Pricing Strategy - Lower Prices, Full Prices, Coupons, and Discounts
By Chuck Lundberg
The way we wash cars has really changed over the years, but more recently we have seen an enormous change in how we package, price, and discount our wash options. By the time you finish reading this, I hope you will have more questions than answers. Years ago, when it came to car wash pricing, there was almost an industry standard. Within a few dollars here or there, most car washes in a specific area were all priced the same. Not anymore, you can drive through any town USA and find one car wash charging $8 for a basic wash then pass another at $3 with free vacuums. A few miles further you might find a car wash at a gas station that offers 5 cents off a gallon of gas when you buy a car wash for $6.
How is a consumer supposed to make sense of it when we, the car wash operators, can’t even decide which way is up? Everyone swears their way is the best way, and rightfully so. These businesses are washing a lot of cars and making a lot of money. There is no right and wrong. So I am not going to tell you which way will make you rich and which way will steer you to failure. After talking with so many successful car wash owners, I can honestly say that in the end it will be the customer who decides if your car wash business will be successful or not.
Let’s get familiar with a customer’s perceived value? This is when a consumer evaluates and decides the value of a product or service when compared with others who offer the same or similar services and products. So one would think that if I am charging $8 for my base wash and there is a car wash across town offering a $3 express wash with free vacuums that I would soon be out of business, right? Across the country this has proven not to be true. Car washes with different prices and packages are washing cars and making money in perfect harmony.
$3 wash customers still want extras.
A customer’s opinion of a product’s value may have little or nothing to do with a product’s market price. For example, the customer who is going to the car wash that charges $8 for a basic wash feels that this place does a good job and believes they are getting a good value for their $8 — it is money well spent. If you were to ask a loyal customer who goes through the $3 car wash, they will most likely tell you the same thing.
One important thing I have heard from customers who use the $3 car wash is that they can now afford to wash their car more often. This brings up another important question, does the $3 car wash model really wash more cars than the $8 car wash or does it just wash the same number of cars more often? In others words, is the customer base that uses the $3 car wash larger than the customer base that goes through the $8 wash? Does the $3 price for a car wash allow the customer to now wash twice or three times a week compared to the $8 car wash customer who may only wash once or twice a month?
This is the important matter of fact. There is a difference between the people who use the $3 car wash and those who use higher priced car washes. In extensive research and study this is what I found: They are not the same customer. It is a different customer base. Just like when the owners of some car washes that featured both a tunnel wash and self-serve wand bays did not want to install an in-bay automatic wash in a self-serve bay because they thought it would just take customers away from their tunnel wash. Many years later we see in wash after wash that putting in an in-bay automatic did not lower the car count in the tunnel wash. The customer who uses the in-bay automatic is a different customer than the ones who prefers to go through the tunnel wash or self-service bays. It’s a whole new customer base.
The same applies for the $3 car wash model. Ask an owner of a $3 express car wash where these new customers came from. They will tell you, they do not know, but they are loving it. Another factor that proves the $3 car wash customer is a new customer base is the dollar-per-car ticket average. At most $3 car wash facilities, they will tell you that the $3 wash is not the best seller. Customers still come in and buy the top package.
So back to a customer’s perceived value: some customers who go to the $3 wash still want all the extras and are willing to pay the extra money for the top wash. These customers are not there because the base wash is only $3. When we talk to the owners of the higher-price car washes, they too tell us that their base wash is not the best seller, and their top wash sells very well. So is the customer who would buy the top wash at a $3 wash perhaps the same customer who would buy the top package at the higher-price car wash business across town?
When we ask the owners of a higher-price wash how they compete with the $3 car wash across town, some say they offer discounts and coupons. Some do this marketing online or in print advertising, offering anything from $2 off any wash to $4 off their best wash. But again, after lots of research and study, many marketing companies will tell you that the customers who clip coupons and shop on savings are not the same customers who buy products or services because of convenience or reliability. So this means when you offer discounts, coupons, frequent wash clubs, and such, that you are again appealing to a whole new customer base. The consumers who visit your wash with a discount coupon they found on your website may never have visited your wash if that coupon had not been available. Often that customer will go where the deals are and only wash where they can get a discount.
Many car wash owners who have spent a lot of time and money trying to attract new business through discounts and coupons will tell you what frustrates them is some customers will only come in when they have that coupon. That is exactly right. They say that like it is a bad thing. It’s that customer base that will only shop when they see a discount or coupon that saves them money off the full price. When you stop putting out the coupons, most often you will not see the coupon clippers anymore; they are now washing with the guy across town who is still offering discounts. Or maybe they are using the $3 car wash with the free vacuums.
If you decide to keep your wash prices higher than the $3 car wash model and offer discounts and coupons to attract the customers looking for deals, I can tell you this: You need to give them a great offer. Too many print-ad coupons fail not because people did not see it; it failed because the deal was not attractive enough. If I live five minutes from a lower-price car wash and your wash across town charges more, a coupon for $1 off any wash will not bring you many new customers. Most people will not drive two miles out of their way to save a dollar off a wash. Make it a great deal and show the customer that with this discount coupon you are giving them a full-price, quality car wash for half the price. That will hit the spot in a consumer’s mind. You will have exceeded their expectations, giving them a great wash at a super low price.
Coupons and discounts attract new customers.
We can all agree that coupons and discounts are used to attract new customers to your business or to entice some of your existing customers to come in more often but, once they are in, it’s ultimately your job to provide them with a great car wash experience so they will become a regular customer.
In the end, whether you run a $3 express car wash or a wash system with higher prices, you will need to help customers gain a perceived high value for your service. In order for you to enjoy continued success, you will need to provide your customers with quality service and a great car wash experience for a price that the customer feels is fair.
Chuck Lundberg, a 25-year car wash industry professional, is presently general manager of Clean & Green Car Wash of Marlborough, MA and owner of Independent Car Wash Consultants of NH. Chuck has served on the board of directors of the New England Carwash Association and, most recently, was a speaker on a panel discussion at The Car Wash Show in Las Vegas in April 2015. You can contact Chuck via e-mail at firstname.lastname@example.org.