The Latest in Pricing Strategies: New Approaches for Today's Market

Transcript

Kayla Ivey: We're super excited to have you today. So, we're going to be talking about pricing strategy. We're going to take it kind of to the next level today. So, what are some new approaches in pricing for the car wash industry? Kind of how has pricing evolved over the years? What have we seen work and not work. And really taking you into 2025, what are the strategies that you should be implementing that are kind of the latest and greatest, what we've seen working really well for operators? 

So, super excited to have you. Thanks so much for joining. And just a quick note, if you have taken any of our pricing sessions in the past, our goal today is kind of to take you to a little bit of that next level or kind of the next evolution of what's new in pricing strategy. So if you have kind of that baseline, that's perfect. If you haven't joined us on pricing webinars or sessions in the past, we've got lots of content, so we'd be happy to send some of that out after the webinar today if you need a little bit more of a base level knowledge on pricing strategy. But we'll try to give you a little bit of a crash course today, so everyone can follow along and kind of learn what the the latest strategies are. You can go ahead, Chris. Looks like we've got quite a few join now. So just a reminder for a little bit of housekeeping here on how to communicate with us. So we'll be using the Q&A button at the bottom of your screen. You should be able to see that. The chat is going to be disabled, so use the Q&A. Only we see your questions or comments in there. So as we go along, we'll make sure to save probably 10 minutes or so at the end for questions. Hopefully you guys have lots of questions about pricing, so please just put those in as we go. And if for some reason we don't have time to get through all of the questions, we always send out responses afterward, so your question will at least get answered via email if we can't answer it live. And if you for some reason can't see that button, you can try hitting exit full screen and should bring it into a smaller window for you to be able to view. And then we'll be sending out as always a webinar recording and those answers that I mentioned to the questions. So keep an eye out in your inbox for the follow up. Go ahead. Thank you.

Let's do a couple quick intros here and then we'll kind of kick off into the content. So, my name's Kayla Ivey. I'm a Product Marketing Manager for DRB. And I'm really just here as your moderator today to kind of help Chris out and I'll facilitate the questions that you guys have. And I've had the pleasure of working with Chris for years now on revenue driving strategies for car washes, been able to see his expertise really come to life for so many different operators and how powerful pricing strategy can be. So, excited to have him here. And, Chris, I'll hand it over to you to introduce yourself and dive into our topic.

Chris Moriarity: Well, thank you very much, Kayla. And I can't stress this enough, please ask questions. Because any of you who have ever heard me talk before, I am your resident crazy person and I will get carried away. I have the complete misfortune of very much enjoying what I do, but the byproduct of that is sometimes I can move too quickly. So please ask for questions, clarity, depth around anything. But a little bit of background, as many of you know that I worked for SUDS with Kayla and the gang and the whole team at DRB for many years. 

I now work for Vontier, which is the company that owns DRB and basically all day long I do the exact same stuff just for more companies. And what's interesting about this industry is you have a lot of people who want to walk outside knowledge into this industry and start making recommendations. I like watching that. Has any of you who've been in this industry for a while know that there are no cookie cutter solutions. And just because it worked for companies X, Y, and Z who make whatever, that doesn't mean that it's going to work over here and many things don't. So we know that getting into this market and staying profitable in this market is not getting easier. Oh gosh, just the barrier to entry is what, 6X what it used to be. So, for these investments to pay off and for you to better serve your community, pricing kind of sits in the center as that linchpin that's going to give you control and in large part dictate your profitability and your ability to obviously grow, set up more sites if you want to. 

So again, this is intended, we're going to do a little bit of a level set, but then we're going to get into more advanced strategies as we kind of go along. Because the reality is pricing is a problem. The reason that it's a problem in our industry is you basically only have three ways to do pricing. One is cost plus. If I sell wood, I have what it costs me and I'm going to put a margin on top and that's what I'm going to sell it for. This industry has its entire history in what's called competition based pricing, which means you move to town, you look at what everybody else's signs say and you just go a little bit and a little north or a little south of that. There's a lot of that, you know? And it's almost like dominoes. Everyone's waiting for somebody else to move their price and they're going to follow them around. And if you really dig down as we have, you'll find that most of the prices that you see are based on absolutely nothing. Most often they're based if you're a smaller operator or a single operator, and this is going to sound a bit pejorative, but very often their pricing's based on ego. They just wrote the largest checks of their life to build this Ferrari style tunnel and they're expecting Ferrari style pricing. 

