they are not going to go to any other carwash,” she says.
Some operators, especially traditional-minded operators, might be hesitant to adopt a loyalty program at their carwash. One of their chief concerns is the upfront cost to install and maintain the program. Technology and equipment advancements have quelled most of those concerns.
“Some operators also think that with more members comes more expenses. Yes, increases in volume lead to increased expenses, but the revenue generated will exceed the percentage of increase in your expenses,” explains Kansa, adding that advances in pay stations and RFID technology are helping carwashes process more cars cost-effectively. “Pay station screen workflows are configured based on the consumer’s choice. They should be set up to upsell your monthly wash club customers, especially those not on your top plan.”
According to Kansa, certain pay stations can even change workflow screens based on volume. “So, if the carwash is very busy and you just want to push customers through, you can modify the workflow to not offer any upsells. This way, the transactions are faster and you can process more vehicles,” she adds.
Carwash professionals across the industry continue to tout the benefits of loyalty programs for both customers and the actual carwash business. From overcoming concerns about bad weather affecting business to reducing labor needs, a quality loyalty program can solve many of the woes that might have plagued your wash in the past.
“Customers are demanding to do business with companies that offer some kind of reward program,” asserts Rassamni, citing several well-known studies on the topic of customer loyalty and its impact on a business. “For operators, increasing customer retention and the frequency of visits is the fastest way to increase revenue and to grow net profit exponentially. Any increase in total revenue is a direct increase in net profit because fixed expenses and labor costs do not change. The only extra costs are the extra cost of water, power and chemical.”
Price points to increase business
In a recent issue of Professional Carwashing & Detailing, we covered best practices in menu and signage design and installation. However, setting prices, especially for inexperienced operators, could be one of the most challenging aspects of running a carwash. For many customers, frequenting a business comes down to price, especially for customers who view carwashing as a commodity where results are repeatable regardless of the site.
For many operators of the country — from New York to California — prices are escalating to combat higher minimum wage increases. Setting prices becomes a careful balancing act when trying to retain customers and still be profitable. Determining prices for each individual carwash should be based on an area’s demographics, what the competition is charging, the services you’re offering and several other factors. If you are unsure, it is best to work with your supplier, manufacturers or consultants in the industry.
For wash club members, there are some noted best practices and guidelines offered by Kansa. “First, operators must determine the wash and wash package prices, and they must fall in line with the services being offered and the competition,” she says. “Once that is determined, it lays the foundation for pricing the monthly unlimited wash club plans.”
Similar to creating a carwash menu that appeals to and upsells one-off customers, the strategy behind wash club plan pricing is to make sure that the top package is the most appealing. “The customer has to believe that they will ‘win’ by purchasing the higher plan,” adds Kansa.
Acquiring new business through marketing is a critical factor when looking to grow profits. Creating customer loyalty is proving to be even more powerful today in the professional carwash business. Living up to your wash’s profit potential means finding operational efficiencies and creating a crowd of loyal customers who understand the value of your services.