Price Leader?

[pete f]

As Kirby posted, a mat can do well being a price leader. And as have said, it is not my style. Has anyone every lowered price and gained business trying to steal back business becuase of a new store nearby? My store has been around for 20 years, but I am comming up on my 5th year of owneship of this one soon. I am doing better than last year, but the new store has sucked up some volume I counted on getting becuase of the remodel. I am seriouly considering a "customer appreciation" sale which would last about a month, maybe longer. I would take prices down about 25% so it is more than a quarter difference.. Actually back to to about what they were 5 yrs ago. I would look for a 40% volume increase, (would be a net 25% from todays' price) as I was at that level just before the new place opened. I know the new guy is struggling much harder than I ever will, so this may force him to lower prices which might put him under quicker. I know the fight money with money is not a great business plan, I am just asking if anyone has tried it and what the results were.

[Kitty]

I heard you never want to go lower once raising prices, but hell Walmart gets away with it. You can have a "roll back the prices" promotion. However, when we had the 1st mat enter our world, we added what was necessary to compete and started to be very customer service oriented, even more than we have always been. We added some great liitle perks, as a Daves Dirty Dozen wash club, after 12 washes, 13th is free, up to 6 bucks. We also have weekly wash winner that must be notified by mail. I have a very extensive clientelle list and I am able to track where they are from. Many, many come past both the new mats that have opened in the last 5 years.

I beleive one promotion that did us so freaking good, was an unlimited free wash for a full weekend. There was an enormous response, and after the remodel last year never knowing what the added revenue would be there has been almost a 50% increase. Customers love free, love to flock to free stuff and will greatly appreciate the free wash from the lonely maytag man! It is a way to get them back in your door, and a way to gain customer loyalty!

[mike]

PeteF

I haven't tried it, so this is just an untried opinion:

Unless your volume is very low, I don't think you can raise it by 40%, I just don't think so !

Your right, you can make the big guy bleed a little more, but as people (including me) have said before on this board, These big new aundromats rarely actually close, they just change owners at lower sale prices.

I have a guy down the street from me who was charging 50¢ a wash for tops (that's 38¢ U.S. !!) I was annoyed, he probably got 10% of my customers. I ignored him. After about a year, he went to 75¢, after another 6 months, he just went to $1. I am still at the $1.50 for tops that I have been for eight years. I still ignore him.

[Jim F.]

Pete,

I tried something a few months ago that is a little different. I just completed a remodel at one store which is unattended and added quite a few 40lb and larger machines. I have tried advertising in the paper in the past and never gotten any results.

I have some Maytag Neptune and Topload machines with the new computer. I programed them to be .75 wash from 10 AM - 2 PM, Tuesday, Wednesday and Thursday. I just put up a few signs in the laundry and no outside advertising at all.

My store is getting really busy because of it. I'm getting people in from all over that had never been there before. They are obviously being drawn in for the cheap sale, but upon seeing the larger washers, they are in many cases using them instead. Sometimes they use a couple small ones and some large ones. Sometimes all the smaller ones are taken and then they still use the bigger ones.

I figured on the Neptunes I'm still making money at .75 and whatever on the tops. I only have four tops anyways. I'm making far more overall from the new business and repeat customers to make it worth it. I figured from 10 - 2 there could only be 7 washes per machine if they ran them back to back. Then I compared that to how much I would 'give away' from a coupon and it seemed about the same.

It has worked really well for me and now I am trying it at another store.

[Howard]

There are always unintended consequences and results when you start a Price War. How different is it from "Free Dry"? And, we all know some of the long lasting and detrimental results of that "promotion".

You aren't going to get him to close up. The mat will always be there. You're just going to encourage him to fight back. That involves risk.

[Kitty]

Isn't the intention for promotions or sales to increase traffic? Walmart does it, HT and Lowes foods, always has buy 1 get one free every week in the sales flyers. These enticements are to lure the shopper into their doors versus their competition. Do your wives shop the same store each week? More so than not I do too, but many many times I have been lured by those sales papers. The enticements are to gain traffic and hope you will gain a loyal customer from it.

The average laundry customer is underprivelaged and economically challenged and a free anything motivates them. Many appreciates the "deal" or the "freebie" by being loyal to the stores that give them a break.....

[Chuckels]

Kitty,

Stores that sell stuff as opposed to a service such as rental of equip use promotions as a loss leaders. The promoted item leads them to the store albeit at a loss but then the customer buys other items more than making up for the discounted item. Increased traffic is the goal however it is the additional purchases that are made that make it work. Perhaps Pete has ancillary income that would improve his bottom line but aside from this I think that there are never any winners in mat price wars.

And thats my 25 cents for 8 minutes dry.

Chuckels

[Kitty]

I don't think a price war is a way to go at all, but there are enticements that do work and can gain traffic, all without giving away the store.

[Anonymous]

Kitty, buy one get one free won't work in the laundromat business. It works at Walmart because people will buy more, stock up, etc... Just because you offer two for one people will not go and dirty extra clothing or decide that they will wash all their clothing twice instead of only once.

