You can lose 20% of your customer base with same revenue

[Buzzie8]

I recently raised my price at my newer wash. I raised it from $2 for 4 min. to $2.50 for 4 min.. I noticed that the wash has not been as busy. I have always had the highest price in town. I own the wash about 1 mile down the road and left the prices at $2.00 for four minutes (so I should still get this biz). I was curious how much of my customer base could I lose at the newer wash and still be at the same revenue for this segment of my wash and I realized that I could lose 20% of my start up cycles and still realize the same revenue. That's 20% less dirty bays to be cleaned, 20% less water, 20% less chemical purchases, pits getting pumped 20% less often. Now, I realize I lose vac income and vending income, but I cannot think of why this isn't a bad move even if I lose 20% (which I don't think will happen). I am amazed how under valued the service offering is. I have a modern wash with many options, always clean, well lit, security, and usually everything is working. Each 4 min wash probably uses about 5 gallons of water and some chemical. A large coffee across the street at McDonald's is around $1.75 and uses 12 OZ of water and a few coffee beans. Please let me know what is wrong with my logic.

 

[Whale of a Wash]

drop the time to 3 min and we will be equal. we pay almost 7% sales tax from some washes also. Why worry about the price, it's not that expensive. It should be more like $3 for all we have to provide.

 

[PaulLovesJamie]

Please let me know what is wrong with my logic.

I didn't check your math, but there's nothing wrong with the logic you presented. Be a little bit careful though, what you present is only 1 consideration in pricing strategy, there is a lot more to aligning price with strategy. The illustrative reductio absurdum is to set your price at $100,000 and shoot for one customer.

(I"m not disagreeing with your decision, just commenting.)

 

[Buzzie8]

I am sure that there are other considerations. If you can please supply other bullet points for pricing strategies. One that I am familiar with is lowering prices on one service so you can increase sales (or pricing for a related service). A perfect example - free vacs with a wash purchase.

 

[mac]

That's what I find interesting with this business, it's a window into people's thinking process. If that works for you, well good for you. You seem to be creating two different client bases. Something else to keep in mind along these lines. You have to always be trying to increase your customer base. The reason is people move away, die, loose their job, or go to a better location. You can't sit back and just enjoy the gravy train.

 

[rph9168]

Most retail products usually try to keep the price the same and reduce the amount of product you receive. They use various methods to hide the fact that you are getting less for the same price. Cereals keep the same height of the package and reduce the width. Ice cream companies do the same. Processed meats often reduce the amount from 16 to 12 ounces. The same is true for most canned goods.

 

[PaulLovesJamie]

I am sure that there are other considerations. If you can please supply other bullet points for pricing strategies. One that I am familiar with is lowering prices on one service so you can increase sales (or pricing for a related service). A perfect example - free vacs with a wash purchase.

Buzzie, no offense, but if you google "pricing strategy" you'll come up with tons of reading, you could get a degree in this topic. Wikipedia for example gives a decent awareness list (although I'd call these more tactics than strategies... depends on perspective I suppose):

* 1 Competition-based pricing
* 2 Cost-plus pricing
* 3 Creaming or skimming
* 4 Limit pricing
* 5 Loss leader
* 6 Market-oriented pricing
* 7 Penetration pricing
* 8 Price discrimination
* 9 Premium pricing
* 10 Predatory pricing
* 11 Contribution margin-based pricing
* 12 Psychological pricing
* 13 Dynamic pricing
* 14 Price leadership
* 15 Target pricing
* 16 Absorption pricing
* 17 High-low pricing
* 18 Premium Decoy pricing
* 19 Marginal-cost pricing
* 20 Value Based pricing
* 21 Pay what you want pricing
* 22 Freemium pricing

The "Nine Laws of Price Sensitivity & Consumer Psychology" at the end is worthwhile too.

... wow, I just quoted wikipedia! (I generally dont care for it, I find it too cursory for my tastes.)

Bottom line IMO is depending on what you are trying to achieve, you'd implement the appropriate combination of pricing schemes starting with the above list.

Yes, sadly, I think about this kind of stuff. And... Go Steelers!

