Quick, what do Starbucks, AMC Theaters and Volvo all have in common? They have all launched subscription services recently.
Like you, these brands are in traditional industries yet they have adopted the business model used by the software industry. In a subscription business model, instead of paying as a customer uses the service, customers pay a regular fee for regular access.
Could it work in the car wash industry?
It already is.
Lock Out Competitors
Mister Car Wash is one of the leading car wash organizations in the United States, with more than 250 locations nationwide, and they aggressively promote their Unlimited Wash Club which offers customers a subscription for unlimited car washes.
Why would Mister Car Wash erode their margins by giving away free car washes? It turns out there are several hidden benefits to moving your car wash to an unlimited subscription model.
When a customer subscribes, they become loyal to your wash. Knowing they have already paid for a wash at your location means they are less likely to get a wash from a competitor.
Steady Cash Flow
The weather heavily influences the car wash business. On a sunny winter day in the north east, it’s not uncommon to see a line-up of cars waiting to be washed while the same location can be empty on a rainy afternoon in April. This means cash flow for most car washes can be sporadic and heavily weather dependent. With a subscription, customers pay rain or shine and you get the peace of mind to know your cash flow is predictable.
The Trojan Horse Effect
Once people subscribe, it makes them much more likely to buy additional things from you. We call this the “Trojan Horse Effect” because one of the main benefits of winning a subscriber is hidden. For example, Amazon Prime subscribers spend about three times what a non Prime customer spends with Amazon every year. The act of subscribing means you are entering into a long term relationship with your customer and statistically speaking, she will become much more likely to buy your other high margin offering like air fresheners, wiper blades, oil changes etc.
Lifetime Value
Customers who subscribe tend to have a much higher life time value than those who purchase when they need a service. That’s obviously a good thing on its surface but what’s more, when you know the life time value of a subscription is hundreds of thousands of dollars, you can start experimenting with different sales approaches. One wash I spoke with recently has a dedicated sales person at their wash whose primary job is selling the unlimited wash subscription. The wash is happy to invest in the salary knowing that each customer they win will be worth thousands over the life of the subscription.
Valuation
Your car wash will be worth much more to an acquirer if you have the steady, recurring revenue that comes from a subscription. Recurring revenue makes virtually any business more valuable because it “de-risks” the acquisition for the buyer.
John Warrillow spoke at The Car Wash Show 2018 on how you can adopt a subscription model in your car wash.
