“How worthwhile is it to
lock people in at a discounted rate when they are likely going to come to you anyway?”
Since worthwhile is synonymous with value, look at two main ways in which a person gains from an investment.
First is capital gain or difference between purchase and sale price of investment and second is investment income generated from business operations.
Modeling 100,000 CPY against average price of $8.50, variable unit cost $2.13 and fixed cost $212,500 equals business-only value is $1.487 million.
Here, “average” customer value is $34 and lifetime value is $170.
If 1,000 customers (4.0% of customer base) enroll in unlimited at $19.95 under same assumptions, this would lead to a $77,900 increase in EBITDA and business-only value increases to $1.76 million.
Here, average customer value increases to $42 and lifetime value to $211.
Modeling unlimited price of $15.00 under same assumptions would lead to $34,000 increase in EBITDA and business-only value is $1.55 million.
So, even at $15, there is an increase in capital gain and investment income.
However, what many analysis (and this one) leave out is change in cost.
For example, under the unlimited assumptions 100,000 CPY becomes 156,000 cars washed. So, over five years, this would be another 280,000 vehicle’s worth of wear and tear.
Moreover, there is cost of investment including equipment and software upgrades as well as promotional expense,
training, etc.
“….this business is still about trying to control a local monopoly….”
This is aim of unlimited. It increases switching costs for customers.
“There has been a lot of drb
marketing that has gone into this and i think many operators have accepted it as a panacea.”
More like drug addiction than panacea.
“…..find a niche and market the heck out of millennials and understand that 1/2 your customers are women.”
That’s good advice.