 

[PaulLovesJamie]

Btw, I should have started out my first response with a the first thought that came to me when I opened this thread - I like what you did with different pricing at your 2 washes. Done consciously and with some strategic effort, it could give you a better total return.
Combined with your observation about McDs marketing machine, seems to me you're on the right track, thinking about good stuff.

 

[mjc3333]

I think the general public feels that a car wash especially a self serve, is supposed to be "cheap".

With that said, cheap to the public and cheap to the operator are two totally different things.

The general public ultimately wants everything they spend their income on to remain the same year after year. They also want the own income to increase year after year. This is exactly the opposite of what happens in the real world. Skyrocketing prices for goods and services (car washes included????), and an income that has been stagnant for at least a decade or so.

What is the spending public to do?

Complain, complain, complain about how you, the car wash owner, is making tons of money off of just some water and soap when they have to spend money on what they feel are necessities.

Trust me, the public, has NO concept on what it takes to run a business, small or large. They think all businesses make tons of money and you, by raising your prices, just want more of it from them.

Price your wash on your needs, not the public's needs.

The first response when asked "what would make you come to the car wash more often?" is and always will be lower price. I guess that is why the EE market is doing so well in certain areas.

 

[Bill Manke]

I see all the time where everyone is saying to raise the price. My question is are you that busy that they are waiting to wash? I see at my wash that if it is slow it gets slower. If it is busy it stays busy. So it is a fine line on raising the price.

 

[Greg Pack]

You can do it as long as their is no third party in your market (particularly the express model ) that can offer your customers a better value.

 

[pgrzes]

I see all the time where everyone is saying to raise the price. My question is are you that busy that they are waiting to wash? I see at my wash that if it is slow it gets slower. If it is busy it stays busy. So it is a fine line on raising the price.

I agree with Bill!! Business breeds business! Sure we can make the same $ from 7 people instead of 10 IN THE BAY. How bout the fact that you now have 3 less people to buy Armour all pack, air freshener and a towel? Oh yeah and maybe 2 of those 3 will vacuum. If you dont like to wash the bays dont own a ss carwash!!! I tell my employees that complain about it, that its job security!! If they still complain they are fired!!!!

 

[Reds]

I recently raised my price at my newer wash. Please let me know what is wrong with my logic.

Earlier this year I raised my price to $3 for 4 minutes. Very few complaints, no noticable change in car counts, and my SS sales are up. Even at $3 there is a lot of value for the price. Regarding your logic I think you are spot on. You also have less liability and the customers you lose are the bottom fishers who, IMO, are more likely to litter, scatter debris, etc. They are also, IMO, the ones who get mad when there time runs out and bend your wands, smash your bay meter, or throw the wand on the ground.
People are very ignorant about the cost (in dollars and effort) of building and running a carwash. I think that $3 is cheap. You can't even buy a Whopper or a gallon of gas for 3 bucks. And certainly not a pack of cigarettes or a six pack.

 

[Waxman]

I lowered time from 3.5 min for $2 to 3 minutes based on my friend 'whale's' advice.

Results are positive from a revenue standpoint and from a customer standpoint, no one has noticed, IMO.

 

[txheat]

I lowered time from 3.5 min for $2 to 3 minutes based on my friend 'whale's' advice.

Results are positive from a revenue standpoint and from a customer standpoint, no one has noticed, IMO.

wow... our is $1 for 3.5 min. and the highest price in 2 mile radius is $1.50 for 3 minutes.

 

[Whale of a Wash]

One has to remeber that us northern people are only a few weeks away from floor heat, and pay alot for garage doors and door maintenance, and hit and run door repairs. Our expenses can be $2-3K a month for floor heat in january.
So we sometimes look the same as a Texas business. but have alot different expenses. We can gain customers for salt washing or if real cold have almost no business for many days. I was closed last winter for 18 days due to bad snow storms for most of the winter.

 

[Waxman]

wow... our is $1 for 3.5 min. and the highest price in 2 mile radius is $1.50 for 3 minutes.

Sounds too inexpensive to me.