June 17, 2021
Success in today’s car wash industry is often equated to how high and fast you can build your unlimited car wash plan membership. Certainly, a healthy unlimited program can form a strong foundation for a growing car wash business, but its long-term stability depends on more than the relentless pursuit of new members.
In that pursuit, operators often ignore a silent enemy that threatens to undermine their efforts: Churn. You can’t prevent every membership cancellation, but as I discussed in an International Car Wash Association Car Wash Live episode, there are many factors you can address to keep car wash unlimited plan churn as low as possible.
What to Look For
First, though, it’s important to get a sense of where your churn should be. At SUDS®, we like to keep our clients’ overall churn rate under 6-8% annually. That rate includes both voluntary terminations and involuntary drop offs caused by credit card declines and expirations. Our goal is to keep our clients’ voluntary churn rate down to about 3% annually.
If you see your churn rates edge close to these benchmarks, it’s time to look at the possible factors and how you can address them.
Factor #1: Price
Price is one of the leading factors that contributes to churn. Higher-priced plans have a higher churn rate. With this in mind, you may find that your lower-tiered members are your most valuable. For example, if your $20 members stay on the plan an average of eight months, and $40 members only stay on an average of three, it is evident that the lifetime value of lower-tiered members is actually greater — variable costs aside.
This could mean that it might be wiser to market your lower-tiered plans more heavily, or it could be a sign that your highest-level plan is priced too high. You should keep an eye on the average tenure of each unlimited wash package. If you notice that it dips down to four months or less for any given package, it could indicate that you have priced yourself out of the market and that you may want to revisit pricing.
Getting pricing right is complicated, but SUDS can help with PrecisionPricing®, an analytical modeling tool that optimizes retail and membership pricing to maximize profitability. Contact SUDS to learn more.
Factor #2: Wash Frequency
Conventional wisdom would have you believe that the less your members wash the better because they are effectively paying more per wash. But when it comes to churn and lifetime value, our analysis shows that the more they wash, the more likely they are to stay on your unlimited wash plan.
This is particularly important during their first 30 days of membership. In analyzing over 100 sites across the United States, we have found that if new members wash their cars an average of 1.7 times or less in the first 30 days, they are 75% less likely to stay on for a second month. Conversely, new members who wash an average of three times or more in that first month are 76% more likely to recharge their plan at least once. If they wash four or more times in the month, they are 61% more likely to still be a member by month six.
Based on our research, the “sweet spot” for wash frequency is two to four times a month. The way to facilitate that is to perform “maintenance marketing.” You should be collecting contact information (phone number and email address) from every member. To ensure you are staying top of mind, send periodic texts and emails.
Factor #3: Customer Experience
I can’t stress enough the importance of the customer experience when it comes to cultivating member loyalty. One bad experience at your car wash can derail the effort you put into getting that customer as a member. That’s why customer experience is one of the first things we examine when one of our clients struggles with high churn rates.
A lot of this has to do with the quality of your training and the stability of your site management. Make sure employees understand that the ultimate goal is customer loyalty. To that end, if you’re incentivizing employees for memberships, you may want to make the incentive effective on the first recharge or after x number of months rather than upon signup.
Think about ways you can make your members feel special. It can be as simple as giving them free towels that non-members must pay for or acknowledging them on their membership anniversary with an added perk or gift.
Factor #4: Seasonality
We all know that weather impacts the car wash business, so it’s no surprise that churn will go up during certain seasons in your region.
However, you can hedge against that by considering seasonality when running promos on your unlimited wash plans. You might be inclined to run them during slower seasons to drum up business, but knowing how critical wash frequency is, you should consider offering them when your demand is higher and members will just naturally wash more. Hopefully, by the time the slower season approaches, the washing habit will be deeply entrenched and you will have created some long-term members.
Factor #5: Involuntary Churn
Involuntary churn refers to credit card declines and expirations. It may seem like this factor is out of your control, but there are ways to combat it:
- Automatic retry period. Your point-of-sale system should provide an option to automatically retry members’ credit cards for a period of time after they have been declined. Setting this option to retry cards for 14 days or longer can significantly reduce your churn.
- Customer communications. Utilize pay station screens, text messaging and email marketing to notify customers when their credit cards are about to expire and direct them to where they can update them. With a system such as SUDS SendIt®, you can have text and email messages automatically sent when a members’ card is approaching its expiration date.
- Automatic credit card updater. Some credit card processors will offer a service in which they will automatically check for and apply credit card changes monthly.
(Don’t) Feel the Churn
Churn happens, but you have more control over how much it happens at your wash than you may think. Be proactive and watch your churn rates. If you find they are increasing, you might find your solution within one of the factors above. Don’t let churn silently kill all the progress you’ve made with your unlimited wash plan.