Finishing Line - December 2008

Save Yourself:
Treats to Retain Customers
By Robert Roman

Last month I read a sad story on a forum about a local car wash operator who decided to throw in the towel and close his business. The operator attributed the closure to the area’s economic problems. What I found troubling were some comments made by others that maybe this operator did not do everything possible to save his business.

This may seem like harsh criticism, but some statistical research shows that only 19 percent of small businesses fail due to inflation and economic conditions. In other words, 81 percent of the owners surveyed failed because of issues that were under their control. Does this mean that we can’t make the case that a small business like a car wash can fail due to economic conditions despite an operator’s best efforts to prevent it? Let’s take a look at the situation.

Up until about 2006, the economic climate of the region where this closure occurred was not that bad. In fact, economic indicators painted a rosy picture for many of the counties in the region. Unfortunately, oil prices took off and the housing market crashed. Since then, many communities have taken a dive. Unemployment is up; jobs and population are in decline; home values, sales, and construction permits are way down; home foreclosures are up; and the cost of living has skyrocketed. Throw in bad weather and it is not surprising why some of the car wash operators here are complaining that sales volumes are off by as much as 30 percent to 50 percent.

Let’s take a look at how the average pocketbook has fared. Over the last two years, there has been no change in the area’s average wage of $40,000. However, there have been increases in the price of basics like gasoline, car and homeowners’ insurance, energy, and food. As a result, the cost of just these few items, measured as a percentage of the average wage, has gone up from 26 percent to 34 percent, or about a $3,000 increase. Since the area’s taxable sales are down by 6.5 percent over last year, we can make the argument that the average wage earner has less money to spend. If so, does this necessarily mean that the demand for car wash services is any lower? Not exactly.

When times are tough, consumers have several choices. They can continue to buy something at the same level and forsake something else in their market basket. They can opt for a less expensive alternative or they can delay or cancel a purchase altogether. Consequently, one of the car wash operator’s biggest challenges is to overcome the temptation to assume things. For example, even during the toughest times, people still have the tendency to want treats, but they are going to look for less expensive treats. Let’s consider someone making $40,000 a year who has a habit of buying a $15 full-service wash twice a month. After getting their net income smooched by a cool $3,000 worth of inflation, this consumer has choices to make. Perhaps your car wash is no longer one of them. Do you have any treats for customers?

For example, do you have a coupon that will help get them back into the $15 wash that they have grown accustom to and once decided they could afford? Do you have a less expensive alternative for them to choose from like an exterior-only wash? Do you have a loyalty program that allows you to reward customers with meaningful benefits for their return business?

Many experts believe that one of the primary demand drivers for car wash services is new-car sales. When people aren’t buying new cars, they take better care of their existing car so it will last longer. Do you have any treats for them? In other words, is it possible to change your products and services to better meettheir needs? For example, if you have an express exterior or wand-bay facility with no detail shop or express detailing, quite frankly, you don’t have anything else to sell to customers to help them maintain or restore their vehicle.

When times are tough, car wash operators also have to be more careful with their cash. This means aligning the business with the right suppliers and vendors. Nice people tend to be more kind during tough times. There are suppliers out there that fit that bill. For your sake, seek them out.

Bob Roman is president of RJR Enterprises — Consulting Services (www.carwashplan.com) and vice president of Bubble Wash Buildings LLC. You can reach Bob via e-mail at rjrcarwashplan@yahoo.com.

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