The only way it can work is if you draw customers from another mat, and then somehow manage to get them to stay after the special is over. During your special those that use a 35# machine will downgrade to two 18# machines - which means your existing customers will be generating roughly 1/2 the wash revenue you are currently generating. This strategy probably will not work, but that is only one persons opinion.

[Kitty]

I was using those grocery store enticements as examples, that enticements may draw customers into the establishment.

We have had great results with the promotion you, Kirby enlightened us with, as well as the Daves Dirty Dozen club. We offer free coffee in the winter, sometimes with donuts or some home baked goodies........ We have maintained the market share, even after losing the 20% gravy money after the 1st year the 1st competition opened, we have since gained most of the gravy back, and we have never felt a pinch after the 2nd comp opened last June. Some enticements do not cost a fortune, these "promos" can entice and retain a clientelle, of course as long as the establishment meets their criteria for doing business. We were always committed to customer service and customer satisfaction, but after the customers choices broadened, so did our committment to outstanding service.

When trying to gain some market share, the store owner has got to do something to entice a customer from a store of which the customer has been consintently doing business. It has been said many many times, that the average laundry customer is a creature of habit and usually loyal. So how does one gain the share from a mat that is successfully providing the customer the services they wish?

I have always felt that in this business the pie gets smaller and the work gets harder to maintain your slice. In Petes case, he has lost customers to the guy across the street, now, he wants those customers back. How does he do it?

Having his 5 year anniversary is a great opportunity to advertise and draw them back, find an enticement...........Find the other stores weaknesses and do much better than them and consistently provide your customers top notch services.

[laundryboy]

Kitty is right on about exploting the competitions weakness. As far as the Walmarts go, they can give product away that costs them next to nothing because they know the customer will buy other items in their store. High margin items. A laundry doesn't have a whole lot to offer to make up for the freebies. We all need the customer to come through the door, Walmart needs them to buy lots of things.

[Kitty]

Tis true about Walmart, but people usually do not mind going to these places. However these stores still use some enticements to gain traffic.

I hate laundry, I don't even do it. I'd say most people would say the same? If I was a laundry customer I would be seeking a clean place where I could get clean clothes. Location would be an issue, but atmosphere as well as bang for my buck would make me a customer. But, lets say there is no loyalty for me to do my wash a Jons mat, or Petes mat as neither one shows any preference as to where I do my laundry, so they don't care why should I?

Show customers you want their business, it may take some enticing to get them in your door but then it is up to you to maintain them as a customer.

[mike]

I have said this before, so bear with me !

I have done "flyer mailings" (actually hand delivered by me) that specifically target the areas immediately surrounding my competitor's stores.

I offer a free, or greatly reduced wash price to those customers,

I get a double bang for my buck: every customer extra for me is one less for my competitors. And I still get regular vend prices from everyone else. It works until they start photocopying the flyers for their friends who don't live in that neighborhood, then I had to switch to colored paper.

I picked this way, because my competitors are mostly un-attended, so they can't counter this special without reducing the prices on ALL of their washes.
(nothing personal, PeteF.)

[Howard]

Not a bad campaign, esspeically since it seems to work for you. However, I am curious. Why is it important to ensure that your competitor has one less customer as versus just getting the business?

For example, do you think you will hurt them as a business or personally? Force them to close up?

[Lar Hylobates]

I'm not opposed to Mike's campaign. Definitely too much work for not enough return, but I might have tried it 10 years ago. Now I'd rather own that store that they bitch about the owner never doing anything but taking the money out of.

Pete, do yourself a favor and don't lower your prices. If you are going to go under, lowering your prices aren't going to save you. If your store is doing enough to survive, it's simply time to spruce up the numbers and dump it on some sucker. Fill up that 250 gallon tank and go fishing.

[Anonymous]

I would have agreed that it is never a good idea to lower prices, until I was proven very wrong by a store that I saw earlier this week. It is a 4,000 sqft store that has been around for 30 years. Two years ago within a two week period two 5,000 sqft mega stores opened, one was directly across the street (90 feet away) the other is 2 blocks away. They charge "standard" pricing, are very nice and have lots of parking. They hurt him for two weeks, but customers came back as he was lower price. So, they lowered their price a little. He fought back and dropped his doubles to 75 cents and has been there ever since. He hurting them, and still doing fairly well by making it on volume.

Sure his store looks like crap and the equipment is run down, he does not put money into the store, but he is making six figures a year from the place.

[Kitty]

When you say he is making six figures, is that the mat revenue or his gross profit?

[Anonymous]

Profit!

[mike]

Howard, to paraphrase the godfather, "It's not personal, it's just business".

Sure I hope he'll close, I don't hope his family will starve, (just not have enough money to open another mat !)

Kirby, can we ever be really sure someone is doing six figures in profit ? He may do high volume at a lower vend price, but that doesn't always translate into big profit.

[Fred50]

Kirby,

I'm surprised at you! As impressive as it is making 6 fig's, how long can this guy last at this rate?

How much deferred maintenance does he have?

