Who are the "Trade Up" People and How can your Carwash Reach Them?

In a survey conducted by the Boston Consulting Group, 67% of middle class consumers said they routinely splurge on small inexpensive indulgences as a way of rewarding themselves for hard work. Brands ranging from Starbucks Coffee and Panera Bread to Nike and Bath & Body Works have prospered in recent years by meeting this ever-increasing appetite for "everyday extravagances." Carwashes can take a cue from these marketers, and increase dollars per vehicle, by promoting deluxe packages to customers who are looking for luxury on a budget.

Affordable luxury

It might sound like a contradiction in terms, but to highly regarded business consultants Michael J. Silverstein and Neil Fiske affordable luxury describes an emerging and very powerful marketing trend that could have a direct bearing on the carwash industry. In their book, Trading Up: The New American Luxury, Silverstein and Fiske analyze the growing popularity of mass market luxuries like Starbucks and Godiva Chocolate.

According to the authors, a growing number of consumers are now basing some - but not all -- of their buying decisions on emotional factors by selecting products and services that enhance their sense of well-being and self-worth, even though less costly alternatives are readily available. For example, a young office worker might pack his own lunch to save money, but stop at Starbucks instead of Dunkin' Donuts for his morning coffee because it makes him feel more professional.

Meanwhile, the woman who works next to him might never even consider spending 25% to 40% over the Dunkin' price for a cup of coffee at Starbucks. She'll also buy all her clothing off the discount rack to save money. But she'll gladly pay $9 for an 11 ounce bottle of Bath & Body Works lotion, instead of $3.29 for the same size bottle of Vaseline Intensive Care. The 276% difference in price doesn't faze her, because the Bath & Body Works product makes her feel special.

The Boston Consulting Group survey cited earlier found that 87% of "middle market consumers" (those making $50,000 or more) were willing to economize in some areas in order to have more money to spend on selected luxuries. In our complex and often impersonal society, more consumers are defining their individuality by forming attachments to affordable extravagances that (at least in their minds) set them apart from the crowd. Since cars and car care have always evoked strong emotions in Americans, carwash operators would do well to address this emerging mass luxury consumer in their marketing plans.

A Profit Builder

Carwash operators looking for inspiration can find plenty of examples of companies that have succeeded by marketing to the mass luxury consumer. Consider the following:

• Starbucks vs. Dunkin' Donuts -- Although it charges considerably more for a cup of coffee, Starbucks consistently outgrows its rival. In 2004, Starbucks' sales increased at a rate that was 74% greater than Dunkin's.
• Gourmet Sodas vs. Pepsi and Coke -- Carbonated soft drink sales were down 3.6% for the first nine months of 2005, according to Beverage Digest. The only pop in the industry has been provided by pricier gourmet sodas like Fizzy Lizzy. These specialty sodas enjoyed a 39.1% sales increase between 2002 and 2004.
• Panera Bread vs. McDonald's -- "Fast Casual" restaurants, which offer premium food at a slightly higher price (affordable luxury), are the fastest growing players in their industry. During the first half of 2003, Panera Bread, which charges twice as much for a sandwich as its competitors, grew at a 30% rate. The industry average was under 5%. In November 2005, Panera reported a same store sales increase of 8.2% over year ago levels, more than double the increase reported by McDonald's.
• Costco vs. Sam's Club -- Costco outsells Sam's Club ($47.5 billion to $34.5 billion) even though it has fewer stores (449 vs. 538). A key factor behind Costco's success has been its decision to market upscale luxury items through its discount club format. For example, in 2001, it began selling upscale cashmere sweaters for $49. This business grew so much that within three years the company accounted for 15% of the world's supply of cashmere. Costco is also the number one seller of Don Perigon champagne in the US. This success demonstrates the power of the affordable luxury market.

Reaching The Affordable Luxury Customer At The Carwash

The first step toward reaching affordable luxury carwash customers is to recognize that they exist. In the past, almost everyone who entered a carwash driving luxury vehicle came from the uppermost income brackets. This is no longer the case. According to Silverstein and Fiske's theory, customers who pull up to your carwash in a Mercedes coup or Lexus SUV today aren't necessarily affluent. They may be middle income consumers who "traded up" to their high-priced wheels by cutting back in other spending areas, perhaps by giving up vacation travel, or postponing a home remodeling project. Click To Learn About The SiteWatch Loyalty Module.

