Are you afraid of raising your shirt price? I think that many drycleaners are, although I admit that it seems to be not as bad as it used to be. There are hundreds of drycleaners that now get well over $2 for their shirts, and there are many over $3. This is good news for the industry, not bad. Still, some seem insistent on the "loss-leader" mentality and, frankly, I just don't get it. This lowers the perceived value of your laundered shirt product and thereby doing nothing to develop your business. For some, the fear of losing customers due to overpricing is omnipresent.
This is where you need to cut yourself some slack. Give yourself a little bit of credit. For one thing, you are reading this. Don't you know how many cleaners don't read anything about the industry? Don't you know how many did not go to the Clean Show this past summer? Don't you how many cleaners are too busy to learn how to improve their business? If you are reading this, you are more likely a leader than a follower. It's time to step up to the plate and get some credit for this. You add value to your product because you want to improve it. Your customers should not remain unaware of this. I have met many drycleaners confidently assert that they do a very good shirt. Some even proclaim the "perfect shirt". Still, perhaps because they have not made their customers acutely aware of the investment in time, money and equipment that they make in order to proclaim such, they hide behind the fear that they will lose customers if they raise their prices ten cents per shirt. I think that is nothing short of absurd. I have my shirts done by my drycleaner and I have no idea what I charged. It isn't important because the price is not the deciding factor that leads me to this particular drycleaner. If you advertise a low shirt price, you make that the deciding factor, at least for some. I don't think that price should ever be the deciding factor when choosing a drycleaner or a shirt launderer. We offer far too many other features. It is those features that need to be brought to the forefront.
Maybe you feel that those other features are not important to your customers because they are rather cosmic and intangible. When you are in a service business, many facets are going to be intangible, by definition.
- The smile at the door
- The greeting by name
- The shirts and drycleaning done on time
- The clean, neat, uncluttered call office
The professional image. That is what customers want and are willing to pay for and you must believe in this. First, you need to be certain that this is what your customers "consciously or sub-consciously" desire from you and stop thinking about the price thing.
There are people before you that have feared the same thing as you may fear and somehow overcame the fear of pricing themselves out of customers.
I was talking with the drycleaner of a client in the Northwest. Years ago, he had his own shop in Juneau, Alaska. He did ok. He paid himself a salary and made an acceptable, although not terrific profit. With his eye on making more money, he told his office help to raise all the prices for drycleaning and shirts five percent. But, he later discovered that there was a problem. They made a drastic mistake. The price increase did not affect customers. No one seemed to notice. And profits more than doubled. Doubled? Yes. It seems that the office personnel were not so good at math. They accidentally raised all of the prices fifteen percent. The customers at this cleaners did not patronize his store for price. They patronized the store for other reasons that had nothing to do with price.
In 1991, I had already amassed over a dozen years in this business. I was a wholesale shirt launderer in New England. At eighty cents per shirt, I was typically priced. My partner and I believed that we were a cut above our competitors. Our volume of 22,000 shirts per week and our customer count of 108 wholesale customers - certainly indicated that we were the vendor of choice. Getting customers and volume was not a problem. Making a profit seemed impossible. We eventually came to terms with the fact that we were drastically under-pricing our product and we had moved far too slowly. We should have routinely raised our prices to keep up with our expenses. We hemmed and hawed until it was do or die time. Our average income per shirt simply did not pay the bills. Working backwards, that is knowing our costs very well and how much we needed to cover them all, we came up with our new price per shirt. It was ninety-six cents per shirt. This included a very small cushion. Call that profit if you like. We called it a joke. The fact that our price increase turned out to be exactly 20% was merely a coincidence. At eighty cents per shirt, we were priced like our competitors. There were a couple of small operators that charged less, doing shirts on-the-side in their drycleaning plant. But that was ok. To compete with them, all we had to do was play the "we are the specialists" card.
I say that almost as an afterthought or a sidebar, but it is a very important point. The 5 to 15 cents difference in price was justified by something cosmic and intangible. That intangible was that, as a wholesaler, the retail drycleaner was my number one customer. If you were a customer, you owned a small drycleaning plant or a drop store and I never competed with you because I did not do retail. You were my one and only priority. This had a lot of value for my customers and it had nothing to do with the cleanliness of the shirts, the press job or the nice trucks.
Well, anyway, I digress. I was forced to raise my price drastically. In fact, a full 20% more than what the going rate suggested was "fair". So what happened? I lost 20% of my business. I wasn't happy about this at all. Not even a little. I had hoped that my reputation would sustain me and everyone would see the value that I had brought to the table and not want to part with it at any price (so to speak). Coming to terms with losing 20% of your business does not make for a happy day. Twenty percent of my business was from far more than 20% of my customers. It might have been a third or more. I lost dozens of customers within days. That sucked. If there is another way to put that, my editors with re-word.
After the initial shock of learning that my customers did not think that I was worth more, I realized that I had nothing to be upset about. I had lost 20% of my business, I had reduced the number of trucks on the road by 33% (from 3 to 2), I had reduced drivers also, from 3 to 2, plant payroll was reduced by 20%, as well as every other variable cost AND MY INCOME REMAINED THE SAME!
Still, we dramatically swung open the door to all sorts of competition. Small players in the business, on one day, got more new customers than they could previously manage to acquire in years. If they had been smart, they would have seized the opportunity to raise their price, but they did not. They did not have confidence in their product. We were certainly the Goliath, but in their heart of hearts, they did not believe in their product enough to seize the moment.
So, that's the end of the story.
What happened later is the moral of the story. We got nearly all of our business back. All at the higher price. Cool, huh? Why? Because we believed in our product and we knew that we were better than our competition.
Our customers just needed to take a time-out and learn that for themselves.
"If you do what you've always done, you'll get what you always got."