Laundromat Owners Share the Pricing Philosophies They Utilize to Keep Their Self-Service Customers Happy – And Their Bottom Lines Healthy
[This is the second of a two-part series on vend price strategies for today’s self-service laundry businesses. Read Part 1 here.]
In the first part of this series, we asked some laundry industry insiders to weigh in on vend pricing strategies, as well as to share their thoughts on today’s pricing trends and the impact of payment technology on self-service laundry pricing.
This month, in the second and final installment of this series, a batch of top store owners divulge the key factors they consider when eyeing vend price adjustments:
Albert Bingenheimer
Neighborhood Laundromat
Midlothian, Va.
Payment Acceptance: Cash, credit/debit cards, and mobile app.
We maintain higher prices than our competitors. However, we offer a quality experience – focused on cleanliness, high-speed washers, cash and mobile payment options, and a neighborhood feel.
Our vend prices are based on our profit and loss statements, which we review quarterly, as well as competitive comparisons and, most importantly, our need to maintain profitability.
Over the years, our pricing strategy has remained the same. I try to alternate between price increases one year, with expense management tactics the following year. For instance, one year I’ll increase vend prices, and the next years perhaps I’ll lower water levels or find some other way to lower expenses.
Also, I plan to switch to a full-cycle dry pricing model the next time I need to raise dryer revenue.
Pricing Trends: In my market, it seems like the owners who are investing in and growing their businesses are increasing vend prices to continue that growth. Meanwhile, the “ZombieMats” are lowering their prices to attract business, and it’s not working. I’ve noticed the price gap widening between successful laundry businesses and less-successful locations.
Payment Technology: Transaction fees definitely are real, but customer convenience is king. What’s more, customers who use the mobile app seem to spend more. They don’t seem to notice the cash outlay as much, and they tend to use larger washers and dry longer.
Also, I’ve seen some customers come in with loads of laundry, fill up the machines, and then realize they didn’t bring any cash to the laundromat. With the mobile app, they can quickly register, add a credit or debit card, and proceed to do their laundry – rather than having to pack up everything, find an ATM, and possibly return later. It’s a definite time-saver for them.
Common Mistakes to Avoid: The biggest mistake is being afraid to increase prices and maintain profitability. Focus on small improvements for your business every three months, and demonstrate to your customers how your price increases are invested back into the laundromat. Once customers understand that part of the price increase is making the experience better for them, it’s a win-win for both of you.
Andy and Michelle Merendino
Suds Yer Duds
Carneys Point, N.J.
Our pricing strategy for our three small-town laundries is to be the high-price leader. We’re always the highest price and offer the best facility in the area. Pricing at the high end enables us to invest that extra revenue annually into improvements for our customers.
We raised vend prices last year, based on utility cost increases. We always try to include a visible customer improvement and an employee raise at the same time. This has been a long-time strategy for us, and we believe it helps with the acceptance of any price hike.
Our washer prices range from $4 to $10, and our dryers costs 25 cents for five and six minutes.
I see some stores offering free dry; however, we don’t like the free dry business model at all. I don’t see the benefit of it, if you’re offering balanced and competitive pricing. We also have several dry-only customers. We’re not going to waste our time calculating the cost/benefit analysis – when I see a machine spinning, I know that it’s earning money.
Payment Technology: We recently began accepting payment through a mobile app at one of our stores, and we plan to offer this at the other two locations as well. Currently, it represents only about 12 percent of the sales at that store.
Best Practices: I would encourage all self-service laundry owners to visit the other stores in their markets and check the vend pricing. It’s also beneficial to meet your local competitors and get to know them. With that said, I recommend always being the area’s price leader and striving to be the customers’ favorite laundromat.
Beck Miller
LaundroLab
Charlotte, N.C.
Payment Acceptance: Cash and cards via a mobile app.
You need to be aware of your expenses, your competition, and your value proposition. As long as you’re balancing, monitoring, and maintaining those three things, you’re going to ensure that you’re priced appropriately.
Our pricing strategy hasn’t changed over the years, but our prices have. The cost of utilities, labor, parts, and so on have gone up more than normal over the last couple of years. As a result, we’ve had to adjust prices to maintain our margin goals.
Pricing Trends: Prices are going up on just about everything in every country right now – not just in the U.S. and your local market. However, many laundromat owners seem hesitant to adjust their vend prices.
