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February 22, 2012
Coin Laundry Pricing Strategies (Part 3 of 3)

CHICAGO — Phil Arvin and his two partners opened their first Maytag-equipped coin laundry in Memphis, Tenn., last March. The 5,000-square-foot attended store is equipped with new energy-efficient 60- and 80-pound washers that are much larger than those in competing stores and thus could command a higher vend price, Arvin says.

But the group followed the suggestions of distributor Justin Laundry and established prices that are comparable to the laundries nearby, Arvin says. “Even though we’re offering a much higher quality product, we didn’t want to be perceived as the higher priced place.”

This is just one example of how the market can influence a laundry’s pricing strategy. But other factors are at work, too, and there are some basic premises that the self-service laundry operator should keep in mind when establishing or changing vend prices.

Your Competitor Has Undercut You – Now What?

And whether it happens intentionally or not, there is likely to come a time when a competitor will undercut you in price. Then you have a decision to make.

“If an owner is convinced that for the type of wash and dry they’re offering, the atmosphere, the other services, that they’re charging fairly, they should probably make the decision to give it some time and see if customers recognize that value and come back,” says Kevin Hietpas, vice president of sales and marketing for Dexter. He suggests giving it a month before acting.

Like any battle, a price war requires a strategy, Gauthier says. Neutrality is one strategy that allows the store owner to focus on their strengths while letting the competitor take the financial hit. But, neutrality isn’t always an option.

“Strategies are best developed after understanding a competitor’s strengths and weaknesses,” says Gary Gauthier, national sales manager, vended laundries, Milnor Laundry Systems. “For instance: Is their equipment mix weak? Maybe offering—and promoting—the right size machines for your market is the key. In a margin-based industry like vended laundries, price decreases should only be considered as a last—and short-term—step.”

“A store owner needs to provide his customers with assurance that they are getting the best service, equipment and experience money can buy,” says Kent Walters, national sales manager for Maytag/Whirlpool Commercial Laundry. “If a competitor in the area is charging less for a similar service, the store owner needs to tout the reasons why his/her store is worth spending the extra money.”

In this type of situation, the opinion of a neutral third party is invaluable, he says.

“Ask someone to visit your store, talk to the customers and provide feedback. Why would a customer pay more for your coin store? What are the perks of your store vs. the competition? This information can help an owner accurately illustrate the experience customers receive at his/her store.”

Click here for Part 1.
Click here for Part 2.

February 21, 2012
Coin Laundry Pricing Strategies (Part 2 of 3)

CHICAGO — Phil Arvin and his two partners opened their first Maytag-equipped coin laundry in Memphis, Tenn., last March. The 5,000-square-foot attended store is equipped with new energy-efficient 60- and 80-pound washers that are much larger than those in competing stores and thus could command a higher vend price, Arvin says.

But the group followed the suggestions of distributor Justin Laundry and established prices that are comparable to the laundries nearby, Arvin says. “Even though we’re offering a much higher quality product, we didn’t want to be perceived as the higher priced place.”

This is just one example of how the market can influence a laundry’s pricing strategy. But other factors are at work, too, and there are some basic premises that the self-service laundry operator should keep in mind when establishing or changing vend prices.

Should You Announce a Price Change?

How should a laundry owner approach the topic of pricing with his customers? Should he alert them prior to implementing a price change?

Kevin Hietpas, vice president of sales and marketing for Dexter, says he’s seen many owners have good luck increasing prices when they are up front with their customers. For example, if you’re planning to raise prices due to higher utility rates being charged by your municipality, post a couple of articles from the local newspaper about that topic. “Customers, as much as they may not like it, understand that kind of stuff,” he says.

“As consumers, we routinely respond to price increases with little or no advance notice from the stores or makers of the products we buy,” says Gary Gauthier, national sales manager, vended laundries, Milnor Laundry Systems. “Consumers in vended laundries are no different. Store owners and their staffs should be ready to carefully respond to customer questions about the higher costs. But the vast majority of the store owners that I’ve spoken to hear very little feedback when a modest price increase is enacted.”

He recommends raising prices on different types of machines at different times, instead of implementing a sweeping, storewide increase all at once. “This puts the owner in the position of continually assessing vend levels while customers aren’t shocked when costs go up.”

“The most important thing to address regarding a change in price is why,” says Kent Walters, national sales manager for Maytag/Whirlpool Commercial Laundry. “Customers need to understand why prices are fluctuating. Typically, price increases can be attributed to the cost of utilities. Store owners have to stay ahead of the cost of doing business, especially in the laundry industry that depends heavily on the use of utilities.”

“The owner ends up explaining it one way or another,” Hietpas says. “That’s why I think it’s better to address it on the front end with as many facts as possible rather than feel like they’re playing catch up by explaining it on the back end.”

Shifting Prices Too Frequently?

