Seasonal Pricing.

[Michael McKernan]

I'm really considering this. Our gas is going out the roof top and water is running down the drain with floor heat and weeps.
I have taken measures to drastically cut down on these expenses, but it is still expensive.
This could be a plus if no one asks. You could leave your prices alone in the summer time.
Every business does it.
We are going to get some serious ice and snow this weekend. I will be raising prices 10% and the customers won't care. They need us. Let's get paid for our hard work and the risk we take.
Again, I wouldn't mind going lowering prices in the summer.
Many thoughts are appreciated.

 

[smokun]

Seasonal Pricing Can Be A Slippery Slope!

Michael...

I understand your desire to cover additional costs with a surcharge, but nevertheless, question its prudence. Do you really want to attach a barometer to your pricing?!

Most business that function in a seasonal environment factor in all associated costs when developing their business plan. Agreed, the energy increases have spiked and costs are significantly higher... but this is something that our industry has "weathered" before in prior oil shortages and market demands. And, Yes... everyone empathizes with our man-made energy crunch.

Be that as it may... there is a philosophical axiom in play called market adjustment. Sort of like the Newtonian "what goes up... must come down" theory, whereby you will be expected to adjust prices according to THE WEATHER. Long after the oil games are muzzled again, you may find your business integrity being called into question. Prices frequently go up... and seldom, if ever, come back all the way down.

Cold is a relative term to most consumers. Consumers think what they "feel"; in this case, cold. Never mind the cost of energy. That relativity makes all things rather subjective. So, whatever empirical formula you've leaned on in the past... may suddenly be out the window.

My advice: Instead of hanging a price increase on the tangible "cold weather", simply adjust your prices to reflect increase costs... and be done with it. No whining, please. There are a myriad of cost adjustments that contribute to retail pricing. So, why hang your hat on just one?

Hope my opinion helps. I'm sure they'll be others.

-Steve

 

[Michael McKernan]

Steve, thanks for the input. I was hanging on Dec.1 to March 31. for my dates. My point was trying to give a good wash at a price customers would accept with current costs. Then lowering when costs go down.
That is my grocery store back ground kicking in.
I agree compeletly with adjusting prices to much. It was a thought. Thanks Steve,
I'm just going to raise prices. Be more efficent in expenses.

 

[Fatboy769]

Michael, I think that is a good idea! I would do whatever I had to do to maintain the same quality of wash my customers were used to recieving. We all can be more efficient in our expenses, but I personally would never cut quality! Good luck in whatever you do.


Scott

 

[BayWatch]

I dont see why not. Fruit prices go up in the winter. Fuel and oil prices are up in the winter and summer. I understand those examples are supply and demand based but why is this different for our business. We have more demand in the winter and pay more for utilities during this time. Shipping costs go up and down with fuel costs, why not our prices accordingly.

 

[smokun]

Do You Really Want Commodity Pricing?

Why would anyone equate fruit pricing with retail carwash valuation? Why would a perishable commodity seems like a fair benchmark for carwash pricing logic? Or, for that matter, where is the logic in your rationale?

I am truly puzzled by the thought process that arrived at such a conclusion. Please offer more of an explanation beyond supply versus demand price fluctuation.

 

[Waxman]

Stay high.

One mistake I made in the past while operating a full-service detail shop was not adjusting prices upward as soon as necessary to keep prifitability where I needed it. This was a mistake that I inteneded to avoid when I built the car wash. And so far my pricing has worked well for me. My washes are priced high, both in SS and IBA.

I priced my washes at $1 higher across the board than my closest (and best) competitor for my IBA. Guess what? Immediately after I opened, he went up and matched my pricing!~

Just raise your prices and keep em up. Let your margins be higher all year as a result! Win customers over on service and quality and a commitment to your community. I'm with Steve-O on this one; definitely.

 

[PaulLovesJamie]

I agree with Steve on this one. But with reservations.

Today, I agree that we can find that middle-ground price that gives us an average annual profit margin. But as margins continue to get squeezed, it will become increasingly difficult to hit that point reliably. Think about it - if your profit margin was only 10%, would you be willing to take the risk of losing $ in the winter due to colder weather and therefore higher costs? Or would you raise your price in the winter. And if you dont then lower them during the summer, you could easily lose business to your competition ... thus seasonal pricing.

I think the consideration here is really the cost structure. There are plenty of industries that raise and lower their prices based on the cost of supplies - gas stations being a good example.

I'm currently planning a "traditional" price increase. But I believe there are circumstances that would cause me to use seasonal pricing. Are there risks in that? Absolutely!

Good thread, helps clarify my thinking.

 

[Michael McKernan]

Thanks for all the responses. My closet comptetion is 6 miles away and runs a terrible wash. He is a quarter for 20 seconds. Customers put a quarter in and finally get P/S with about the 5 seconds left. I'm $1.50 for 3 minutes. My thought was go to $1.50 for 2 minutes 42 seconds.
I'm not raising my automatic prices. To combat those extra expenese in the automatics, I'm going to install automatic doors with another weep miser. The floor heat, should heat the bay up enough to turn the weeps off and allow me to stay open in 10 degree weather. I have been closing the bays down at 20 degrees. I also only have 3 options.
So, I would like more input on this as well. Winter time have a $9 wash with a Weather Shield/Rain-X. Maybe a $3 express in the summer.
I'm really leaning on a $9 upgrade, promote as winter salt and summer sun ray protectant.
Need to add dryers as well.
Thanks again.

