September 23, 2024

Success in today’s car wash industry is often equated to how many members you can acquire and how fast. Certainly, a steady of stream of new members is essential, but your plan’s long-term stability depends on more than the relentless pursuit of new members.

In that pursuit, operators often struggle with a silent enemy that threatens to undermine their efforts: Churn. While you will never get your churn rate to zero, understanding the root cause(s) contributing to your churn and how to address it can help keep it as low as possible.

What to Look For

So if zero is an unrealistic goal, what should you aim for? Ideally, you want to keep your overall churn rate under 5% annually. That rate includes both voluntary terminations and involuntary drop-offs caused by credit card declines and expirations. Your voluntary churn rate should be about 3% annually. 

Several factors contribute to churn. Knowing and paying attention to these factors can help you proactively keep churn rates low. 

Factor #1: Price

Price is one of the leading causes of churn. Higher-priced plans have a higher churn rate. You should also keep an eye on the average tenure of each membership 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.

Another element to consider is your promotional pricing. If you’re offering a free or 99-cent first month and then recharging for $40, the sticker shock often causes an increase in churn. Use an analytical tool such as a cohort analysis to understand the impacts of promotions on churn so you can make educated decisions on your promotional 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

Factor #2: Customer Experience

We 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.

Of course, this starts with stellar customer service for all customers. Beyond that, think about ways you can make your members feel special. It can be as simple as having employees smile and wave when they visit. You might also consider giving free towels exclusively to members or acknowledging them on their membership anniversary with an added perk or gift.

More than anything, though, it’s important to understand that customers join your plan for convenience, so it’s imperative to make using their plan as fast and seamless as possible. Consider the following ideas to enhance your members' experience at the wash:

• Adding a members-only lane to speed entry to the tunnel.
• Utilize AI-LPR for quick and accurate vehicle identification.
• Install NoPileups™ to increase throughput.

Factor #3: Involuntary Churn

Involuntary churn refers to credit card declines and expirations. It may seem like this factor is out of your control, but your point-of-sale should provide functionality to help you combat involuntary churn:

• 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. Patheon^® users can have these messages automatically sent to members through the Customer Notifications feature.
• 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.

Factor #4: 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. To get members up to that frequency, consider implementing an onboarding campaign in which you send messages to new members reinforcing their decision to join and reminding them to utilize their plan.

Our marketing automation platform, Catalyst, makes this easy by allowing you to set up an email drip campaign that automatically sends these messages at a specific cadence.

Factor #5 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 launching offers when your demand is higher. It’s more likely that new members will wash frequently during this time and hopefully develop a regular washing habit that they’ll want to sustain past the peak season.

(Don’t) Feel the Churn

Churn happens, but you have more control over how much it happens at your wash than you may think. If you experience a higher-than-average or increasing churn, 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 membership growth.