The Elbaum Equation
Understand Your Customers When Setting Monthly Pass Prices
Lenny Elbaum is a gifted and creative marketer. But unlike most marketing whizzes, he is also an astute numbers guy, which is why his calculations about new marketing initiatives are almost always spot on. Lenny's well-thought out "monthly pass equation" provides a good example of his analytical ability.
First a little background… Always a marketing leader, Lenny became one of the pioneers in selling monthly passes using the SiteWatch® Automatic Recharge Module® (ARM®) back in 2010. Monthly pass customers now account for a large share of the volume at Lenny's four southern California sites, which include a full service, two flex serves, and a double-tunnel express exterior operation. Extremely happy with his monthly pass plans, Lenny calls them "the biggest thing to increase loyalty" in the years he's been in the car wash industry.
Pricing monthly passes is always a concern when a car wash starts selling them. In Lenny's case, the marketer in him was excited about the promise monthly passes offered to lock in customer loyalty. However, the numbers guy part of him kept whispering, "be careful of setting your prices too low, because customers can abuse the plan and hurt you." It was then that Lenny developed The Elbaum Equation.
Monthly pass customers are reasonable, Lenny decided after evaluating their behavior. Their main interest is in keeping their cars clean, not in seeing how often they can visit your car wash. With this in mind, Lenny set his monthly passes at two to three times the price of a wash. (His rate is higher for full service passes than it is for exterior plans.)
"In most cases, I believe that two to three times the wash price is the best price for a monthly pass," says Lenny. "Some car wash operators think they'll get killed doing this, so they'll go four times the price of a wash, but in my view this holds down traffic."
The increased traffic from monthly passes has many hidden benefits for a car wash, according to Lenny. This is why he believes it's so important for operators to strike a balance between prices that are low enough to maximize traffic, while still being high enough to generate solid profits.
"An active site always attracts new business because activity breeds more activity," he says. "The amount of additional traffic that I am generating can only be positive in helping to attract new customers."
Selling monthly passes also offers added benefits to a flex serve, says Lenny, because some exterior pass customers will trade up to a full service plan. "We see unlimited exterior customers upgrading to full service washes at our full serves that also offer exterior. We allow them to do this by offering them a credit off the base cost of the exterior towards any full service wash."
Lenny charges $19.99 for a monthly exterior pass and $49.00 for a full service. According to a study done by DRB Systems, Inc. Numbers Guy, Harold Guthrie, exterior pass customers visit Lenny's washes 2.6 times a month and full service members drop by 2.73 times. All of which is fine by Lenny, who estimates that monthly passes have contributed 10% extra to his dollar volume.
"Monthly passes are a winner for everyone," says Lenny. "I like them because they give me the opportunity to create a larger base of regular customers. As far as my customers themselves are concerned, they like the fact that they can budget for car washing and have the freedom to come in whenever they want. I've had successful car washes for a long time, and I can say without question that monthly passes have changed my business for the better."
Lenny Elbaum Car Wash Career Sketch
- Entered car wash industry in 1980 with brother Nathan after a successful career in the grocery and real estate businesses.
- His first car wash in Manhattan Beach quickly exceeded his expectations, so he began opening additional sites.
- Between 1980 and 2005, he built and sold 12 car washes, but continued to own his Manhattan Beach location and a site in Canoga Park.
- In 2006, he opened his flagship site in Simi Valley, a double tunnel exterior wash, called California Speedwash, where he installed the SiteWatch Xpress Pay Terminal (XPT).
- Says that the XPT has been very efficient and reliable and notes that "most customers like them and the few that initially don't, eventually get used to them and become comfortable."
- Implemented many successful marketing programs at his XPTs, such "incentive selling," with offers like a free wash with the purchase of a $25 gift card.
- An early flex serve operator, he notes that this format cannot be achieved simply by adding an exterior option to a full-service car wash. "A true flex serve gives the customer the option of experiencing what they would expect to find at an exterior wash or a full service all at the same location," he says.