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August 13, 2013
Performing the Price Increase
Chart Utilities as Percent of Gross
Determining the Target Vend Price
3 Things before you Raise your Prices
# of Quarters to Start
Newspaper Article Showing Rising Gas Prices
HK Video showing # of Quarters
Fun Stuff
HK Weekly Parts Specials

    

Featured Article


Price Increase?

 

  

 

 Huge Pile of Bills-2 

Bag of Quarters  

 

 

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Performing the Price Increase - Part 6.

 

In the previous HK Newsletter articles we discussed that Laundromat Vend Prices have kept up with inflation and also have kept ahead of Natural Gas plooked at an example of determining the Utilities as a percentage of Gross revenue.  We review this again and complete our article of Increasing your Vend Prices.

 

This week we conclude How to Perform your Price Increase.

  

We initially calculate the current utilities as a percentage of our gross. As you can see from our example this store currently have utilities at 32% of gross. That means we are only working with 68% of each dollar to cover all of our overhead (rather than the ideal 75-80%). This is not very good economic situation and we need to correct this.

 

If I can increase my vend price and be within 25% of my competitors prices, then I will raise my prices and track my revenue closely for the next 2 months. It takes approximately 2 months for the "market" to balance itself out. A couple of weeks to lose customers and then a couple more weeks to have most of them return. I use a minimum of an 8 weeks timeline to be safe and to be able to see a real trend in your Laundromat.

 

Please note that I have also tried to balance out my vend price per pound of washing capacity. Most Laundromat deeply discount the big washers. Why? The large washers are the most expensive to purchase, the fewest in number and are always in demand. According to supply and demand they should also be the most expensive. So why do we discount the large washers with lower vend price per pound of capacity? So why do we subside the large washer to our customers? These machines use the same proportion of water, gas, and electricity, why discount the big machines?

 

Also note that I did not touch my dryer vend prices. Customers seem hyper-sensitive to any reduction in dryer time and react negativity and emotionally to any dryer price increase. Customers, who are content to pay an extra dollar for a washer, go ballistic when they have to insert one more quarter into the dryers. There is no logic to this emotion, but people go irrational when they have to pay an extra quarter in the dryers. I don't know why? I would like to hear your theories.

 

So in this example I would raise the 20 lbs. washers from $2.50 to $3.00 a wash which is a 25% increase. The 30 lbs. washers would go from $3.50 to $4.50 or an increase of 28% and the 60 lbs. washers would increase from $5.00 to $6.25 which is a 25% increase. Wow. It seems like a huge increase. Would anyone be left coming to the Laundromat? Well it depends upon the location and the social economics of your market. If you are in a very poor neighborhood and close to several good Laundromat then you may not be able to reach so high in the first round of increases.

 

I can also tell you from first hand experience that I have done just as large vend increase and it has gone off without a problem.  

 
Chart Determining Utilities as a Percentage of Gross:          
          
 Mechanics of raising $ - 1
Determining the Target Vend Pricing:          
          
Mechanics of Raising $ - 2 
3 Things to do Before you Raise your Vend Prices.

 

When I execute any vend price change I do 3 things:

  

1.)        Make sure your store is in the best possible condition before you increase the vend prices. Don't give your customers an excuse to leave your Laundromat for the competition. A dirty, dingy Laundromat with out-of-order tags, will scare away more customers than a price change ever will. Run the best operation possible!!! Have the store professional cleaned before you start the increase.

 

2.)        I always let my customer know that there is a price increase and why I have to increase the prices. Remember your customer know exactly which dryer run the longest and which one is the hottest...don't you think that they would notice an increase in prices. Don't insult your customers, let then know right up front you have had to raise your prices and why. I place laminated signs right on my bill changes and I make the signs in English and in Spanish. I start by saying "Dear Valued Customers....".