Depending on the size of the machine, the gap between our stores – which typically are at or near the top in terms of price within a market – and the lowest-priced laundries can be anywhere from $1 to $3. Lately, this gap has been increasing, as many owners have not adjusted prices to keep up with inflation.
The full-cycle dry pricing method also is trending is some markets. We’ve tested it in our stores, and the feedback we received was predominantly negative. Following the test period, we went back to the quarter-per-minute method. This isn’t to say this model won’t work in other markets. In fact, I know many owners who rave about this dryer pricing structure.
Free dry is another method we view as a gimmick. Owners who offer “free dry” have to increase their washer prices proportionally to offset the lost revenue from their dryers. It’s a marketing ploy that deceives the customer into thinking they’re saving money, when in reality that’s not the case.
Payment Technology: There absolutely are pricing benefits to some of today’s non-quarter options. The more granular control you, as an owner, have over pricing, the easier you can make adjustments to those prices. By having a payment system that allows you to accept payment in non-quarter increments, you can raise prices more subtly by pennies at a time, rather than being held to multiples of 25 cents.
Common Mistakes to Avoid: Don’t get into a race to the bottom. Remember, even if someone is 50 percent cheaper than you, it only amounts to a few dollars, depending on the washer and dryer size. Yes, laundromat customers are price-conscious, but they also appreciate being taken care of. If owners are providing a high level of service to their customers, they should price appropriately so that they can maintain that level of service.
Travis Unema
Brio Laundry
Bellingham, Wash.
Payment Acceptance: Currently, we accept coins, loyalty cards, credit cards, tap to pay, chip pay, Apple Pay, Android, Samsung and others. And app payment is coming next. Also, our POS software enables customers to pay upfront, and we can start the machines for them – which is clutch, if a machine has a coin jam or an out-of-service card reader.
I price my self-service machines to maintain a 10 percent gross utility cost. In other words, if a wash costs me $1 in utilities, I charge $10 at minimum for that wash – with consistent yearly increases. For soap sales, I charge 100 percent over the wholesale cost.
Over time, our pricing strategy has changed but the goal is the same. Finding data that is easily measurable is the most effective way to set prices. For me, measuring my utility cost, versus gross machine income, is how I set my vend prices.
Pricing Trends: As a price leader in our local market, the price gap between the various qualities of laundromats is increasing. ZombieMats with toploaders cannot compete with new, efficient high-speed equipment. Customers will pay more to save time in their days – so the price gap can be as large as $3 to $5 per wash.
Payment Technology: Cards and digital payments are fast and easy, but there are costs. Transaction fees, monthly fees, deposit fees, chargebacks and more. Knowing what percentage those fees represent makes it much easier to set prices. For example, if you have fees at 5 percent, your utilities cost 10 percent, and you take in $10 on a wash, you quickly know your costs.
Today’s technology provides accurate data and customer options. With quarters seemingly are on their way out – especially as prices increase – and consumers continue to use their phones for more and more transactions, laundry owners need updated payment options.
Common Mistakes to Avoid: Set your profit margins and stick with them. Have you ever seen a gas station lower its prices and cut into its profit margin?
Matt Langa
Seattle, Wash.
Payment Acceptance: Quarters, dollar coins, and mobile payment.
Vend price is tied to water consumption and length of cycle. The customer pays for extra water and extra time. We offer three tiers, and hot water is “free,” only because too many pricing options get confusing.
Drying is X minutes per quarter, depending on the size and popularity of the machine. The more popular dryers are more expensive, with the thought that it encourages customers to balance usage to less-favored machines. For instance, the upper pocket is more expensive than the lower pocket on stacks.
Philosophically, we are committed to raising prices every year, even if it’s just a little. We want the customer to expect it, anticipate it, and plan for it. We want to be seen as a friendly and welcoming store, but it’s extremely important the customers (and employees) recognize that it’s a serious, well-run business, too. Sound business decisions can be difficult on some, so setting the tone of a serious, well-run business helps everyone adjust during an unpopular or difficult decision. We raise prices in February and March, when it’s far enough from the money shock of surviving the end-of-year holidays. By this time, we’ve also got a good sense of any rate increases from our suppliers.
Pricing strategy must come from the targets you set for your forward-looking balance sheet and profit-and-loss statement. Pricing, expense management, and annual projects are adjustable tools executed to achieve those targets.
