Raising prices

[carnut2]

After three years in business, we feel due to increased expenses we will have to raise our prices. Even if we go up one dollar per wash, we will be 25% below other washes in our area. Any suggestions on how to go about doing it. Notify or post the new prices or just raise them up?

 

[JMMUSTANG]

Why is it that in the car wash industry we have this question every time we feel the need to raise our prices.
Does your local grocery store, department store, drug store or whatever post signs stating they are going to raise their prices and give a reson why?
Over the years I've always gone through the same reasonings you are going through and believe me I have had very few compliants after raising prices.
Saying all that, I'm going through this same question/issue as you are right now.
Just needed to rant.

 

[JimmyJaffa]

Why are your prices below your competition, is your wash 25% inferior to them? If you are, then $1 is correct, else, raise $2. We have found a way to raise prices and make the customer feel there was an increase in value.
When you raise prices it is best to do it at the start of your busy season.

 

[Earl Weiss]

After three years in business, we feel due to increased expenses we will have to raise our prices. Even if we go up one dollar per wash, we will be 25% below other washes in our area. Any suggestions on how to go about doing it. Notify or post the new prices or just raise them up?

Just raise it. Just post new prices. Many may not even notice it was a change.

 

[Waxman]

Value-added can accompany a price increase to take the sting out. Something that won't cost alot, like sealer in the underbody flush or more blower time.

I am the highest priced IBA in the market at $12. The closest competitor costs less, gives further deals with gas purchase and the place is a dump; missing letters on sign (place has been 'tuchfree' for years now), dirty bays, poor wash quality.

Never be afraid to charge more, especially when you need to.

This business for me has been a constant quest to earn more while I save more on everything. It's tough, but raising prices is necessary in all businesses if they are to remain competitive and have positive cash flow.

What does a pair of Nikes cost? Get my drift??? JUST DO IT.

 

[JeffM]

JimmyJaffa's has a very good point. The quality of your wash will determine your ability to charge a proper price for it. If you are 25% less than your competition and offer a better product, you are giving up profit that you don't need to. With a superior product you should be priced slightly higher (5-10%), but if you are not, lower (5-10%) will still keep you competitive.

In my experience and research I have done, I have found the price of carwashing to be relatively inelastic (price increase may trigger a small decrease in wash volume) with full rebounds to previous volume levels within a very short period of time; 2-3 months. You need to keep in mind that with a drop off in volume your increase in revenue should keep you on par or above previous levels and seeing a gradual increase over the next few months. Not only will this make your slower months more survivable, but it will also put more cash in hand.

Just for demonstration purposes let's assume that your competition is charging $10 and you are charging $6 for the same product. Being 40% lower means you are giving up HUGE amounts of revenue and profitability. You should be priced relatively the same, making a jump of $4 all at once will hurt your volume levels. It would be best to make the move up over time (i.e. $1 per quarter, $2 now and again $2 in the spring) as to minimize the influence on customers.

contd in next post...

 

[JeffM]

As Earl pointed out, many people will not even notice a change and if they do the best way for you to deal with the question is just by saying "yes" and leaving it as that. I have never had someone try and dig in as to why our prices went up.

Lastly, you can tell that Waxman has been in this industry for a while and knows his stuff. I couldn't agree more that a low-cost value-added service/product inclusion will definately help with any price increase. We wash most of our cars full-service and put an unbelieveable amount of labour into washing a car. We also charge a fair, but somewhat premium price for the service which we provide. The result being that we can maintain profitability even on slower months.

With the price range increase you are looking at, something that would cost you in the $0.10-$0.15 per car range would probably be optimal as to provide "significant value" to your customers.

Ultimately, do what you think is best for your business to make you competative in YOUR local market.

Just my $0.02!

 

[briteauto]

I think one of the reasons our industry struggles with the increases is that we are pretty much forced into $1 increment increases (at least for automatic washes, not s.s. so much).

A grocer or dining establishment can go up a dime, quarter, fifty cents, whatever. Even if they do this rather frequently, it is a slow transition for the consumer.

We go up $1, and in many cases, that can be a 20% increase on an express priced wash. I have no problem doing it, but some operators seem shy to pull the trigger. Every business has to raise prices. Show me any business that is lowering their prices, and I'll show you a business that is struggling and will not be around much longer.

One of the first washes I worked at is still in operation. It charged $3 for a basic in the early eighties. They charge $9 for the basic today. I'm wondering how that compares with a hamburger, slice of pizza or whatever from that same time.

Any 20 - 30 year operators out there remember what they started out charging, and where they are at now?

 

[mmurra]

.19c with a fill up in 1969. $3 without gas. 2010 $4 without gas. That is the our problem. McDonalds next to us recently raised prices on what I buy, about 20% and never said a word. No explanation, no "value added", nothing. Just the increase. Still go there.

