Past Issue

Free Car Wash for Life - Dealerships Benefit from Benefits They Offer

By Robert Roman

10/01/18

To sell cars and keep customers coming back, new car dealerships have moved beyond factory-to-customer incentives and customer rebates.

Today, dealers are offering a host of loyalty attributes ranging from free shuttle service, free coffee and donuts, free maintenance and lifetime warranty programs, and free car washes for life.

 

Team Auto Group.

For example, if a person buys a new, certified pre-owned, or a used vehicle from Team Auto Group in Salisbury, NC, the dealership will provide free car washes for that vehicle for as long as the buyer owns it.

To help keep this promise, Team Auto Group has an automatic car wash system located on its property to service the internal demand for washing vehicles. However, this wash is not open to the general public per se, and that is an important consideration when estimating the subject’s usage.

According the National Automobile Dealers Association, the typical new-car dealerships sell 1,050 vehicles per year and services 18,000 vehicles per year. So if the dealership cleans all vehicles associated with service and sales, the baseline would be 19,050 washes annually or about 61 cars a day — a number well within the capacity of most in-bay automatic car wash systems.

DEMAND

As for estimating demand created from offering free washes for life, we must make  as sumptions about take rate and wash frequency. For example, the retail trade area for new-car dealerships is significantly larger than it is for commercial car washing — 10-mile radius or more versus 3 to 5 miles.

 

Kinsel Toyota.

So, some new-car buyers may find the economic distance or free wash is not advantageous enough to merit an extra trip to the store.

To keep things simple, we’ll assume an average of 500 new-car buyers redeem the offer and wash three times per month whereas the typical customer visits the dealership’s service department about 2.5 times per year.

Thus, total internal demand would equal 20,000 + (1,500 X 12 months) or 38,000 washes or about 122 cars a day. This is about the upper limit a single in-bay automatic can service without creating excessively long waiting lines and average waiting times.

Moreover, if the assumptions hold, each consecutive year the program is offered would add at least another 18,000 washes annually.

So, in year three of the program, our dealer might face the task of washing 74,000 cars a year or about 237 cars a day.

Clearly, this level of demand would require two standard in-bay automatics, one express in-bay, or a mini-tunnel.

Next consider a dealership that wants to do even more than offer new car buyers’ free washes for life such as Kinsel Toyota in Beaumont, TX.

Kinsel’s Insta-Clean facility is an express exterior conveyor with 150’ of computer-controlled equipment with free vacuums that is also open to the general public. Kinsel offers three wash packages with prices ranging from $5.00 to $15.00 as well as an unlimited monthly wash option starting at $19.95.

Since location is paramount to store performance, the decision-making schema can be divided into two branches.

The first branch includes dealerships that do not want to operate a car wash facility as a standalone business. In this case, the car wash evaluation would focus on store characteristics such as store size, layout, and implemented services.

For example, the facility’s design and signage and its location on the property should be appropriate for this niche, which usage is driven by the dealership’s customers and not pass-by traffic.

PUBLIC NEED

The dealerships belonging in the second branch are interested in serving the public at large as well as new-car buyers and service customers and would first determine if there is public need for a new car wash.

Two crucial aspects of public need are 1) is there sufficient unmet demand for car washing in the area, and 2) will the proposed wash be reasonably convenient and useful to the public.

Team Auto Group and Kinsel are only two examples of how new-car dealers and their customers can benefit from car washing.

In the final analysis, a car wash allows new-car dealers to solve more of their customer’s problems in one place. Stay-in-the-car, automatic car wash service appeals to the broadest segment of the available market.

A car wash allows new-car dealers to capture more of the value they create in the value chain. A state-of-the-art car wash is often described as a 50 percent gross net business. A car wash allows new-car dealers to benefit from network effects and deliver more value to customers (e.g., rideshare, fleets). Finally, a car wash allows new-car dealers to develop asustainable competitive advantage by means of cost, differentiation, or niche strategy.

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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