It is common knowledge that it costs more to acquire a new customer than it does to keep an existing one. Business owners are always looking for ways to turn customers into loyal customers.

Loyalty programs are popular with many businesses, particularly car care facilities. Some offer gift certificates and punch cards. Others have point systems that are similar to airline frequent flyer programs. Some offer coupon books or bounce back coupons where a customer gets a discount for a second vehicle or for coming back to the facility in a specified amount of time. All of these programs are geared to encourage customers to keep returning to a particular facility or company.

One company that has a thriving loyalty program is Waterway Gas & Wash which has 15 centers with full service car washes, gas stations and convenience stores. The company has a niche business in higher end neighborhoods in St. Louis, Kansas City and Denver.

"We target customers who fit our niche strategy," said Robert Dubinsky, President of Waterway. "These are customers with upper incomes who are established with families, homes and professional careers who have nicer, newer cars."

The Clean Car Club is Waterway's program which leverages the company's strength of service quality and convenience. "It's a high end program for high end customers," Dubinsky said. "It's structured to be a very good deal for our most frequent customers and hopefully very positive and profitable for us as a company."

The Clean Car Club program is an annual car wash pass which costs $250 for one specific vehicle, but is sometimes discounted during special promotions. As a member of the Clean Car Club, members receive a free car wash (basic tunnel wash with interior vacuum) every time they fill up with gasoline. There is no minimum fill up required.

"We tell the customers whatever tops off your tank, even if it is just a squirt, meets the requirement of the Club," Dubinsky said. "However, the average customer probably buys ten gallons of gasoline."

In addition to the free car wash, Clean Car Club members receive a five cent discount on every gallon of gasoline purchased. There also is no surcharge for having an SUV, truck or van. Clean Car Club members also receive a discount off of other carwashes and packages.

Memberships are sold inside the store by the cashier. The cashiers are commissioned salespeople and will earn between 2 ½ to 5 percent of the sales price as a commission. "A fairly successful cashier will earn two, three, four hundred bucks a month selling membership," said Dubinsky.

Waterway uses an application for membership that customers must complete. Customers receive a temporary paper card at the time of purchase. The completed application is sent to the main office where a coordinator enters the information into a database and sends out a hard card to the customer. Customers also receive a window decal to place in the front driver's side window so that when the customer pulls onto the lot, the attendants recognize the member.

The company does have special promotions during the year to increase membership in the Clear Car Club. In the fall for six weeks, Waterway drops the price of the membership by $20 or $30. "It is a good time for renewals and for new members," Dubinsky said. "Over half of our memberships are sold during that six week period."

Renewals are very important to the success of the Clean Car Club. "We work hard, no matter when the memberships expire, to persuade customers to renew and join again for another year," Dubinsky said. Waterway's renewal rate is between 70-75%, but Dubinsky admits they would like to do better.

If a member opts not to renew, the company has the general manager for the store the customer visits most often call the person at home to find out why they did not renew and to inquire if they would consider joining again.

The Clean Car Club is working for Waterway. The company does about $5 million in membership sales per year with about 20,000 members. "It's a successful program because it's great deal for customers," said Dubinsky. "That's why we have so many members."

It's also a great deal for Waterway. With the program in place, the company washes more vehicles than it normally would. Also with the gasoline tie-in, the company sells more gas.

The company also sees the Clean Car Club as a competitive advantage. "When someone has bought into the program and their car washes are free, they typically are not going to go somewhere else," noted Dubinsky. "We know we have them for at least a year and a chance to really make them a satisfied, happy customer."

Another less obvious benefit of the program is that the customers actually help improve operations because they provide good feedback when they are in the stores so often. Members also get survey by mail every year or two to get their opinions on the service they receive at Waterway. The company gets back between 30 and 40 percent of the surveys.

FOCUS

Is a Loyalty Program for You?

Loyalty programs can be an effective way to keep customers returning to your location. According to Robert Dubinsky of Waterway Gas & Wash, a lot of time and effort goes into a successful loyalty program. Before starting a program, there are questions that you need to ask yourself:

1. Are you ready to invest the effort to get it off the ground?

2. What's the pay off for you and your operation?

3. Are you willing to put the work in at the front end?

4. Who are your customers?

5. What differentiates your car wash/quick lube?

6. Which type of program makes sense for you?

7. What are your technological limitations?

8. Are you willing to put a database or system together yourself or are you going to go out and buy it?

The company does have some concerns with the program. They question if they are pricing the membership too low and generating frequency, but not gaining financially. They wonder if they are pricing the program too high and not making it a good enough deal for the customer and may lose members.

Some might expect that they are concerned about abuse of the program. Dubinsky said the average member comes in 30 to 40 times per year, but there are some people that come in more often than that. There is also the concern that a customer uses the membership for more than one vehicle. "We have concerns about abuse, but we really don't worry about it too much," he noted.

Loyalty programs can be a valid way to increase repeat business and create customer loyalty, but the program alone is not enough. "The way to get loyalty and frequency is to have a really good operation," Dubinsky said. "That is the most important thing to keeping customers satisfied."