Memberships are a vital piece of the tunnel market, few will argue that, but do they have a place in the in-bay/self-service world?
Given my background in biology and chemistry, I answered this question from a scientific perspective. I formed a hypothesis and tested it through mathematical considerations and study.
My hypothesis was that mem-berships don’t make sense in automatic/rollovers because the machines are too slow and the usage levels are too high. It turns out, after a lot of study, consultation, and observation, my conclusion is that my hypothesis was false. Memberships Do belong in the automatic/rollover space, you just need to follow a different set of rules.
Below are the research findings. But first, a little about me and my car washes. I currently own and operate a small chain of six car wash locations, named Red Rhino Car Washes. These locations are spread out over about a 10-mile radius of Northeast Philadelphia. They feature 25 self-service bays, eight automatics, and one express exterior tunnel wash.
My first foray into the membership model came with the acquisition of a site that had two automatics on the EverWash platform with about 200 members. The previous owner added the membership as a defensive move against a massive two-tunnel operation built less than a quarter mile away that offered memberships. The idea was to combat the loss of customers to that new operation. At my wash, memberships have grown to more than 2,000, and automatic volume is about 50 percent membership based.
Research Findings
Psychology. Memberships make sense for in-bays because of the “Power of Busyness and Attraction.” The analogy that fits best is to imagine two restaurants. One is filled with people, and the parking lot barely has room for another car. Across the street is a dimly lit restaurant with only a few cars. Where do we choose to go for dinner and why? The practical choice seems to be to go to the restaurant with fewer people; our seating choices will be better, and our wait will be shorter. But we choose the busy restaurant out of experience because:
1. Social proof. “Everyone is here, so it must be good.”
2. Experience. We learn that busy spots are busy for good reasons, not just psychological ones.
3. Safety. In the case of a car wash, having people around makes us feel safer.
Subconscious Cues. Imagine sitting at a light and having a clear view of a car wash in front of you. The car enters, and the undercarriage and side blasters blow water all over the vehicle. The presoak “painting the vehicle” mesmerizes you as you see the foam blanket the vehicle. The high-pressure blaster comes on, and you see dirt coming off the rear of a vehicle, leaving a clean white car behind. Your mind travels to your car, and you pull into that wash. Now imagine that happening more often because more people frequent the wash using their memberships. Activity building more activity in action.
Loyalty. One of the most obvious impacts of membership participation is the impact on loyalty. If you are a member of a car wash on Main Street but are on the other side of town and have an urge to wash, why would you spend the money at another site when you “belong” to the Main Street car wash? Most wouldn’t. People remain loyal to their member wash. This captures and keeps your customers loyal to your brand.
Oops, loyalty. Even the best operators have moments of “oops.” A point of sale is down, the Internet is down, an attendant lets soap run out, or some other site failure. A first-time customer experiencing this might never come back, but club members look at those moments in the context of all the other good experiences they had. They don’t feel cheated because they know that they can just come back again tomorrow.
Consistent revenue. Another advantage to monthly membership is its impact on flattening the revenue curve on slow rainy months or during the slow seasons. Assume half your customers are monthly members, then 50 percent of your revenue is guaranteed even on a rainy month or during the slow seasons. Another impact is when you go to sell your wash, buyers will like the built-in assurance of a healthy membership program. The recent Wall Street Journal article “Private Equity Wants to Wash Your Car,” points out that “when car-wash owners introduced prepaid wash memberships, revenue became more consistent and fewer employees were required to be on site. That made private equity investors pay attention.” While private equity might not be ready to approach an operator in the self-service and automatic sector, buyer valuations and considerations are similar whether it’s private equity or a local doctor or lawyer looking for a good investment. Valuations for a solid location with a strong member base are likely to be higher.
Memberships are a social norm. Nowadays, everyone has a monthly membership — Netflix, Amazon, gym memberships, etc. Customers no longer need to be taught the value and normalcy surrounding a car wash membership. Customers expect a membership option at your car wash, and not having one puts you at a disadvantage.
The math of membership. The International Car Wash Association (ICA) did a study that shows the average car wash customer only washes their vehicle four times annually. If the average car wash costs $15, the consumer will spend about $60 a year. If the average monthly membership costs $25, this same average consumer now spends $300 a year instead of $60. This five-fold increase in spending delivers three times the profit to the operator, even when considering the cost of chemicals, energy, water, and overhead.
The Grid
I developed a grid to help operators decide whether to offer memberships. The simple truth is not every operator should offer memberships. On the horizontal axis, the grid looks at how busy a location is. On the vertical axis it looks at the number of car washes within a relevant radius to a location that offers memberships.
For example, if you have a super busy location within a region with virtually no other washes offering memberships, it might not be in your best interest to dilute your profitability with memberships. These locations do exist; however, they might not last forever. It might be a matter of time until another wash is built nearby, and the need to offer memberships to compete will arise.
Recommendations
If you elect to offer monthly memberships, you should:
1) Charge more than the usual 2 X tunnel wash price. Get closer to a 2.5 X wash price.
2) Get quality chemicals for less. One easy way to do this is to buy your presoaks from a company that offers alkalinity and surfactants in separate containers to avoid shipping water.
3) Buy hyper concentrates. Hyper concentrates cost more per pail, but less cost per use.
4) Research your POS options and find one that markets and sells memberships. Self-service washes can’t easily afford a full-time sales effort.
5) Use reclaimed water to save money. Higher wash volumes raise water and sewer costs, so offsetting some of this with reclaim is a wise move.
6) Monitor monthly percentages. Don’t let your memberships be less than 25 percent of your volume because all you are doing is discounting your high-usage customers. Don’t let it get too much higher than 50 percent, or you won’t enjoy high-ticket customers. Shoot for around 50 percent membership.
7) Track usage and shoot for 4.5 uses per month or less. You can adjust usage down by monitoring abusers that try and wash multiple cars on the same membership and by raising the price on monthly wash packages.
Self-Serve Memberships?
What about self-service bays? Do memberships make sense there too? I am not committed to monthly clubs yet, but I have had dialogue with several operators who swear it’s adding to their success. These washes are offering memberships between $12 and $18 a month to use the self-service bays for between 10 and 15 minutes per day and allow customers to choose between the self-service bays and the automatics.
The industry needs to study this more and look for successful applications that support this use of memberships. The basic principles of being busy, the psychological impacts of customer activity, and impulse reminders still apply and should be considered.
