Success Stories
Speedy Car Wash, Panama City, FL
Full-service carwash
Frequency Discounts Help Operator Increase Car Count By 15.5% After Raising Prices
Challenge: How to raise prices without alienating regular customers and losing tunnel traffic.
Solution: At the same time that prices are raised, use the Loyalty Promotions feature in your DRB Systems computer to implement a plan that ties the price of a wash to the frequency of the customer's visits.
Every carwash owner is familiar with the experience . . . You raise prices to keep up with escalating costs, and the next thing you know, you’ve alienated some of your regular customers.
Speedy Car Wash was no exception to this rule during the first 40 years of its history. “Whenever we raised prices, we had a negative reaction from customers and a temporary drop in traffic,” said Jimmy Branch, whose father started the Panama City, FL wash. But when Branch recently raised prices by $2 for an exterior and $1 for a full-service, something very different happened: Instead of declining after the price hike, Speedy’s car count increased by 15.5%, and its dollar volume jumped 21.7% over year-ago levels. (These figures are for the 4 months following the increase.) Weather conditions were very similar in Panama City both years.
“This was the first time we ever gained volume after raising prices,” said Branch. The Florida operator achieved this increase by introducing a frequency discount plan at the same time that he raised prices.
Using his computer to track every vehicle by plate number, Branch offers customers a discount based on the date of their last visit. For example, customers who return to Speedy within 2 weeks receive a $3 discount, while those who return less often than every 6 weeks get no discount. The frequency discounts, which are applied to the customer’s purchase automatically by the DRB Systems computer, have “protected” Branch’s regular customers from the effects of his price increase.
Here’s how Branch’s frequency discount plan works:
| Time Since Last Visit | Discount | Exterior Price | Full-Service Price |
|---|---|---|---|
| 2 weeks or less | $3 off | $3.95 | $5.95 |
| 2-4 weeks | $2 off | $4.95 Price | $6.95 |
| 4-6 weeks | $1 off | $5.95 Price | $7.95 |
| Over 6 weeks | 0 | $6.95 | $8.95 |
* Note: Before Branch raised prices, an exterior wash was $4.95 and a full-service $7.95
Given the chance to earn bigger discounts by visiting more often, Branch’s customers are increasing the frequency of their visits. The percentage of customers returning every 2 weeks or more jumped from 0.7% to 13% in the 4 months following the plan’s introduction. During the same period, the number of “2-4 week customers” rose from 6% to 17%, and the number of "4-6 week customers" went from 4% to 8%.
In total, the percentage of customers returning at least once every 6 weeks increased 3.5 times to 38%. This still leaves 62% of Branch’s customers in the “infrequent” category, which means they’re paying the new, higher prices. As a result, Branch is able to charge more to almost two-out-of-three customers, without alienating the one-third who are more price-sensitive.
“In addition to encouraging regular customers to visit more often, the discount plan has made our price structure fairer,” said Branch. “We feel that people who come in less often should pay more, because their vehicles require more work. At the same time, these customers are also less concerned about the price of a carwash than our frequent customers are, so what we charge doesn’t matter as much to them.”