 

[Earl Weiss]

Any 20 - 30 year operators out there remember what they started out charging, and where they are at now?

In the mid 1970's we went from FS to what later became known as EE with an after care component. The price was 99 cents, 25 cents extra Fri. - Sun Holidays and day before Holidays.

Now we are at $3.50 still getting 25 cents more on those days.

By Comparison gas was about 75 cents a Gallon

 

[JustClean]

I increased my prices by 20% 18 months ago without any added explanation (signage). Three people complaint. I explained that there had been no price increase in the last 4 years and I had no other option. One customer said he would not come back (still one of my best customer...).
And I truly believe by being the most expensive wash in town I got rid of most of the low-life, bucket washers or trashers and leave my wash to the ladies with their dusty cars...

 

[pitzerwm]

I never did it but I was going to, just never got around to it. By putting up a sign that stated that this was the most expensive wash in town because they deserved the best.

 

[buda]

What type of wash operation are you? Full service, conveyor exterior, roll over, self-service.

Where you located?

What are your prices now?

How many cars do you wash per month?

Give us some definitive information so we know a bit more about your operation

Bud Abraham

 

[carnut2]

We are an EE tunnel outside Kansas City. Current pricing is 5,7,9,12.

 

[buda]

Pricing

Thanks for the reply.

What I would do if I were in your same situation is go with:

Basic Wash $6.00

Wash & POLISH 'n WAX $8.00

The Works - wash. POLISH 'n WAX; Undercarriage and Tire Shine $112

Three packages is all you need, 4 is too many, 2 is too few.

You will sell 30% to 40% an upsell at these prices and packages in my experience.

Regards
Bud Abraham

 

[robert roman]

The problem of increasing price is no different than the problem of setting price. A model of assessment is required to reach a decision.

Typically, the first assessment is current and past performance.

You mentioned current pricing of $5.00 to $12.00.

What is your store’s average revenue per wash now and in the past? Is the average at, below or above the benchmark?

If below average, it may not be price but store and services design that requires attention because these factors are most linked to service quality and customer satisfaction. Conversely, if above average, you may be in a better position to raise price than you believe.

Is the average trending upward, downward or stable? If average is trending downward, increasing price may be risky.

You can also learn something about performance and price sensitivity by assessing store conversion rate. Conversion rate is sales dollars divided by traffic count.

For example, if store conversion rate is below the benchmark, it may not be price but customer loyalty that needs attention.

Consequently, my advice is to assess performance then determine if there are any viable alternatives to increasing price.

 

[rph9168]

In a time when prices are going up everywhere I think many of your customers will accept any price increase - not happily but they will accept it. Never did I think I would be happy to buy gas for well over $3 a gallon or over milk for over $3 a gallon or bread for almost $2 a loaf but I accept it in light of the current situation. While I know those things are more essential than a car wash but they are still something I buy. I now pay probably twice for a wash than I did several years ago but I still want a clean vehicle so I pay the price.

I know it is a tough decision for most operators but it is one that you have to make to make your wash profitable. Do it and move on.

 

[pitzerwm]

Raising your price should involve one thing, Am I making the return on this money that I could be making doing something else? If you don't make a profit, you go out of biz, if you don't make a decent return for your efforts, you get burned out.

 

[Waxman]

Also, remember another way to raise prices is with a decrease in time given on vacs and/or SS bays.

It's not what all operators like to do but it is another way to increase revenues.

 

[smokun]

Smart Gorilla Research & Proven Pricing Trick

I suggest doing some easy inexpensive research... which should be a routine activity for all carwash owners. It's a 2-step 2-part process.

First, take a critical look at your product (carwash quality) and process (time required and showmanship). Things like conspicuously visible suds, drying effectiveness, clean bright tunnel, amount of courtesy extended, etc.

Next, have a diversified mix of 5 secret shoppers (spies) visit your wash anonymously and provide strategic feedback.

Finally, repeat the same critical research process at your competition. Then, assess the marketplace findings and judge how you measure up. Make appropriate improvements. Compare & contrast all pricing in your marketplace. Adjust pricing of all products, when appropriate. Increase no more than 99-cents per product.

Proven Pricing Trick: THE POWER OF THE PENNY!

The Right-Digit Effect is a powerful strategy that justifies any perceived inconvenience. The strategy has be proven for many, many decades by successful retailers nationwide. For example, $4.99 is hugely more powerful than $5. It's just a penny... but dozens of studies with consumers all across the country have found that it really works... all the time.

Implement both of these strategies and you will see immediate results. If you have questions or need help, just ask!

HAPPIEST OF HOLIDAY SEASONS TO ALL!!!