Auto Laundry News - August 2013

Good, Better, or Best? — Intuitive Wash Package Naming

By Robert Roman

Today, banks and private equity are most interested in companies with growth prospects, some barriers to entry, managed by an experienced team, and an exit strategy providing adequate returns for risk taken.

Since it takes money to make money, car wash operators seeking funds to accelerate development of an idea should develop a business plan that demonstrates more predictable cash flow and profitability when benchmarked against peers.

Motorists use a car wash specifically to solve problems. In exchange, operators are paid for services rendered. Since profit margin is a function of price and cost, owners have some capacity to influence margins — making more money.

Here, lenders are most interested in knowing what the product is, its unique selling points, and how the product will add value to customer purchases. Arguably, value proposition for any category of car wash is to clean, shine, and protect customers’ vehicles.

Lenders are also interested in opportunity for products and if management has the ability to exploit the opportunity. Consequently, a plan should identify the potential customer base, offerings, and pricing among other things.

According to marketing experts, given a choice of three prices, approximately two-thirds of those who make a purchase will choose the middle. Because of this tendency, there is a school of thought that calls for sellers to offer three solutions — low-priced, right-priced, and premium-priced.

Here, the premise is that most buyers will not choose the least expensive because of the perception they aren’t getting a high-quality solution. Discriminating shoppers will choose premium because they want the best; economical shoppers will choose the lowest price; everybody else chooses the middle.

However, like economic theory, the two-thirds rule usually doesn’t play out in the real world. Experience has shown the effective sales mix for car wash varies by category, format, geography, as well as operator.

Historically, car wash operators have offered a basic service and several wash packages tied to naming conventions based on valuable metals or superlatives like super, elite, the works, etc.

The issue with these names is they do not articulate how capabilities of services match motorists’ needs.

Consequently, customers must read the menu, interpret what is or is not included in each selection and then make a choice. If customers cannot determine what is best for them, choice may become a toss-up.

This is especially so for washes with pay stations where customers cannot articulate their needs to a human being. As a result, customers may choose the middle wash and hope it is good enough.

Marketing experts suggest retailers should differentiate and abandon “good, better, best” for an approach that considers diagnostic questions and presents solutions developed for customers’ needs. In short, provide customers with an intuitive and professional recommendation.

In working with car wash operators, we find that a “clean-shine-protect” naming convention resonates in the minds of most consumers. The convention embodies the car wash value proposition, it’s easy for customers to understand and relate to, and it’s relatively easy for the operator to implement.

The table above contains results from operators who made the transition from a superlative to an intuitive approach to sales (tunnel left, in-bay right column). If we apply the difference in the right column against in-bay benchmarks, the increase in average price would increase monthly net operating income by $1,583 ($19,000/12).

Applying maximum allowable payment yields $1,319 ($1,583/1.2). Using standard lease factors, $1,319 would support an investment of roughly $69,000 for improvements as well as providing a depreciation tax shield.

Of course, it takes more than a simple name change to make this work. Clean must be clean, shine must be shiny, and protection must protect — and operators must keep this promise day in and day out. Operators who consider the intuitive approach to sales may be “supremely” pleased with the outcome.

Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at bob@carwashplan.com.

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