 

3.)        I also place a laminated newspaper article from USA Today about natural gas prices jumping over 50% right next to my bill changers. Sometime you have to go back a few months (or years) to find the right article on the web, but then our timing is not always correct. This helps justify the price increase and most people will take this in stride just like the rapid increase in gasoline prices. It is a kind of the resignation that everything has to go up at some time or another.

  

The absolute best tip I have about raising prices is with the washer coin drop mechanisms. Some manufacturer have the "number of quarters" to start displayed on the drop coin mechanism. I have changed all of my washer digital coin mechanisms to read "Number of Quarters to Start". This honestly is a little smoke & mirrors but quickly how many dollars is 29 quarters? ...or 23 quarters? Most customers will realize that the price has gone up because it will cost a little more to do their laundry, but it is only a couple of quarters. Everyone can spare a couple of quarters.

 

By increasing the vend price from 17 quarters to 19 quarters...well it is only 2 more quarters (vs. $.50 or half a dollar). Change in our pocket is what we drop in the Duncan Donuts Tip Jar. Change in our pockets is not "real money"; it is just "nothings". But when we open our wallet, that is where the real money is stored. We are talking Dollars, not loose change; Dollars. So if we increase the vend price from 17 nothings to 19 nothings, so what...but if we increase it a dollar; WOO that becomes "real money". All digital drop coin mechanisms can be converted to the "# of quarters to start". Just change the "amount per coin to 1" and the "amount to start to the # of quarters" and away you go... We also place a label right next to the drop coin unit saying "# of Quarters to Start" both in English & in Spanish.

 

Once you have performed your price increase the last step is probably the most important. You need to go back and visit your competition and let them know that you have raised your vend prices and to what level. You my find that your competitor has been waiting for you to raise your vend prices, so maybe he will too. If not, then you ride the wave and take a look at your profitability in 8 weeks. Even if you loss business, you may find that you are more profitable now. With fewer customers you have reduced the utility costs, have fewer repairs, less wear & tear on the Laundromat & your equipment.

 

One of the side benefits of being higher in price than your competition is the higher quality of your customers. I have always found that the people who patronize the cheapest Laundromats are also the customers with the least amount of respect. Low respect for your Laundromat, little or not respect for keeping the Laundromat clean and these are the customers who always yell the loudest and complain the most. We should enjoy visiting our Laundromat without being harassed; send these "bottom feeders" to your competitors.

 

Please email me and let me know how you make out? I would love to hear of your success and challenges and any other winning pricing strategies.   Write me at karl@hklaundry.com.

P-touch Label showing the # of Quarters to Start:           
          
  #Q vs Dollars
Newspaper Article Showing Rise in Natural Gas Prices:            
          
  Newspaper Gas Increase Article 
Video explaining why HK recommends showing the # of Quarters:          
          
 
Washer Price Display in Laundromats - Number of Quarters vs. Number of Dollars
Washer Price Display in Laundromats - Number of Quarters vs. Number of Dollars
Fun Stuff ...  
        
   Iron Man Competition
HK Parts Specials:
HU70136101 Dryer Overlay   

 

Overlay for Huebsch Stack Dryers

List Price $ 35.76

HK Special Pricing $ 16.09 

 

  HU70298701 (Red rollers)    

   

Rollers for Huebsch / Speed Queen Dryers

List Price $ 30.89

HK Special Pricing $ 16.98

 

Call Anthony at 1-800-229-4572 or

email anthony@hklaundry.com

to take advantage of these

Weekly Parts Specials.

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HK is a family run business that has been providing "Un-Compromising Quality since 1967".  That is 46 years of trust, respect, and loyalty to our customers.  HK Newsletters is our forum to help educate our customers on important topics in the Laundry Industry.  HK is committed to educating newbies and veterans alike.  Please let us know how we are doing and (obviously) if there is any topic or subject you would like to know more about, please email me at karl@hklaundry.com.
  
Best Regards,

 

Karl Hinrichs

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