Vending technology has enabled owners to change prices on equipment easily—during slow hours or days, for example—but care should be taken to not change prices too often. This can turn off customers, Walters says.

“Yes, altering vend prices often is not a good practice for owners looking to be successful and grow their customer base,” he says. “If customers are unsure what price to expect on a regular basis, they will look for a store that’s more consistent.”

Consistent pricing makes things easier on your customers, Hietpas says.

“A lot of customers are very good at doing the basic math in comparing between (machine) sizes,” he says. “If (one machine is) twice the size of a machine, it should be roughly twice the vend price. A lot of owners like to have rational multiples between machines to make it easier for customers to make decisions about which machine they might want to use.”

Customers are more sensitive to how long it took and how much it cost to dry than they are to small changes in wash prices, Hietpas says. “It’s the last piece they interact with, so it just seems to stick in their memory a little more.”

Tomorrow: Your competitor has undercut you – now what?
Click here for Part 1.

February 16, 2012
Coin Laundry Pricing Strategies (Part 1 of 3)

CHICAGO — Phil Arvin and his two partners opened their first Maytag-equipped coin laundry in Memphis, Tenn., last March. The 5,000-square-foot attended store is equipped with new energy-efficient 60- and 80-pound washers that are much larger than those in competing stores and thus could command a higher vend price, Arvin says.

But the group followed the suggestions of distributor Justin Laundry and established prices that are comparable to the laundries nearby, Arvin says. “Even though we’re offering a much higher quality product, we didn’t want to be perceived as the higher priced place.”

This is just one example of how the market can influence a laundry’s pricing strategy. But other factors are at work, too, and there are some basic premises that the self-service laundry operator should keep in mind when establishing or changing vend prices.

Criteria for Setting Price?

Upon what criteria should a laundry owner base his or her wash and dry vend prices?

“It really comes down to two issues,” says Kevin Hietpas, vice president of sales and marketing for Dexter. “No. 1 is what’s happening to his costs. How have costs impacted the viability and profitability of his business? Owners should have a good sense of where their business is tracking from a performance standpoint.

“No. 2 is where is he competitively. None of us exist in a vacuum, so you want to understand, ‘I might want to get to a certain point, but as of right now the market won’t let me go there all at once.’ That’s a secondary concern, because I think if the owner is providing good value, it’ll be reflected in his costs. He’s not going overboard with what he’s charging, nor is he under pricing for his service.”

“We have a lot of ‘rules of thumb’ in this industry,” says Gary Gauthier, national sales manager, vended laundries, Milnor Laundry Systems. “When it comes to pricing, it’s typically recommended that gross monthly receipts from washer/dryer revenues should be at least four times the monthly rent and at least five times the monthly utility expenses.”

A store owner needs to be aware of and factor in the competition’s prices when determining his or her own washer and dryer pricing, says Kent Walters, national sales manager for Maytag/Whirlpool Commercial Laundry.

“The owner’s goal should be to produce the best experience for the customer from ambiance to equipment and services—and the costs associated with washing and drying play a large part in this equation,” Walters says.

How Do Your Front-Load Prices Compare?

American Coin-Op surveyed its e-mail subscribers about their November 2011 front-load vend prices — their lowest and highest, and whether the prices had changed since the previous November. Those polled were not asked to identify machine capacities.

Results from the anonymous, unscientific StatShot survey show the lowest and highest prices varied quite a bit among the four regions.

In the West, customers could get a front-load wash for as little as $1.50. The lowest-priced front-load washes ranged from $1.50 to $3.75. Nearly 88% of these prices were unchanged from November 2010. The remaining 12.5% of respondents had raised their lowest-price wash during the 12 months.

The price range for the most expensive front-load washes in the Western region was $2.75 to $7.89. Every respondent reported these prices were unchanged from a year earlier.

Low-end front-load prices in the South ranged from $1.75 to $4.25. Approximately 62% of respondents had kept the same low price since November 2010, and 31.6% had raised the price. Just 5.3% had lowered the price.

Southern customers faced the widest price range of all regions — $2 to $17.50. Nearly 58% of operators reported having raised their high-end price since November 2010, and the remainder were unchanged.

In the Northeast, the most inexpensive front-load prices were $1.50 to $5.50. Just 6.7% of operators had raised their prices in the previous 12 months, while the remainder had kept the prices unchanged.

When it came to the most expensive wash, Northeastern customers were paying $2.25 to $8 in November. Approximately 21% of respondents had raised this price compared to November 2010, while the remainder had stood pat.

The most inexpensive front-load prices in the Midwest ranged from $1 to $4.50. Just 5.9% of operators had raised their prices since November 2010, while another 5.9% had lowered them. The remainder had kept prices unchanged.

On the high side of front-load prices, Midwestern customers faced a range of $2.50 to $8.79 in November. Some 12% of respondents had increased prices, with the remainder keeping the status quo.

Tuesday: Should you announce a price change?