Lowering price

[washboy]

My closest competetor lowered his prices @ 3 weeks ago from 2.50 to 2 for 4 mins (same as me). I have just been working on my wash making it better and offering more(and keeping prices the same) with good results, slow results(building a buiss). I had a sure fire loss quickly. I can't lower the price as it is already a good deal and am mad at them for just giving away any profit that we as owners might have. (more customers less profit, break even.). So I was thinking I have a magic vac that I give for a quarter less and change it around. What if I made my least preforming bay the same, just one and a frugal customer might stay.

 

[SplishSplash]

Why did you lose the business? What does your competitor offer that you do not? Why spend the energy and time on trying to make the five per-centers happy?

Use that energy and find ways to increase your sales. Drive those customers that left back to your wash! What functions do you offer? Are your chemicals performing and giving a show that is worth spending the money at your wash for? Do any of your bays have dryers in them, what about bill acceptors in the bays or credit car in the bays?

What your competitor did is a basic business 101 practice, lower the price, increase your foot traffic and sales will follow. He will need to wash a percentage more vehicles now than he did yesterday, but it might work for him. You can follow and see if it works for you or you can add value to your wash and keep the frugal washer going to his wash!

 

[Eric H]

Lets do the math:
Using $1000 dollars as a base gross.
@ $2.50 is 400 wash cycles to gross $1000
@ $2.00 is 500 wash cycles to gross $1000
Assuming customers us 2 cycles you need to "get" 50 new customers to gross the same at $2 vs $2.50. I doubt your competition will increase his gross by lowering his price. Working harder for less money is not for me.

BTW: I studied photography in college and never took a business course in my life. Please don't hesitate to correct anything above.

 

[ruggerwash]

Lets do the math:
Using $1000 dollars as a base gross.
@ $2.50 is 400 wash cycles to gross $1000
@ $2.00 is 500 wash cycles to gross $1000
Assuming customers us 2 cycles you need to "get" 50 new customers to gross the same at $2 vs $2.50. I doubt your competition will increase his gross by lowering his price. Working harder for less money is not for me.

BTW: I studied photography in college and never took a business course in my life. Please don't hesitate to correct anything above.

Furthermore, say your COST per cycle is $1.00 (hypothetical of course)
@ $2.50 400 cycles gross $1000 less $400(cost)= $600 profit
@ $2.00 say you (gain the 100 cycles in business) and run 500 cycles
$1000 gross less $500(cost)= $500 profit

While looking at lowering your price you have to look at profitability, not just potential volume gain. Many overlook the math that can catch people off guard, because they see more cars coming in and they assume they are making more money. Read further...

In order to break even (profit wise), you would have to gain 200 cycles of business. 600 cycles x $2.00= $1200-600(cost)= $600 profit

Find the break even point for how much volume you must increase to make the same profit as you are now. If you think you can beat this point in volume gain, than it might be a good venture. However another variable also exists- what point will the price war stop? If you match a competitor's price drop, he'll probably go lower- a cycle that ends in both businesses going under. I would suggest creating value other than low price. Offer something the competitor doesn't- it could be any good or service that you think would be a value. Depending on where you live, the price sensitivity of customers can easily be outweighed by their perception and confidence of other value.

 

[Waxman]

Plus, more cycles to make more money is more and wear and tear on equipment and requires more maintenance and cleanup and everything, basically.

 

[DavidM]

You are at $2.50, correct?

I wouldn't do anything rash just yet. Three weeks is too short to know what is going on. The last three weeks in my part of PA has been pretty wet so that could be a factor. I would be surprised that a new price could have an impact that quickly.
If people are leaving to try the cheaper price many will come back after they try it once or twice and it isn't as good. (assuming you have the better wash) I would wait it out for a little longer.

What part of PA are you in?

David

 

[I.B. Washincars]

My analysis is not scientific at all, but here is what I have learned from participating in 9+ years of forum posting. Practically everyone that lowered prices did not benefit from it. Practically everyone that raised prices were glad they did. Take it FWIW.

BTW, I have never lowered prices and am always the first to raise them.

 

[washnvac]

I have noticed business dropping a bit in the last few weeks, as the gas prices increased. We are at $2.35 for the cheap, and $2.75 for premium in Delaware. As before, as gas approached $3, the business just evaporated. Most consumers used to be in love with their cars, even if it was a pos. But with the high gas, most of these folks hate their cars. It is $50 plus now to fill up. I think that has a direct and sustained impact on our business. I really believe there is not a lot we can currently do to fight this issue. You just have to hunker down and control costs, while still providing a great wash experience, and ofcourse a clean vehicle.

