Your loyalty programs should always be a profit center instead of a cost center. Read about how unlimited wash clubs affect you.
No doubt about it, unlimited car wash programs are the 'buzz' in the industry, and they definitely can have a place in the marketing plans of a car wash operator. Unlimited plans can drive lots and lots of traffic, and it looks good to an operator to see a long line of cars queuing up to get a wash.
Trouble is, when a customer is washing relentlessly for one, low monthly fee, your profit margins can be severely diminished - and you'll be beating up your equipment as more and more washes are given away for what becomes a low, low average price-per-wash.
Once your unlimited wash customers get hold of a program, it can be very difficult to take it away. Make sure you have an exit strategy.
"Value created must exceed cost of value delivered."
This isn’t new information, the Harvard Business Review was addressing loyalty program issues over two decades ago: “Most companies launch rewards programs without assessing their own needs and the economics of cause and effect. They haven’t thought through the links between the value delivered to customers and the value created for the company. A rewards program should not give something for nothing: The profits will be illusory, but the costs will be real."
As every wash owner knows, the costs for a wash are fixed, so the more often "Chronic Washers" show up, the more margins continue to decline.
Without sophisticated loyalty tracking programs, like a good mobile app, the ability to detect which of your customers are the most valuable is almost impossible. The problem with unlimited programs is, the same reward is given to every participating customer, and the more they use the benefit, the lower profits become.
“A company must give its best value to its best customers…”
According to the Harvard Business Journal, “Realizing the benefits of loyalty requires an admission that not all customers are equal. In order to maximize loyalty and profitability, a company must give its best value to its best customers. That is, customers who generate superior profits for a company should enjoy the benefits of that value creation.”
Again, this is not the case with unlimited wash programs. “Chronic Washers” become the heavy users, washing, rewashing and washing again, driving down the profit on their monthly investment and over-contributing wear and tear on equipment – all at super-low profit margins for the wash owner.
Your loyalty programs should always be a profit center instead of a cost center, and the consumer rewards must be linked to desired behaviors – like making you the preferred car wash, but not for compulsive chronic washers who create long lines at your wash and prematurely wear down your capital investment.
Unlimited wash programs can cost a great deal of money and may not generate true loyalty. They do indeed change customer behavior but often in ways that are undesirable in the long run.
So when it comes to Unlimited Wash Programs – always make sure to have an exit plan!!
References: Great background if you are interested in this topic.
Coping with the big switch: How paid loyalty programs can help bring consumers back to your brand
Do Rewards Really Create Loyalty?
Next time: Who pays the most for an airline ticket – the frequent flier.