Impact of price increase

[Anonymous]

On Jan 2 I effectively raised my dryer prices by going from 8 minutes to 7 minutes. I was curious as to what the impact has been to the droping of time. What I wanted to figure out was if people would just use less time, or would they actually incur the cost of one more start to dry their clothing thus giving me a revenue boost, as opposed to just a cost reduction. What I am talking about is if they were doing 4 starts (32minutes) would they now use 4 starts at 28 minutes or would they go to 5 starts for 35 minutes.

It is difficult in the real work to calculate this. The assumption I made in my analysis was to calculate starts per pound equivalent of washer usage for a period before and after the price change. To do this I multiplies washer starts by the rated capacity in pounds of the washer. I realize this is not a perfect method, but it was the best I could think of to balance dryer usage based on load size. And the results are------------->

When dryers were at 8 minutes customers were using 0.18738 cylces per pound. Since going to 7 minutes they are using 0.21590 cycles per pound, which represents an increase in cycles of 15.2% which rougly equates to the 12.5% drop in time per cycle. So, the answer appears to be there is no drop off in dryer usage so the impact of the time change is to increase dryer revenue by roughly the full amount of the change.

If anyone has a better way to analyze the data I'm open to suggestions.

[CharlieS]

Kirby -
You once questioned why my cycle counts on dryers were less than the number of quarters taken in. It was precisely for this reason, to compute the average dry cost. I consider the average dry time per wash load to be one dry cycle.

I add up my total washer cycles and use that to divide my total dryer income. This gives me the average spent per dry, assuming that 1 wash = 1 dry. Yes, in reality I have people who just dry, or just wash, but I think it works out enough to give me a generally consistent average spent per dry, which is another way of asking your same question. I have computed this number routinely for quite a while, and it is relatively consistent week to week, usually within a 5% range. If your price increase did not result in more quarters, than they are going with less dry time (lower cost to you for the same income). On the other hand, if total income increases, then your customers are spending more (higher income at the same cost). Generally, we are better off with higher income than lower cost in this scenario.

Plus, this is easy for you with your card system!

For others, you can compute your total turns or cycles by dividing the income for a group of machines by the average cost per cycle.


Charlie

[Anonymous]

The reason I put it on a per pound capacity basis is that my washers do not all vend at the equivalent price per pound. I charge substantially more per pound for an 18# wash than for the larger washers. Thus, to just equate washer to dryer income would not take into account that on some days there is a significantly different mix of equipment getting the bulk of usage.

[Fred50]

Kirby,

Have you had any customer complaints / comments?

How do you now compare with your competition on minutes per quarter?

Did you consider going up in price and leaving the time the same? - taking advantage of the card system flexibility.

Thanks!

[Anonymous]

I went up in price with the card system last time, I was at 28 cents for 8 minutes, now at 28 cents for 7 minutes. One competitor is at 25 cents for 7 minutes, while another is at 25 cents for 6 minutes.

[Lar Hylobates]

Kirby,
I calculated mine in the same way when I went from 12 to 10. I increased revenue by the same ratios as the difference in time.

[Kitty]

How many have lowered their dryer times? It seems it is time? Anyone yet to make the move? To what? Anyone make the move? How did customers take it?

[vohraajay]

I'm little confused on the calculation method. What does decreasing the dryer time have to do with turns on the washer. I realize it may some indirect effect(i.e. customer going elsewhere as a result of decr. dryer time). Don't people have customer that only come to dry their close? Am I the only laundromat where people wash their laundry at home and then dry at my store - more so in the winter than in Summer(can dry naturally).

since people are animals of habits, they must go to the same store each and every week. Why not measure your turns on dryers for a quarter(3months), if you're not already doing that, and then measure the effect after the dryer time decrease. Also, grab a gas bill before and after and measure the effect. Wouldn't that give you a greater barometer for decreasing dryer time?

ajay

[Anonymous]

I have never seen a customer come in to dry only, so that is not an issue. The point I was trying to figure out was how would the decrease in dryer time impact the operation. There are several potential outcomes that are possible.

For instance, if people were previously using 4 cycles at 8 minutes per cycle (32 total minutes) it is quite possible that on average their clothing was actually dry in only 28 minutes and the dryers ran for an additional 4 minutes. If that was the case, then with the time decrease they would continue to use only 4 cycles (now 28 minutes) and the net impact of the change would be to leave revenue unchanged but reduce gas consumption by a very minimal amount. I say minimal because there was no more water to absorb and the clothing was already at the set temperature so it would require very little gas to maintain that temperature for the rest of the cycle.

Another possible outcome would be that after 28 minutes their clothing would not be fully dry and they would now have to use 5 cylces rather than 4. Thus, more money will flow to the bottom line as gross revenue is up while gas expenses are up, but probably only slightly.

The reason for equating this to washers on a pound equivalent basis is that from one day to the next a very different mix of washers is used. If you priced all your washers at exactly the same price per pound (which I do no) then you would not need to worry about this step.

Lastly, looking at gas bills does nothing to answer the question as there are too many variables. Usage is never the same month to month, and the outside temperature has a big impact on the amount of gas needed to heat the store.

[anonymous]

Couldn't you come with the same conclusion if you calculate the ratio of Avg Dryer Revnue/Washer Revenue before and after time change on dryers?

[Anonymous]

No because the mix of washers used is different on any given day. My 75# washers vend for 10.52 cents per pound while my 18# washers vend for 13.28 cents per pound. That's a 26% difference in revenue per pound of wash.

[anonymous]

I was thinking that different mix of washing machines would produce different revenue for washers. Since you would be calculating the ratio of Dryer Revenue to Washer Revenue, It should give you the indication of the trend. But you're right, I guess you could come up with the same washer revenue with different mix of the machines.

[mike]

I have a headache from trying to figure this out !

Having a card system has given Kirby too many figures to play with !

You charge what the market will bear.
You charge a little less than someone who opens a new store.

I do my accounting on my fingers and toes.


p.s. I don't see what was wrong with the horse and buggy :-)

[Lar Hylobates]

Mike,

your way works fine...I do the numbers so that I know EXACTLY what, why and how. This helps me to decide the next move rather than guessing again whether the market will or will not bear.

[CharlieS]

Kirby -

Compute your average cost to dry per wash cycle over a longer period of a week, rather than daily. The differences you mention will work themselves out.