These people have made sacrifices to drive the car of their dreams, say Silverstein and Fiske, because it does something for them emotionally. Caring for their prized vehicles is important to them, but they're also interested in stretching their budgets. Offering these "trade up customers" club plans and loyalty deals that allow them to save money on your deluxe wash package is likely to capture their attention -- and keep them coming back to your carwash.

From our perspective, it seems that the affordable luxury customer might be more responsive to slightly different promotions than the other customers who regularly purchase your premium options. For example, the surgeon, high-powered attorney or CEO who visits your carwash will appreciate the convenience of prepaid cards and annual passes, but the customer who has been brown bagging lunch to drive his Lexus might not always have the cash flow for these promotions. You'll probably have more luck reaching this customer with by offering a discount on a deluxe package if he returns within two weeks. Or, if you market prepaid cards to him, you might want to consider having a lower entry barrier, by making your minimum three prepaid washes instead of five.

Click To Learn How One Operator Used Targeted Mailings To Encourage Customers To Trade Up.

In our view, it seems that another idea to try when marketing to the affordable luxury customer would be to offer a new wash option that is better than your mid-level package, but slightly below your best package. For example, if you offer packages for $10, $12 and $16, you might consider adding a $14 package. Most successful affordable luxury marketers price their goods and services near, but not at the top, of the market. Here are two examples:

• Bath & Body Works lotion may be much more than Vaseline, but it still cost less than half the price of super premium lotions like Kiehl's Creme de Corps.
• With an average price of $200 to $400, Coach Bags are far more expensive than the average department store handbag, but they're still a bargain next to the Gucci bags they emulate. This formula has led to a torrid rate of growth at Coach, earning it the No. 17 spot on Business Week's list of top corporate performers. Interestingly, Coach's sales at its discount outlet stores grew 36% in the third quarter of 2005, compared to 14% at its full price stores, demonstrating just how important price is in the affordable luxury market

Affordable Luxury Customers Value The Experience

Emotional factors appear to play an important role in the affordable luxury customer's buying decisions. So it stands to reason that this customer will place a great value on the "experience" offered by a store, restaurant or carwash. Starbucks' success isn't based solely on coffee; it's also used a combination of music, decor and personalized service to provide customers with a coffee shop experience. Sandwiches alone don't make Panera bread stand out from its fast food competitors it's also the comfortable chairs, large tables and relaxed lighting that welcome customers.

Affordable luxury customers are not only more concerned than the average consumer about the value of their shopping experience, they tend to be more astute judges of how well a business delivers this level of quality. Having invested a great deal of emotional energy in their buying decisions, these shoppers make it a point to be well informed. A common trait shared by successful affordable luxury marketers is that they really do deliver a quality product or service.

Look at from this perspective; affordable luxury customers represent something of a paradox. They've made the deliberate decision to spend more than they have to on a product or service, yet at the same time, they're very conscious of value. They want to save money, but not at the expense of quality. This is why the affordable luxury customer who values his or her vehicle is probably less likely than average to go to the $2 carwash.

You may have to work harder to win over these customers, but according to Silverstein and Fiske it's worth the effort, since they tend to be more loyal than the average consumer. The affordable luxury customer should also be more receptive than average to promotions that give him or her special recognition. For example, you might want to give a free detail job to these customers on the first anniversary of their joining your VIP club and a free dinner at a local four star restaurant on their third anniversary, provided they have purchased over a minimum number of washes.

Since affordable luxury customers are very focused on keeping their cars in top condition, they tend to be receptive to information about new services and specials. Author and consultant Jacques Werth, president of High Probability Selling, has found that a successful "upselling program" will ultimately boost sales at the average business by almost one third. This, together with the high level of interest that affordable luxury customers have in your services, will make talking to these customers about upgrade packages or a club plans time well spent.

A hand held presell terminal that gives your salespeople instant access to updated customer histories will increase their chances for success with this customer group by helping them make more informed selling suggestions. Click To Learn About The SiteWatch Portable Touchscreen Terminal.

Of course, a POS system can't tell you whether or not a customer is part of the affordable luxury market. However, an alert greeter or salesperson can be trained to look for signs that indicate a customer is likely to belong to this group. For example, a customer driving a lower end model of a luxury vehicle might well be an affordable luxury customer. The customer driving an older model of a luxury vehicle is also a good candidate, so too is the luxury vehicle owner who always uses a coupon.

Once customers in the affordable luxury group have been identified, you can lock in their loyalty with promotions that make them feel special while stretching their budgets. Do this, and you are likely to earn their repeat business for a long time to come. Cars play an important role in the way these customers feel about themselves -- recognizing this will make your carwash part of this special relationship.

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