Contributing Members:

Team A:

· Oscar Guillen

· Tori Hyman

· Antonio Andre

· Brenden Kim

· Heba Elwahsh

· Nicole Motyka

This business Innovation Report shall discuss how the Service Business: Car Wash, can be innovated and improved. The report will first explain what the Car Wash business is, what are its main functions and how it operates. The report will discuss current issues and problems with the business model that should be addressed, innovating on these issues can lead to a better and more efficient business model. The report will detail what the innovations will be, how it will affect the business model, the positives and negatives of the innovations, and how the business will profit from the innovations.

Executive Summary (Description of Business):

A Car Wash is a Full-Service Operation, offering clients a wide range of services that the customer is able to choose from depending on their budget. There are typically three types of Car Wash Models. The first is an employee wash, this means that Car Wash Employees Soap Scrub, Wash and Dry a client's car by hand with wax. The second type is machine wash, the client's car is fastened by the wheels on a moving platform where it moves by itself across the different machines that wash, scrub, and dry the car. The final model is a self hand car wash, in this model the client is responsible for the car wash, with the company only providing the essential tools that are required for the car wash.

Current issues & problems in the Car Wash Service Industry:

· Labor shortage

· High usage of water

· Inconsistent quality

· Outdated payment systems

List of improvements to enhance the Car Wash Service Industry:

· Self service kiosks

· Automated payments system and processors

· High tech equipment (License plate reader, Automated conveyor system, Water recycling system, and Advanced (senors, brushes, dryers)

How the improvements would benefit the Car Wash Service Industry:

The improvements listed above would benefit the Car Wash service industry because it would enhance the current system, increase overall efficiency, provide consistent quality, convenience for customers, reduce costs for customers while being environmentally friendly and conscious.

Financial Analysis of improvements to make the Car Wash Service Industry more efficient:

Based upon research self-serve car washes can profit around $40,000 yearly. However, more extensive and efficient tunnel car washes can potentially profit from $500,000 to $700,000 yearly. With our improvements we are trying to make towards our car wash service industry, it is planned to gain more profits for our company and to make it more efficient towards consumers. In a financial analysis out of the four p’s in the marketing mix, price is the most important factor. For our product the car wash, since we are offering three different styles of washes. They will all be offered at different rates.

· The first wash – a car wash employees soap scrub

· Cost- $75

· This wash is the most expensive since it is a car wash that is the highest quality to get rid of all the dirt and grime. This also is a wash where the employees wax your vehicle.

· The second wash – a machine wash

· Cost- $20

· This wash is the second most expensive wash since it is your car going through a tunnel wash and it is one of the quickest washes out of all three.

· The third wash – a self hand car wash

· Cost- $10

· This wash is when the customer washes their car on their own only using our equipment and products.

In our to please our consumers we will offer a loyalty program to receive more customers and to show our current customers we valve you them. The loyalty program will have a monthly subscription that will be a total of $60 a month. The monthly subscription will offer getting a tunnel wash (second wash) every week and having the option to get a third wash daily. Their will also be other offers such as if you purchase three of the first wash you will receive a second wash for free. This process will keep customers loyal to our car wash and always coming back.

Since our company will have self service kiosks it will cut down the number of employees that will need to be hired which also cuts down the costs. In addition, having a third wash where customers can wash their cars on their own will help limit the amount of employees needed.

Contributing Members:

Team A:

· Oscar Guillen

· Tori Hyman

· Antonio Andre

· Brenden Kim

· Heba Elwahsh

· Nicole Motyka

1. Who is the “customer” you are focusing on? Describe the average customer using relevant characteristics.

The customer we are focusing on is the average car owner who utilizes car wash services and values a convenient and efficient quality car wash experience. Characteristics relevant to our average customer who will utilize our car wash service is someone who is tech savvy, has disposable income, has a busy schedule, and is environmentally friendly.

2. What is the average “lifetime” of a customer in this industry? Explain your response.

The average lifetime of a customer in the car wash service industry can vary depending on a few critical factors such as the lifespan of their car and the amount of frequent visits to the car wash. Typically, a customer may wash their car 1 – 2 times a month making 12 – 24 total visits a year and the life span of a car can fluctuate anywhere from 5 – 10 years. Assuming 5 – 10 years lifespan of a car we can guess the average lifetime span of a potential customer in the car wash service industry would be estimated at around 60 – 240 visits.

3. Do the customer’s spending patterns change over a lifetime? Why or why not?

In the car wash industry, customer spending patterns do not change much over a lifetime. Car wash businesses are always in demand because of the convenience and ease when it comes to washing a car. Getting a car wash, rather than washing the car yourself, is much more efficient. Most customers will visit a car wash about 1-2 times a month, but factors like poor weather may lead to another one or more visits per month.

4. What would be a relevant time period to use in calculating customer revenue? What is the typical revenue (per loyal customer) over this time period?