 

[Red Baron]

My analysis is not scientific at all, but here is what I have learned from participating in 9+ years of forum posting. Practically everyone that lowered prices did not benefit from it. Practically everyone that raised prices were glad they did. Take it FWIW.

BTW, I have never lowered prices and am always the first to raise them.

Yup.......

 

[ruggerwash]

I have noticed business dropping a bit in the last few weeks, as the gas prices increased. We are at $2.35 for the cheap, and $2.75 for premium in Delaware. As before, as gas approached $3, the business just evaporated. Most consumers used to be in love with their cars, even if it was a pos. But with the high gas, most of these folks hate their cars. It is $50 plus now to fill up. I think that has a direct and sustained impact on our business. I really believe there is not a lot we can currently do to fight this issue. You just have to hunker down and control costs, while still providing a great wash experience, and ofcourse a clean vehicle.

Yes...controlling costs is more effective than lowering prices. You can keep the current business you have and make more profit from that business. Cost controlling is a safer way to beat the competition.

 

[Bud]

Washboy, what everyone said is true but I still don't understand the price. You said (same as me) Does this mean you are at $2.50/4 min or did your competitor lower his price to where you are, $2.00/4 min? Either way there isn't anything you can do about his prices just like there is nothing anyone can do about your prices. Just do the best job you can do.

 

[Greg Pack]

What do you guys think about same price per minute but lower startup price to $1? It's kinda the dollar store mentality. The owner of the highest grossing wash I know of swears by it.

 

[I.B. Washincars]

As has been stated before, you will be getting less money from the occasional customer that buys just one cycle. You will have to gain some customers to make up what you gave away by doing that. I'm not sure that it would be just the "one cycle" guy. As we all have seen, most customers buy a cycle, let it run out, buy another, and so on. That is more opportunities for them to waste some time, use the "free" brush to push there soap around, or whatever. I see no benefit in lowering prices. The negatives far outweigh the possible benefit.

 

[MEP001]

I agree that lowering prices is more likely to reduce your net than increase it. The lower-price operator is going to get the most people who just want to blow their crap off/out of their vehicle for the least cost to them. I've never reduced prices at a wash, I've always operated with the highest start-up time and the lowest time per coin, always provided the best wash and always had the highest income around.

 

[mac]

So if there are just the two of you operators in that market, have you thought of meeting the other operator and agreeing to both keep the original price? Call it price fixing if you want, but it might be worth a phone call or visit. I did it when I owned some washes and it worked for me. Just a thought.

 

[MEP001]

Call it price fixing if you want

I will, because that's what it is.

 

[I.B. Washincars]

I had a new competitor about to open. I bumped into him one day and just asked him what he was going to charge. He said "Same as you, I guess". I replied "Good, so I won't have to return the favor if you undercut me."

 

[Greg Pack]

At this point I would welcome bucket washers at those washes. At least someone would be there and make the places look open.

I am premium priced at the wash I currently own: 2.00/3:30 but I have no competition in the immediate area. But these washes I manage for the bank, the SS revenues are absolutely horrible- half the national average or even worse. They are currently at 2.00/four minutes and the bays stay dry. These washes are in smaller markets to begin with, and two of the three have express washes (not regular exteriors) half a mile away.

So, looking at this situation from a consumer's perspective: I can wash it myself, get all hot and sweaty in the summer or cold in the winter and spend probably 8.00 with vac, or I can go to the express down the street, spend less time, vac all I want and it costs me 5.00. You can already see that most of the customers at the SS either have a special problem where they can't go through the express or they are of the demographic that has a reputation for car worship and the SS wash is an experience for them. Average joe/jane just doesn't wash there very much anymore. With frugal being "in" right now and for years to come I feel like I've got to offer a comparable value- be able to get your car clean and vacuumed for around 5.00 But I am fearful that the aforementioned price/revenue problem comes back up. Frankly, I'm not sure I can regain a foothold in those markets. But I was hoping the 1.00 startup may help the customer feel it's cheaper,and they are in more control of how much they spend. .

 

[I.B. Washincars]

You could try it at one wash as a "Summer special". If it doesn't help it will be no surprise to anyone when you go back up, after all it was just a summer deal.

 

[JustClean]

What do you guys think about same price per minute but lower startup price to $1? It's kinda the dollar store mentality. The owner of the highest grossing wash I know of swears by it.

I don't know if this helps: I haven't published my price. In the 18 months we are open I was asked only 3 times. The rest put in the money and wash....