Why your self-serve wash should be offering memberships

Membership and subscription based business models are booming in America. A recent Forbes article states that subscription based businesses have grown 100% per year for the past 5 years!1 Whether it is Amazon's popular Prime membership which now includes more than 100 million members!2, Blue Apron, Dollar Shave Club, or that shiny new tunnel car wash down the street they all rely on the appeal of monthly memberships.

Memberships done with the consumer in mind are convenient for customers and very appealing. Everyone loves to get a great deal and those deals boost our loyalty to particular brands and services.

There are a couple of things that hold self-serve owners back from offering monthly membership programs. One is simply having a way to effectively administer and manage the program. Owners wonder how they would sell memberships, manage collecting the fees, etc. They also wonder how the member would start the wash once the membership was purchased.

These issues are challenging but perhaps the biggest reason that owners sit on the sidelines of the booming membership economy is that they fear that a membership gives away far too much of a discount and that it will erode their margins. Why do they feel this way? Because they are doing the math wrong! The typical worry goes like this. I sell washes for $10 each and if a member washes twice a week that is 8 times per month. Now if I sell that membership for $29 I've sold the washes for $3.63 each. I can't afford to do that. I will be losing money! I've calculated my costs and it costs me $3.95 per for every car I wash. I have to get more than that or I will lose money.

There are several things wrong with this seemingly logical calculation. What membership businesses including that shiny new tunnel down the street know is that the value of a customer increases by 200% - 400% when you convert that customer to a member. This translates into increased revenue for your primarily fixed cost business and that translates into more profit. Let's take a simple car wash industry example. There are lots of places to wash a car in most towns. Your customers are likely washing a couple of times a month during part of the year and they are skipping long periods of time in other parts of the year and stopping at other facilities from time to time to wash their car as well.

This person may end up averaging 1.25 washes per month when you factor in their full year habits. At $10 per wash that's $150 of annual revenue for a solid customer. If you can convert that customer to a $29 membership you're now earning $348 per year from this same customer. Let's also look at the cost equation. In our example the owner who calculated $3.95 for every car he washes has simply divided their total cost of doing business by the number of cars he washed last year.

The problem with this calculation is that most of his costs are fixed costs. Fixed costs are the things that aren't going to change whether you wash 1 car or 100 cars on a given day. Either way you have your original capital investment in land, building and equipment. The property tax bill is fixed. Loan payment costs are fixed. Much of the labor cost is fixed. The phone bill and internet bills are fixed. Even some of the water, sewer, and gas bills are fixed to provide freeze protection in the winter etc.

If you calculate only the variable costs (soap, water, equip maint) you are looking at a true variable cost of pennies per wash to provide that member a service that they feel is very valuable and are happy to pay a reasonable monthly fee to utilize. This customer will most likely wash their car more frequently but it won't be as drastic as you probably fear and the customer will be a more loyal, more satisfied customer that now feels a strong connection to your business as a member. Surprisingly all of the membership activity at your wash is also likely to draw in additional customers even if they aren't all members. When passers-by see that your wash is always busy they are much more likely to stop in to see what they are missing.

Now what about that original problem of how to manage the memberships? With the convenient Touch4Wash app you can tailor membership programs that include any combination of automatic, tunnel, self-serve bay, vacuums, dog washes, etc. There is no limit to how many memberships you can offer and each one can comprise any number of different services each with their own limits and restrictions. Your customer can not only purchase the membership through the app but they can also start your self-serve bay, your automatic wash, vacuums, etc right from their smart phone. The app automatically collects the membership fees from the customer every month. Now is the time to join the membership boom that is sweeping the nation in multiple industries including the car wash industry!



References:
1. https://www.forbes.com/sites/louiscolumbus/2018/03/04/the-state-of-the-subscription-economy-2018/#33fcdaf353ef
2. http://fortune.com/2018/04/18/amazon-prime-members-millions/