So when the recommendations come in and they're south of that, they really wrestle with it and they really struggle with lower price points. But think about this, what are we happy to pay for? We're happy to pay for quality, right? And that's what I hear all the time. We're way better than them. We put out a way better car. We're way better, yada, yada, yada, yada, yada, quality. Well, if you're new to any market, quality's not something you get to claim. Quality's something you've got to prove. And once you've done that, then sky's the limit. We've also had people who've intentionally gone into markets to be the Ferrari and they've tried to capture the top end of that market. And you're going to see why the next evolution of that's going to be very important, beause you're going to get stuck. No matter where you are, no matter how long you've been doing this, given a long enough timeline, all sites plateau. The reason for that is because you have a finite market. You only have so many people in the area that you can serve. But that doesn't mean that your revenue can stop growing. You have to find ways to continue to raise that profitability and that revenue, because nobody who works for you wants to make less next year, so you got to keep going. 

But the problem with pricing is that we tend to use blunt instruments, and we've heard it all, right? Shift them this way, shift them that way, up, down. And what they're usually making these decisions based on is traditional price elasticity. And what I'm not going to do is give you guys a huge economics and finance and math lesson. But the short of that is that if I move my prices down, I'll get more people to make up the difference. If I raise my prices up, I'll get fewer people, but they're worth more. That's the general idea around price elasticity. 

Now, if you start modeling this, which is what we spend our time doing, it was, gosh, it almost seems like yesterday when you had markets like Dallas, San Diego, Chicago, and Orange County, where a three and $5 entry wash was so common everywhere that everyone believed that the sky would fall. And the math said the sky will absolutely fall if you move those prices. Well, many, many did. Not that those places don't exist. But as people went away from those lower price points, the sky did not fall. People did not run away. And that's where we knew we had to find different methodologies because it was holding people back from really servicing their business, their investors and themselves. 

So, the obvious downside is that there's a lot of risk in moving prices. It's very difficult to undo a price change. That was not a great idea. Again, often those decisions were based on ego and competition. I've had people say to me, "Well, they wouldn't have those prices up there if they weren't selling it." No, they absolutely can. And it's incredibly common. It's literally only there to set themselves up, so you can compare and contrast the ego of the operators in large part, but we're going to move on from that. So, here's where it all starts. Now this is what we would call a histogram or a bell curve, right? But what's going to dictate your pricing in large part is the community that you serve. Every community unto itself is its own market. Meaning you've got a low end of the market, you've got the most people kind of in the middle, and then you've got this high side, right? So these lines that are going through our histogram here kind of represent our prices. And you're going to see this shape pop up because it's really core and central to what we're trying to do. So as I mentioned earlier, we've had people who come out and say, "We're just going to be the best of the best and we're just going to capture these people at the top." Well, okay, that's fine. But again, think about Ferrari buyers. How many are there? Not that many. And we'll talk about some of these, what we call top side plays a little bit. But if you think about it differently. Like once you've captured that top side, if that was indeed your goal, well, I need to grow, number one. But number two, how much of this market do I want to own? The answer's all of it. All of it. And what you need to think in your mind is that you're doing a disservice by ruling some of these people out. Everyone in town either deserves the quality you provide, or they don't. And so, it's almost a fundamental belief. So, we want to address this entire market. Now, it's no secret that as time has gone on, we've seen prices march higher and higher and higher. There was a time where a $10 entry level base price, everyone thought that that was kind of crazy. Now it's now it's very common. And so what we're finding in large part is yes, you might not be out pricing the middle or the top, but you're out pricing the bottom and you're out pricing some of the middle. Well again, how much of that market do I want? All of it. But how do you do that? And especially we're going to talk about brand as well, that if we think about brand on a spectrum, let's think about it in a retail capacity where some of you may have heard of a store called Nordstrom's, high-end fashion, expensive clothes. Clearly I don't shop there. And then all the way down to say Walmart. Well, everyone we always talked to, everyone wants to be Nordstrom's, nobody wants to be Walmart. Why? Last time I checked Walmart's doing really well, right? It's all about the story that you're telling, the people that you're attracting and connecting all these things to make sure that they're congruent. So we're going to come back to this slide or a similar slide very, very often because what it does is it answers a lot of the questions like, well, why don't I just shift all my prices over? Well, visually you can see how much of the market you're leaving behind. And that's one of the things that we measure. 