Thinking about vend pricing is a great time to have the difficult but very necessary conversation about whether the business is healthy and should continue. After all, 65.5 percent of businesses fail after 10 years, according to LendingTree. It’s best to accept reality and control the exit, if necessary.
If the business can’t hit the upcoming P&L targets, based on a realistic market vend price and traffic volume, it’s time to think seriously if you have the ideas and skills to execute a turnaround. It’s easy to unknowingly discover you’re in a death spiral.
If you need a 50-cent increase but believe the market can handle only a 25-cent hike, you’re slowly driving your business to insolvency. Each year, it gets more difficult to get back on track. You have to solve the puzzle of getting that 50 cents.
Pricing Trends: I don’t want to be influenced by the market. If I let the market influence my pricing strategy, rather than my P&L targets, the market runs my store, not me. When the market stops supporting the prices I dictate, I need to question my ability to run the business and whether to exit. If I can only hit my targets through expense management, that’ll be a flag that my business is declining.
Payment Technology: We’re stuck on quarter increments for cash. However, we do have separate cash and credit prices, just like gas stations. Although customers rarely ask about this cash/credit price difference, having gas stations as a public example helps to explain it. And it’s only a few cents different.
Most likely, we’ll always accept coins, because too many customers prefer cash only, though I’d like to get rid of all cash payment.
With regard to payment technology, it’s dangerous to let personal preferences affect your strategies, but I’ve made one exception here: I won’t accept laundry cards – even though I believe it creates a better pricing model. As a customer, I recall the frustration of leaving money on a laundry card; I felt trapped and resentful because it was “my” money, not the laundromat’s money. That negative opinion reflected on that business, even if it was a beautiful laundromat. This is a personal philosophy counter to a better business strategy – I recognize that, but I’m willing to accept it… for now. I don’t want that frustration or negative opinion associated with my store.
Ultimately, I’d love to be cashless and revisit my commitment to cash each year. While accepting cash, I’d love to be dollar-coin-only, but with the commitment to raising prices each year, the math on pricing strictly in dollars is a puzzle I haven’t solved.
Dryer Pricing: We don’t offer full-cycle dryer pricing, but I think it’s a better plan than what we offer. I think of full-cycle dry and free dry as similar concepts, either of which result in a better laundry experience for the customer, because the customer knows the full and complete price for doing a load of laundry.
Our store will probably see full-cycle drying before free dry. The ultimate goal is to have one price the customer knows walking in – a single transaction.
As far as free dry, from a pricing perspective I think it’s absolutely the right answer. The customer should know the full and complete price of washing their clothes before they even start. It’s a puzzle we’ll explore and solve some day.
Common Mistakes to Avoid: It’s critical that your business be profitable to the goals you set. In capitalism, businesses need to go under so that stronger ones can emerge. No business lasts in perpetuity exactly, because capitalism requires relentless engagement. We tend to get complacent when our model is working “well enough.” But, if you don’t run your business with the same energy and focus as when you started, it’s going to cost you somewhere along the line.
Mark Vlaskamp
The Folde
Houston and Austin, Texas
Payment Acceptance: We still have one store that is a quarter-only store, and we can’t wait to get a new card system installed. We’re big fans of the simplicity card systems provide.
We’re a bit different than a typical laundromat. Since we are almost always running production shifts for our wash-dry-fold and pickup-and-delivery business, we use self-service pricing as a tool to incentivize customers to use the self-service laundromat when we’re not as busy with our production staff. Most laundromat owners offer discounts on machines Monday through Friday to attract customers to do their laundry during the week. We’re the opposite. We offer discounts and sales on weekends only. We want our self-service customers to come in on weekends, since we’re not running WDF production during the weekends before 7:00 p.m.
Pricing Trends: In our markets, we are noticing self-service pricing going up. A year ago, we were the price leader by a wide margin. Since then, we’ve seen the local market increase their prices. We’re seeing the same trend with PUD pricing.
When increased prices in March 2022, we put ourselves far ahead of the competition’s pricing. However, we’ve recently found that the gap in pricing between us and some local competitors has shrunk, as their prices have increased, too.
We don’t offer free dry. When the utility company starts offering free natural gas, we will start offering free dry.
Common Mistakes to Avoid: One mistake we made early on is not recognizing that price signals value. Not all of your customers are low-cost price shoppers. Higher prices signal better quality. I don’t think the typical laundromat customer gets enough credit for recognizing this. They know what they want – and most of them are OK paying for it.
