I love monthly auto membership plans because there are so many advantages to creating and selling monthly membership plans for your shop. Some shop owners are scared to offer monthly membership plans because they think customers will end up canceling after 3 months. According to our data that is not the case. Car owners love monthly membership plans because they are easy to understand and they seem more affordable than yearly even though most of the time your shop collects more over the 12 months. We have found that there is less than a 0.3% cancellation rate for monthly membership plans, which is amazing for your shop! In this article, I will educate you on why I think monthly membership programs are amazing for your customers and for your shop.

What is a membership plan?

If you are new to an auto membership plan, it is a way to create an automated loyalty system for your shop. Customers pay a monthly or yearly fee to get access to certain benefits and discounts to your shop. This helps you develop a recurring revenue stream from your customers which helps you operate your business more efficiently in regards to cash flow.

1. Low barrier to entry

Low barrier to entry = more signups, more sign ups = more monthly recurring revenue. Also, $35/mo seems cheaper than $300/yr. You actually will collect $420 in 12 months when you simply charge $35/mo. When offering a membership program you want customers to feel like it is a no-brainer for them and monthly plans do just that. Your customers feel like it is an affordable option to maintain their vehicles.

2. Under the radar payments

I once paid a gym membership for 8 years after I switched to another new gym because of under the radar payments. The advantage of under the radar payments is that they are almost unnoticeable and they are not painful each month or each year to consumers. When you offer a yearly plan, your customers definitely feel that big chunk of money coming out of their bank account each year. On the other hand, small monthly payments are not a nuisance for customers, plus it trains them to pay you each month automatically!

3. Monthly Recurring Revenue

Ah! Monthly. Recurring. Revenue. It’s the best! Many of you know that I am obsessed with this type of revenue stream and I think all auto shops desperately need this working for them. Predictable monthly recurring revenue is the holy grail of business revenue. Imagine if you had $10k/mo or even $40K/mo+ in predictable recurring revenue? We see shops hitting these numbers all the time! Instead of starting each month at $0 you automatically collect all your membership fees and have cold hard cash in your bank account. Some shops have even said that Volcanic has helped them build a cash reserve system with their membership program – Super powerful!

4. Higher Profit

Yes! most monthly membership plans offer a higher profit because most of the plans out there are more expensive than the yearly plan. So if you have a little patience you can create more cash in the long run! Members buy more. Think about Amazon prime (everyone has an Amazon Prime membership), This is a multi-billion dollar revenue stream for Amazon and their Amazon Prime members buy 2X more with Amazon than a non-prime member. The same is true for membership customers, they will end up spending 2X to 3X with your shop!

5. Evergreen Subscribers

According to John Warrilow the author of the Automatic Customer, Evergreen subscriptions go on forever, or at least until a customer tells it to stop. In the world of recurring revenue, this is known as an “evergreen.” I recommend setting up your membership program as a monthly payment with yearly contract and have the contract auto-renew automatically each year and the payment automatically collected each month. This is the best strategy because your customers will continue to pay you month after month forever! This is a fantastic way to retain a customers.

5. Improved Cash Flow Management

As mentioned above, traditionally small businesses start each month with $0 of revenue on the books. This is a problem and a really challenging business model. I know because I used to manage a dental lab (similar business model as auto shops) and the business had cash problems. One month we would hit record numbers and then once that month ended we started at $0, working our tails off to try and hit the numbers from the previous month. Trust me when I say this but business is a lot easier when you automatically start with a guaranteed $10K/mo, $20k/mo or more.

7. Easy to sell

Monthly membership programs are just easier to sell than yearly. Obviously yearly has its own benefits, I will write a whole article on that subject later. If you want to sell more membership plans and grow your recurring revenue your monthly membership plan makes it a “no-brainer” for your customers. Plus your team feels like superheroes when they say you get all these benefits and discounts for only $35/mo!

Best practices

When offering a monthly auto membership program I recommend doing these two best practices.

  • Lock them into a yearly agreement that auto-renews each year and collects the monthly payment each month.
  • Use ACH or bank withdrawals to automatically collect the monthly funds from the customers.

ACH is not only cheaper in regards to merchant fees but it is extremely stable in regard to collecting funds. Credit and debit cards have expiration dates and fraud, causing it to decline and have issues. ACH is the best payment method for your monthly and even yearly membership program.

*The problem with yearly is that a the fee can seem huge the following year when it gets taken out automatically. This may cause the patient to cancel vs taking small amounts each month, this creates under the radar evergreen subscriptions. 

If you are serious about creating and growing a auto membership program Volcanic can help you create, organize and automate your auto membership program as well as connect all your customers to ACH payments!