The most relevant time period to use in calculating customer revenue would probably be during the summer months. The summer is the busiest season for a car wash business. The reason is because of the nice weather. The chance of getting a car wash during the summer and then having the cleanliness ruined by poor weather is much slimmer than the other seasons. When calculating the typical revenue of a loyal customer over this time period, all the different service options and pricing must be looked at. On the low end, an exterior car wash could be only $10. On the high end, there are businesses that offer monthly subscriptions that could be upwards of $60 for unlimited premium car washes. There are other services offered that are priced between these two, but these are the average low and high end. The summer only lasts 3 months, and loyal customers would probably visit a car wash at least two times a month. With all of this information taken into consideration, the average typical revenue per loyal customer during the summer is around $110.

5. Are there costs involved in serving the loyal customers? If so, what are these? Should these costs be considered in the lifetime value calculations? Why or why not?

Since the services provided in the car wash industry are consumed instantly, the need for customer service/resource center is not needed. Car Wash companies also do not save their customers information so expenses such as large inventories or large memory capacitors. Car Wash companies are mostly in a local service area, as such they do not do much marketing or advertising. As such the costs involved in serving loyal customers are mostly due to the car wash companies' promotional campaigns. Some companies' promotions offer a free car wash or tire clean or inside vacuum after a certain amount of visits. As such these costs are made up when the rest of the services are given for the customer to reach the free service. Therefore there is no need to consider the costs of lifetime loyal customers.

6. What is the likely number of referrals that come directly as a result of the lifetime customer’s recommendations? (Be realistic.) Explain your response.

The number of referrals that come directly as a result of a lifetime customer’s recommendations for a car wash business can vary depending on various factors such as the customer’s network, satisfaction with the service, and willingness to recommend. Customers who have a positive experience with a car wash business may refer family, friends, and acquaintances. A lifetime customer can recommend at least 1-2 people from their family, friends, and acquaintances. In the United States, an average car wash gets about 500-1000 customers a month, which is about 6000-12,000 customers a year. If each customer refers 1-2 new customers, the average can be 6000-24,000 referrals in a year.

7. What assumptions are you making in order to do your calculations? List all assumptions that are applicable. (It is very likely you will be making multiple assumptions for each number you use in your calculations.)

The following assumptions have been made in order to do the calculations:

· The average client visits the car wash around 1-2 times per month.

· The average lifetime of a car is supposed to be around 5 to 10 years.

· The relevant time period for measuring customer revenue is the months of summer.

· The average revenue per visit of a loyal client during the months of summer is supposed to be around 110 dollars.

· The calculations are not based on changes in prices or inflation over time.

· The loyalty program assumptions are based on the given data, assuming that the clients would opt for the subscription and utilize the offered washes

8. Use all of the relevant numbers (based on your assumptions) together to calculate the Lifetime Value of a customer in this industry.

In this industry, the calculation of the LTV (Lifetime Value) of a client is based on the formula:

LTV = Average number of visits per year x Average revenue per visit during the summer

In this case, the average number of visits is considered to be around 12 to 24. Besides, the average revenue is supposed to be about 110 dollars per visit. If we suppose an average of 18 visits per year and the lifespan of a car to be around 5 to 10 years, the LTV can be determined as:

LTV = Average visits per year x Average revenue per visit x Lifespan of a car

Taking mid-range values,

LTV = 18 x $110 x 7.5 = 14,850 dollars

9. Based on your calculations and assumptions, what is the lifetime value of a customer to an organization in this industry?

The lifetime value (LTV) of a customer in the car wash service industry, on the basis of the assumptions and calculations made, is measured to be around 14,850 dollars. This value is obtained by:

LTV = The number of years a car is assumed to last (7.5 years, the midpoint of the assumed range) x The average revenue generated per loyal customer during the summer season ($110) x The average number of visits per year (18 visits).

Considering the lifespan of a car to be around 7.5 years, the client is expected to visit the car wash around 135 times (18 visits per year * 7.5 years). Each visit subsidizes an average revenue of 110 dollars, leading to a total revenue of $14,850 over the client’s lifetime. These calculations are based on some assumptions. The assumed lifespan of a car, the revenue per visit, and the average number of visits per month can vary on the basis of different factors like location, customer behavior, and market situations. Therefore, it is important for car wash businesses to regularly adjust and monitor these assumptions on the basis of particular market dynamics and customer base to obtain more accurate estimates of the lifetime value of their clients.

Customer Lines Up

Customer Drives to Moving Platform

Movable/Self Adjustable Dispensers put soap on the car using the scanned data

Platform Moves Car to get Scanned for Optimal Soap Application

Self Adjusting Spinning Sponges Adjust to Car Shape to Ensure even and equal cleaning

Constant Moving Air Blowers Ensure that the car gets an even dry

Customer Can Choose to have a self indoor clean up

Customer Can Choose to have an employee indoor clean up

Physical Evidence

Customer Actions

Employee Actions (Onstage/Visible)

Employee Actions (backstage/invisible)

Support Processes

Line of Interaction

Line of Visibility

Line of Internal Interaction

Select desired wash service

Make payment

Provide feedback on service experience

Provide customer service

Send out promotions to existing customers and potential new customers