 

[Waxman]

If you run a decent wash, I think you can be at: $2/ 3.5 minutes of SS and either $8,9,10 or $7,9,11 for the IBA. This is my pricing setup (my IBA is 7,8,9,10) and I have SFR, Blow dry , underbody, doors on IBA, foam polish, 2 step p.s., h.p. wax., etc.

If your competitor is as poor as you say and that far away, go for this price increase! It's the new guy's opinion, so take it f.w.i.w.! Good luck.

 

[Waxman]

One more thought;

I agree with your idea of offering 'specials' in warm months, like a $3 express or the like. This is a way to raise prices in some months and lower them by offering the specials in others. Good idea.

 

[pitzerwm]

Mike, I'd keep it simple go to $2 and put up a lot of signs promoting the EXTRA time.

 

[BayWatch]

Well I guess I have been smokin something. How could I equate an overall increase of goods and services during the winter. I pay more for gas to heat my house, fuel to have UPS deliver things, increased costs for HiPH and drying agent, labor to clean the parking lot of snow, etc. I guess I should shut my mouth and leave this forum for the pros. I done never gota work with DuPont. I just a dang oh farm boy.

 

[BayWatch]

I do support different prices between the two seasons. I think the summer "promotion" is an excellent idea. I will be studing my P&L statements to further investigate my expenses between the two seasons.

 

[smokun]

Huh?

Don't want a ****in' contest. Simply a coherent answer.

You seemed to scoop up a lot of stuff, shove it into a box... and call it justification to explain the rationale of roller-coaster price fluctuation. It made no economic, or even marketing sense, so I called you on it.

Okay, we all understand the concept of supply and demand. But part of that equation relates to consumption. If you use more energy to heat your home... when it's cold, it is logical to expect a cost for that additional energy consumption. It fluctuates every month in direct relation to its use. That is true with most commodities that are purchased and priced on a real-time basis. Same with water... and agricultural produce.

ERmbracing that same logic for pricing a carwash, and hanging the excuse on seasonal change, in my estimation, is foolish. Unless you planned your carwash business to be operating in Miami, and one night someone moved it to Chicago, the planned costs that a prudent business plan would require might be way off kilter. But, if you went to sleep in Texas, and woke up in... Texas, you'd be expected to understand seasonal changes and anticipate their cost burden. If caught surprised, you'd probably evaluate your overhead, adapt, and adjust accordingly. The price adjustment borne out of those deliberations would provide a sensible, stable price adjustment.

Given the previous comments, it seemed as though you'd embrace a different philosophy; one that adjusts to external price fluctuation. It's warm today, so I better lower my price. It's cold now, so it's time for another adjustment. That's how commodity trading is done. It IS NOT a wise tact for retail pricing. Customers shouldn't have to wonder what your price will be "this visit". Okay, my example may be carrying it to the extreme, but your bewilderment caused me to dummy-down to the more obvious.

(continued)

 

[smokun]

More Huh?

Sure as rain, a customer will be expecting a downward price adjustment every time there is the perception of a notable change in weather, seasonal instability, or other "variables" that the rest of the world anticipates... and factors into their business.

I recommend establishing a resilient financial component to your business plan, and devote unwavering focus on maintaining net profitability. Not simply what you make; what you KEEP. To achieve that, you must have a sound pricing regimen. That philosophy is what motivated my response.

If you were offended by my reaction to your comment, please accept my apology. It was not a personal attack, but rather a knee-jerk reaction to the logic, or lack thereof. On balance, I was offended by the lack of forethought in your apples & oranges comparison... and felt the overwhelming need to set things straight. No offense intended... but obviously some was taken.

Let's move on.


-Steve

 

[Doug P.]

Michael,
I have considered this many times over the years and think it is potentially a good plan. I think everyone can relate to the higher price of oil & nat gas. Also if you are in an area where you get snow it allows you to charge more in peak times but use the increased cost of winter to justify it. In the motel business you would not last very long if you had one set price year round. I wonder if the first hotel owner to bring up peak pricing got berated by the "experts" when he bounced the ideal. I am not totally convinced this is the way to go but it is definitely worth discussing.

Doug P.

 

[PaulLovesJamie]

Michael -- your nearest competitor is at 75 cents per minute, and runs a lousy wash. You are at 50 cents per minute. Need I say more?

One related comment: I'm not sure what the proper balance is between startup price and startup time. But I do try to keep my startup time at 4 minutes or more, even if it means a higher startup price than my competition. I find 4 minutes to be the bare minimum amount of time to do a quick wash on a small car, so I try not to go below that. I am currently at $2 for 4 minutes, planning to increase to $2.25 or $2.50 shortly.

 

[Chiefs]

Keep thinking though.

How about an express/fast pass/priority line for peak wash days. You know those days when you are washing as many cars as you can and the line is 15-20 minutes long. How about giving the customers the ability to pay50-100% more for the privilege of being a priority customer and not sitting in line. Then those that don't want to pay more get fed in only if your Fast pass lane is empty. I'm sure there are enough wealthy and time sensitive customers who would be willing to pay more on a peak wash day just not to wait in line with everyone else. It would kind of be like ticket scalping. The demand is high so the price goes up. Not for everyone of course, just those who make the choice and are willing to pay not to wait.

 

[Ben's Car Wash]

Sorry but I agree with Steve, just increase the prices to make a decent profit in light of increasing cost. And to compare a "seasonal" adjustment to fruit isn't fair. Fruits have limited growing seasons which influance price or need to be improrted to extend that season... increasing there cost too. A car wash is not a comdity, it is a service or a rental of space.

The other issue is that durring the winter time, when heating cost increase, demand increase also. This should have both profit and cost of doing business on the same liner curve resulting in a close to same net profitability because of higher volume.