Finishing Line

Strategy - Dealing With a Too-Close Competitor

By Robert Roman

06/01/20

From time to time, I get inquires from car wash operators looking for ways to defend their turf from someone building a new car wash in their backyard.

When competing companies are located close together it’s referred to as clustering. This practice is commonplace with support services such as convenience stores, gas stations, fast food, banks, pharmacies, etc.

Clustering occurs because businesses want to locate themselves near the center of their potential customer population to attract the greatest number of customers.

Consider the location strategy employed by companies that operate large networks of stores such as Wawa. Wawa Inc. is a very successful chain of 842 convenience stores and gas stations operating in Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Washington, D.C., and Florida.

Wawa entered the Pinellas County, FL market some years back and developed a network of six large stores. Most of Wawa’s stores are located no closer than two to three miles of each other, but there are two stores separated by only one mile.

At that time, Pinellas County was already a very mature market and demand limited because it is a peninsula surrounded by Tampa Bay and the Gulf of Mexico.

Nevertheless, Thorntons followed in Wawa’s footsteps and developed its own network of five stores in Pinellas County. Thorntons LLC is a gas and convenience store chain headquartered in Louisville, KY. Thorntons operates 191 locations in Florida, Illinois, Indiana, Kentucky, Ohio, and Tennessee.

Thorntons’ sites are located slightly further apart from each other than Wawa’s but they are located fairly close to Wawa stores. In some cases, their store is across the street.

Arguably, the fact these companies continue the practice of clustering provides some evidence that the effect of being located close to similar stores is on average positive for a retailer.

COUNTER MEASURES

So, what can a car wash operator do if someone has decided to build a new wash a mile down the road or even across the street. In this case, I suggest the operator take a step back and objectively evaluate the business including asking customers what they want. For example, customer satisfaction surveys are designed to ask your customers for their view on how your company is performing.

Surveys can help operators gain a better understanding of customers’ requirements and concerns so they can improve products and standards of service in line with customers’ needs. By monitoring customer satisfaction and responding to feedback, operators can improve customer loyalty and protect their revenue and profitability.

Researchers have found that responding directly to customers needs and wants can lift sales revenue by 20 percent or more.

Identifying additional revenue opportunities is another way to help fend off the impact of someone building to close. According to the folks who make self-service equipment, operators can improve services for customers while generating additional income by exploiting vending opportunities. Most popular are handheld air dryer, rug beater/carpet cleaner, water/ice vending, drink and snacks vending, and pet wash.

Having an effective loyalty rewards program is another way to help fend off a new competitor. A loyalty program is a marketing strategy designed to encourage customers to continue to shop at or use the services of businesses associated with each program.

Most common is a plastic card similar to a credit card that identifies the cardholder as a participant. By presenting such a card, purchasers typically receive either a discount on the current purchase, or an allotment of points that they can use for future purchases.

An alternative to a loyalty program is a subscription business model in which customers pay a recurring price at regular intervals for access to a product or service (e.g., unlimited wash option).

Reaching out to generate new customers is another way to fend off a new wash. For example, research shows 80 percent of people between 18 and 44 years old own a mobile device (i.e., smartphone) and between 40 and 60 percent want companies to deliver deals to these devices. Consequently, if a car wash operator doesn’t have a way to interact with customers on their smartphones, how could they do that?

And finally, car wash operators should consult with advisors who have the expertise to design an effective marketing strategy with practical and cost-effective tactics.

 

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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