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How can memberships help your business?
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Below is some information on memberships and how they can help boost your business.
First I would like to say that most owners look at their business revenue as "Value/Wash". When considering memberships, it is important to change that mindset to "Value/Customer".
I will explain more below.
The below is just an example using industry stats. There are many variables that can affect the success of any business. As you know the car wash industry is no different.
According to some recent studies it was determined that on average, car wash consumers will wash their car 13 times a year. So we will use this in our example to illustrate the impact memberships can have on your business.
Let's assume you have 3 wash levels at $14, $12 and $10. Let's use 500 as our number of customers. Assuming that these 500 customers use the wash levels at the following rate:
Top Wash - 60% - or 300 customers
Middle Wash - 25% - or 125 customer
Bottom Wash - 15% - or 75 customers
As a non membership owner, you could forecast that these 500 customers will generate $83,850 in revenue. See math below:
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300 Customers @ 13 Washes/Yr @ $14/Wash = $182 Rev/Customer/Yr or $54,600 Rev/Yr
125 Customers @ 13 Washes/Yr @ $12/Wash = $156 Rev/Customer/Yr or $19,500 Rev/Yr
75 Customers @ 13 Washes/Yr @ $10/Wash = $130 Rev/Customer/Yr or $9,750 Rev/Yr
Or a total Annual Revenue of $83,850 |
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Now let's look at these same customers through the "membership" lens. Remember we need to track Value/Customer.
If we take the same 500 customers. Let's assume we have 3 membership levels, all priced at 2.3 times the wash price and that the same percentage is applied to the membership level purchases.
Those same 500 customers would yield $178,020 in annual revenue. See math below:
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300 Customers @ $32.20/month = $386.40 Rev per Customer/month x 12 months = $115,920 Rev/Yr
125 Customers @ $27.60/month = $331.20 Rev per Customer/month x 12 months = $41,400 Rev/Yr
75 Customers @ $23.00/month = $276.00 Rev per Customer/month x 12 = $20,700 Rev/Yr
Or a total Annual Revenue of $178,020! |
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That is 2.1 times the value!
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If we use the idea that customers are going to wash 13 times per year, you would need to get 1062 customers to generate the same level of revenue.
This is a simple example, but it does show the power of a good membership program.
I have read that the industry expects membership members to use the wash between 2 - 4 times per month. While these vary from site to site and time of year, etc..., our data would support that 4 or less washes per month is reasonable.
Now the trap some owners fall into is falling back into the "Value/Wash" mindset again and thinking they will lose out with a membership plan that yields a customer paying for 2 wash and washing 4 times.
The math says they will lose, but remember that on average, car wash consumers will use the wash 13 times per year. The reality is that if it were not for the membership the consumer would only wash the 13 times with no assurance that the customer will use the same location for those 13 washes.
And ultimately would not come to the wash 4 times per month to pay full price.
The other topic to consider is that the first group of consumers to purchase your membership are likely your heavy washers anyway. The idea is that you have to get through that level of consumer to get to the avg user consumer.
This means that your avg washes per month per member will likely be a bit high at first. As you gain more members, you will get to that magic group.
The next thing to consider is how to price your membership. Here is another pitfall that some owners struggle with. Some take the expected washes and use that as their multiple. While this seems to make sense, it can actually hurt the performance of the membership.
While the math might work out, the "avg consumer" will not see the value in this pricing structure. This is why the industry reports that pricing should be in the 2 to 2.3 range. This makes the sale seem super simple to the consumer. "So if I pay for two washes, I can wash anytime I want?" - Wow, now that is valuable.
Make the purchase easy for the consumer to say YES...
The final question we get is do I do unlimited or do I do limited membership plans. Some owners lean toward a limited program as they are falling back into the Value/Wash mindset. Now, we do have customers that are having success with limited programs, Our top performing customers are running unlimited programs.
Our data would also indicate that membership usage is almost identical at the sites with limited programs as it is at sites with unlimited programs. So again make the sale easy for the consumer to say YES. Unlimited seems more valuable than limited.
In summary, we think there is some real value in offering membership programs at your washes. Customer loyalty, recurring revenue, etc...
Unlimited plans seem to be easier to sell, with similar membership usage.
Memberships can increase your Rev/Customer while offering a valuable service at a price your customers will feel good about paying, and allow you to increase your revenue as you gain more members.
We hope this was helpful. If you would like to learn more reach out to us below. |
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