The other thing is we get into some of the advanced techniques. We always get the question, how many packages should I have? And the answer is, I don't care. The only thing I care about is what works best and what's the best fit based on your market? And then we'll hear stories all the time. Well, we know one guy, he just has one membership level and he's crushing it. Well, great, I don't care, right? The only question I ask is, are you making money? And are your members happy? And if the answer is yes to both of those, we'll keep doing it. I don't care, right? Like you're not setting up more packages for me, right? It's on behalf of the business. But now let's think of another case. Again, if you're not growing, you're dying. Every single person that works for you expects to make more next year. So one of the things we're going to talk about a lot is distributions. How are people voting with their wallets? So let's say that I've got 60% of my visitors are paying $17, 60%. So what percentage of them would be willing to pay 18? Well, that answer's not zero, right? But how much can you move? And that's exactly what we're going to get into is how do you measure that, How do you predict it? Because what this ultimately comes down to is price optimization, not price maximization. We're not trying to find the edge of what you can charge. That's a fool's errand because what pricing optimization does is it buffers us from an unknown future. Like I wish we'd all seen this inflation coming, I wish we'd all seen those labor costs that they were going to go up. And it forced people to scramble and make some, unfortunately poor decisions sometimes. But pricing optimization means this. That we're trying to find a way to move the revenue and the profit dial up without needing one more car, without needing one more member. How do you take what you have right now and optimize that? And that's another thing that kind of catches people off guard. So what it's often looked like, especially historically, we have had, I would say in the beginning, four to five packages was kind of the standard. And what kind of goes right in the face of common thinking. And there's tremendous amount of research around this. More choices is not better. But we're conditioned to think so that if I give people more options. And the pricing back in the day was ridiculous. Two, $3 increments from wherever to wherever. I mean there it is just a shotgun blast. And what we lose in that is control, meaning that we have a very, very narrow window for the person in the car to make that decision. 

So, you have to ask yourself, what decision do I want them to make? And what they evaluate has to be very clear and almost singular. Now, this case in front of you is a real case. They got themselves into a situation where, again, large workforce and they needed about a $5 increase. So when they came to us, their plan was to literally just increase all their prices by $5. And we asked them for some trust, we ran a whole bunch of models and said, Look, I think we can get you that $5 jump, but it's going to seem odd because believe it or not, we actually took down about 40% of their prices, meaning we lowered those, but the outcome was an additional $10 million a year. Now remember, we're not touching costing whatsoever, meaning that every additional dollar goes straight to the bottom. So that's 10 million in profit by actually lowering a good number of their prices. And as we look at these distributions, this is what we would call a linear distribution, meaning that it kind of goes in a straight line. Most people at the bottom, then as it gets more expensive, it thins out. And when people look at that, that seems rational, that seems normal. But if you look at the after, what we're really trying to gain here is an intentional shape by design. So now we've got 25% of people at the top happily staying there because tenure or how long somebody stays on a membership is very important. 

Now, as Kayla mentioned, go ahead and go to that Q&A box and I want people to guess. I want you to guess what the number, the highest number of packages that I've ever seen at a single site. Take a guess, put them in there. I'll give you 10 seconds. The answer is 45, 45 different individual packages because they set out to be something for everyone. Needless to say, I hope to never see that again, because unwinding that is is really quite tricky. But before we get into the next slides, again, what we're trying to do is gain control over these distributions. How are people voting with their wallet and how can we influence or nudge them into different buckets? So one of the things that's new in terms of the capabilities is I obviously live in the data world. And as you guys are collecting data all the time, we're finding new and interesting ways to obviously better utilize that. Now we talked about that histogram earlier. That represents your market. Well, let's play a game. Let's imagine that you set up literally 100 different options at $1 increments. And if you did this and ran this for a while, what you're going to start to see are certain peaks around where people like to spend. And we're going to get into this a little bit more, but as you do this in real life with people's sites, you can kind of see where these groupings are. But here's the problem is that that's a pretty sophisticated technique in terms of knowing where the timing is, avoiding redundancies and blah, blah, blah, blah, blah. What happens to most people is that it looks like this. The more data that comes in, there's something called the central limit theorem, which means that all the data does is start to reinforce the median, which isn't good or bad. It's good in the sense that what it basically does is shows me where my market lives, it shows me where my edges are, and I can build a pricing strategy around this. But what gets lost is exactly the where. 