If he isn't putting away $$ for equipment replacement, then he is just delaying the inevitable. He is also putting excessive wear and tear on his machines with the low price, high volume approach thereby approaching the mass breakdown stage at a faster rate.

BTW, how is he making any $$ charging .75 for a double loader? I would think that his costs would run close to that if he's in NJ.

[Anonymous]

Mark, he IS in NJ. And I was surprised at this, but he does not run a mat that you or I would every take our worst friends clothing to. Yes he has lots of maintenance and the machines are crap. BUT he will not replace them with new, he will replace them with the ones that you or I no longer want. The ones he buys from a distributor that is scraping them. His cost of equipment is very low, and he does the maintenance himself.

You or I would not want to run an operation like that, but the point is that in certain markets you can make a killing doing business that way. The big guys mistakenly thought they could put him under, yet because of his lower cost structure he is hurting them, not the other way around. His customer base is so price conseous that the nice big clean laundromats are empty while he is packed. Its a strange world out there.

[Fred50]

Now it makes a bit more sense.

I remember reading in the journal about a couple of guys in Texas? who are doing the same kind of thing.

It is analogous to the person who buys only used cars (lets somebody else take the depreciation hit) and maintains them well and keeps them until they fall apart.

In some markets, this probably works great. However, as you mentioned, they have to be price-sensitive customers to accept the older equipment and lesser decor, etc.

I still think the clean, well maintained approach is the way to go regardless of vend price.

[Kitty]

The price concious consumer is everwhere.

However, the way this guy opertates he will have nothing to sell, at least not at the value he will think he can evaluate it to be.

[Fred50]

Kitty,

Yes, it is true that no one wants to (or in many cases can afford to) overpay for any good or service.

However, price sensitivity has its limits. Would you drive 30 miles out of your way to save $2 or would most people go to a place where they felt uncomfortable to save a few $$?

It's all a question of degrees.

[pete f]

The replies have been great, thank you. I am not sue I can remember them all to answer each of you. Because I am unattended some comenst will not help. I also only have 2 washers that i can set special pricing for time of day on, so that is not going to work. I COULD pass out flyers walking the neighborhood, but without some great deal in them it does not seem worth it. That would lead me to do the lower pricing and flyers could say discount self serve laundrmat or something. This is a possibility. We are talking about people driving 100 ft to save $2 or $3 , not 20 miles. Every watch gas stions across the srteet from each other? Keep an eye on the one with a few cents less per gallon. My little store is not going "under", it just does not make as much money as I expect it to for my time and investment. The ratio's are very good, but because of low volume the numbers are low across the board. I have mostly new machines and the mat is in nice shape, tile floors. a/c etc. I have 2 things the other guy does not, drive up parking and open 24 hrs a day. If I could pump the vloume up 20% it would make the place that much beter for me. Becuase the guy across the street is doing almost double what I am doing, at least watching his water meeter, and has not really taken away biz from me, as I am doing a little better than was doing last year, I see quite a bit more business out there than i thought available. I think he is taking alot form the apartments and condos, and now I want a piece of HIS pie. He gave away free wash for 2 weeks when he opened, maybe cheap wash and dry would be a good gamble for me. Thier really is no other mats around to get into a fray with. I could knock out 25% of my business and still make a tiny bit of money, say I never gained a customer. I am bored with the store and want the volume. So far I have just ignored things, but I tend to like to fight when I am ready, and I feel ready.
I will let you all know what I decide to do.

[Kitty]

As a laundry owner what would you do, if competition started sopping your gravy? What if 20% disappeared down the street to the "other" place, or the "new" place. Figure what 20% loss of biz would do to you financially. What would you do? Would you live with it, or try to regain the percentage lost? How would you do it either way?

[Kitty]

Looking for something else I found this thread, this is very intersesting as it seems to be a hot topic right now. Pete, what ever happened with this care to share your story? Its been several years not, but I when you have some time care to tell us?

Kitty

[pete f]

Looking for something else I found this thread, this is very intersesting as it seems to be a hot topic right now. Pete, what ever happened with this care to share your story? Its been several years not, but I when you have some time care to tell us?

Kitty

That was 2003. I held my prices for another year. Every mat around me was 25 cent lower. Then a mat remodeled about a mile away and started in with 75 cent tops and $1.25 doubles. I did nothing for another 6 months. 1 year ago Thanksgiving I lowered my big washers prices across the board to at least 25 cent less than anyone, put the tops at $1. The guy eventualy got to 1.25 washers, but that was only a few months ago. I kept my dryer price firm, 8 min a qtr ( now 6 min a qtr). My gross is up substainaly, as is net profits. I might raise prices a little soon just becuase I think people expect it, and my rent went up 20%:( I expect it to be even better in 06 becuase a big apartment complex nearby was empty most of the summer going thru a big remodel. It is filling back up with potential customers. I don't recomend doing what I did unless you think it will work. I should have been more carefull not being the highest mat around for so long. I don't know what the big one across the street is doing, it is for sale for about 1/2 of what he spent to build it.