Auto Laundry News - February 2011

The Coupon — A Necessary Evil?

By Robert Roman

Figure 1 - Coupons in Car Wash Industry

Retailers commonly use coup-ons to promote their products and services.

I receive car wash coupons at my home from Saver’s Digest and Green Values Magazine, locally owned and operated monthly advertising circulars.

The coupon is usually dollar-bill sized, good for 30 days, and contains three separate coupons. The offer is an exterior-only wash for $4.95, regularly $6.95, or upgrade to full-service for $2.

The $2 discount is typical in my market and is similar to the one I offered over 15 years ago when I operated a wash. In my case, price competition was great, and price-conscious customers would go elsewhere in a heartbeat if they didn’t get their monthly car wash coupons.

Consequently, I developed an opinion that couponing was a necessary evil of the car wash business. I don’t believe I would have the same opinion today.

According to sources like Advertising Age, Coupon Trend Report, Nielsen Media, and Wall Street Journal, the evidence for distributing coupons today is compelling.

U.S. consumers reportedly now use about $3.5 billion in coupons, annually — 95 percent of all shoppers like coupons, 87 percent use coupons, 60 percent search for coupons, and 54 percent have stepped up the use of coupons.

Figure 2 - Redemption Rate

In 2009, coupon use in the United States rose by 28 percent compared to 2008 levels. Some analysts expect the number of U.S. companies that send e-mail coupons to consumers will nearly double between 2010 and 2013.

On the other hand, benchmarking surveys suggest the trend in couponing in the car wash industry may not be headed in the same direction. See Figure 1, below.

How can you develop a couponing program that works? As with other marketing, the first step is to determine what you are trying to accomplish. Coupons can be used to help expand or increase the size of a retail trade area, attract customers away from the competition, or attract new residents and old customers. Generating more door swings also provides the opportunity to up-sell and may result in additional impulse purchases.

The next step is to create an offer that appeals to the self-interest of people. There are many options: a free service with purchase, percentage off, dollar amount off, buy one get one free, etc. Offers can be limited by hour of day, day of week, season, and so on.

On average, car wash operators distribute coupons about eight times a year at a cost that may represent 20 percent to 25 percent of total advertising expenditures for the business.

One car wash operator recently placed a coupon in a local circular for one month. Placement cost was $600 plus $200 for set-up and artwork. This provided a circulation of 35,000 households.

In this case, 540 customers cashed in their coupons during the month, generating about $5,400 in gross sales. After subtracting the cost of goods sold as well as the cost to print and distribute the coupons, the operator’s net profit was $2,170 or a return on investment of about 270 percent.

All good things come to an end and so do coupons. As shown in Figure 2, below, the most coupons were redeem-ed during the first week and by the end of the month, they were barely dribbling in.

Once an operator settles on a plan for a campaign, it may be possible to save 20 percent in cost by signing a contract, typically a minimum of three consecutive months. Unfortunately, not all areas have inexpensive circulars to place car wash coupons.

Operators may want to consider companies like Val-Pak, Moving Targets, etc., which specialize in targeted marketing. This means a different cost structure, but you can count on achieving much higher redemption rates.
Coupons can also be distributed on a web page. Typically, this is accomplished by embedding on the page an Adobe file (PDF) that contains a printable coupon that can be downloaded.

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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