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A FEATURED ARTICLE FROM

MAY 2003

Car Wash Club New Program
Locks Customers in, Encourages Frequency

The marketing message comes through loud and clear in this flyer.
Since brothers Steve and Bill Castelblanco got their feet wet in the marketing business in 1985, they have worked with organizations at every level - from Fortune 500 companies to regional and local businesses -structuring reward and various other loyalty programs. Through their company, Loyalty Concepts Inc. of Huntington Beach, CA, they have also made their mark in the car wash industry - they have, in fact, been doing so for the past 15 or so years.

In the September 1998 issue of Auto Laundry News, we covered the brothers' innovative certificate -based car wash club, which operated as a marketing tool to recruit new customers. Now Steve and Bill have pushed the envelope and pioneered a new loyalty club program built around the EFT (Electronic Fund Transfer) payment method.

The concept is simplicity itself: Customers sign up as car wash club members and pay a monthly membership fee, which is transferred from the customer's account to the car wash's account via EFT.
Membership is for a particular vehicle at a particular car wash and entitles that vehicle to unlimited
visits to the car wash for a basic wash.

FEES

Monthly membership fees are roughly based on the cost of two basic car washes with an additional charge for oversized vehicles. According to Steve Castelblanco, the fee at a particular wash would depend on the location's demographics. "It is determined by what the market will bear in a certain state, area, or city, though $24.99 seems to be a pretty standard amount," he says. The idea is to settle on a price point where most customers will be comfortable. "We want it to be as affordable as possible so more people will become members," Steve adds.

"Look at the gym-membership concept, for example," Bill explains. "Many gyms will offer $19.95 a month membership. Come 23 times a month - no problem. Some smaller gyms charge $40 even $80 a month. You immediately cut out a major, major demographic. You get only the die-hards who are totally committed. We want to open it up to the masses so that more people can participate. It's not a fixed number. Some washes do it at $24.99, others at $29.99, and some are at $39.99."

A two-visit-per-month (for a basic wash) average was chosen as a guide because a lot of consumers won't use their membership that often.

A couple of things happen as a result, according the brothers. One is that customers who do not visit more than twice a month are less apt to pull out because the feel they are at least getting their money's worth. If they do make it more than twice a month, then obviously they feel they have the upper hand because they are now tapping into the savings of the program.

HOW THE CAR WASH BENEFITS

From the car wash perspective, club membership covers the basic wash only. If the customer comes in and asks for only a basic wash, it is very easy for the customer service advisor (CSA) to upgrade that customer to a package wash for the difference in price. "We have recorded such add-on sales at anywhere from 65 percent to 85 percent of visits by our membership," says Steve, noting that the loyalty program software tracks and records extra purchases by individual customers.

The EFT payment method offers a huge plus to the car wash industry, the marketers say, because customers enter a wash location with the perception that the basic wash is already paid for and that the money they would have had to pay for that wash now is available for additional discretionary spending. They can now spend the money in their pockets on upgrades, c-store purchases, services, and the like.
One obvious benefit to the car wash is that it is getting paid regularly, come rain or shine. The customer's membership fee is credited to the car wash's account whether the customer visits the car wash once or twice a month, or doesn't show up at all. Further, once a club member is signed up, the car wash has him
or her locked in as a customer. The basic wash is already paid for, so why go to a competitor?

ATTRITION

Unlike most EFT loyalty programs, membership in the car wash club does not require a year-or-more commitment. The customer is in fact only committed to the month he has already paid for. The member can get out of the deal simply by canceling at least 10 days prior to the next billing cycle. The reason for this easy-in-easy-out approach, the Castelblancos say, is that they wanted to reduce all barriers to becoming club members. Given these circumstances, one would imagine a fairly high membership turnover. Not so, says Bill: "Our average member now stays on board for 14 months."

To further contain the attrition rate, Loyalty Concepts has arranged for several major companies - like Pizza Hut, Tony Roma's, movie theater chains, etc. - to make products available to dithering
car wash club members. A member contemplating cancellation might receive coupons for free pizza or free movie passes compliments of the car wash as an inducement to remain a member. "This is one of the reasons we believe our attrition rate is so good - right now, at about 4 percent," says Steve.

The marketing company is working to add even more value to membership in a car wash club. Soon customers will be able to get discounts at major retailers, including the Gap and Old Navy, simply by showing their membership cards. These benefits, Steve says, are shared with all members - not only those considering cancellation.

PROCESS

What makes this program particularly attractive is that it requires hardly any effort by the car wash. The initial membership drive is coordinated and executed by marketing company representatives employing either one of or a combination of the following methods:

1. on-site presentation of the program to customers, answering questions, and actual signing up of members;

2. door-to-door effort in which members are signed up at their residences (where individuals don't sign up, a menu or a special discount on one service or another is left);

3. online presence, which allows prospective members to access the company's web site (www.gotcarwash.com) to find participating car wash locations in their market areas.The car wash always has the option to employ its own cashiers and CSAs to promote and sell club memberships.
The marketing company takes care of all collections, accounting, customer service, courtesy calls, mailers, etc., acting as a middleman to facilitate the customer's car wash experience at that location and make it a more pleasant and convenient one.

The computer system that runs the club membership is separate from any existing POS system the car wash may currently have, though talks are ongoing with regard to integrating the system with "car wash software" already widely in use. The car wash has the option of acquiring the computer or paying a small usage fee. In either case, full training, support manuals, and technical support are provided.

NEW STANDARD

While Steve and Bill are phasing in their program conservatively, ensuring that they can provide each operator with the same level of service, they believe that the system they have pioneered will become an industry standard. They foresee a day when car washes - like today's health clubs - will be filled with members, not just customers.

AUTO LAUNDRY NEWS is published by EW Williams Publications Company
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