So, since you can't see those peaks anymore, how do you figure out where to put them? And if you're new to a market, that's one conversation. For existing sites, your roadmap exists in your current distributions. Meaning if these are my prices and I didn't want to just make this super duper math heavy, so we just high, medium, low, just so we can kind of understand conceptually what we're looking at. So if I've got all of these packages here, 5, 8, 10, 13, 15. I got all these choices, I got whatever you want, right? I'm losing control. I need to find a way to be able to make a shift, gain more control. But I'm going to say this several times. 

Pricing is something that should be evaluated on about a six-month basis, not changed on a six-month basis, but it should be evaluated. And the reason for that is you might be missing opportunity. Think about that case that I just told you about before. They made an extra $10 million that year, right? What do you think they said? They all say the same thing. Gosh, wish that we'd done this sooner. We've changed prices at over 1500 locations and the system that we employ has a 100% success rate. It's never been wrong. Now, it's going to be. One day it is going to be wrong, and it's probably going to be real bad. But so far we've done a good job of taking care of people and a lot of that kind of came through trust. But the first thing that we want to pick up again is control. Because I know I'm going to change prices and then surprise, surprise, sooner or later I'm going to have to change them again. So you almost have to plan for the second change at the same time that you're planning the first. So if you follow this left to right, we go from our five packages and we've condensed them down to three. Now what I've done in this slide is I've shown you where the gap is. The strategy that we're using here is what's called a dominated alternative. And I'm not going to go into too much detail on that because that's a strategy that we've talked about for years, so if you're unfamiliar, grab Kayla, get some of the historic information. But basically I've got a $10 spread, which has tested out to work very, very well. And in the middle we took our previous top side, that 15, which had a high distribution, slid that down to the middle, then threw a new top, a new high end over the top to make our $10 spread. Now if this distribution was high, meaning like let's say that it was 60% like we talked about earlier, the whole goal is to place the new package close enough to the old previous top choice and have people spill over. And there's some mathematics and whatever that go on to calculate exactly what we should expect. 

But when we do a pricing change, we do a forecast. We forecast what we believe the gains are going to be, but we also forecast what the distributions are going to be. And it's that reassurance that is what keeps people comfortable because again, we fear the unknown and that how far can I push this? What's too far? And the goal is always to keep it safe. The expectation historically has been a minimum about $1.15 in terms of a bump on the retail side and starting right around $2 on the membership side since we know changing prices can get quite involved and if it's not worth it, don't do it. But we need to be looking at this continually because there's a good chance that many, many sites are leaving money on the table. Now, as this condenses, with this new high side, I've got my gap in the middle, I've got this gap up. The $15 price actually will do one of two things. Either A, it's kind of a non-choice. It's only there to set up the $18 choice. So time goes on, time goes on, time goes on. So now same prices moving down to the left here. We had something interesting happen in the industry a little while back and it was called ceramic. We all remember that, right? And in the beginning, if you recall the variable cost around ceramic initially it was all over the place, right? And so some people got excited and just jammed it in every package. They lost out a little bit on the value. But other folks, they just didn't know where to put it. Now here's the deal and we're going to step back from the mathematics and we really have to consider how people actually think. People spend in buckets. And unfortunately for us, man, we can put buckets wherever we want, but we know that those buckets are going to represent quality somehow. And we've had many, many operators work with really, really smart chemists to make sure that their process is indeed the best and that's what they believe that they're selling. Well, unfortunately that's not what people are buying. And I hear that all the time where even in, I think we surveyed something like 200,000 car wash patrons and every one of them said the same thing. When we said how do you choose a wash? The number one answer was always quality. 

Now why can't that be true? It cannot be true because there aren't enough lifetimes for them to learn your chemical process, understand it, then go to all your competitors, learn their chemical processes, understand those, then evaluate it and make a decision. That's never happened in the history of time. So what do they mean by quality? They mean everything else. They mean your site, they mean your team. They mean all those other things are what they actually mean by quality. So the difference is, is that when ceramic came out, we had to establish what the value was. And the real benefit, the real, I would say, power of ceramic is that the patron could actually see the difference. If you put triple foam on or not, like outside of the colors or whatever else. They have no idea what it did, right? With ceramic they could tell. That increased the value. Let me give you an example of why creating that value is so vitally important on anything that's new. If I were to drive a brand new Ferrari up to the front of your house and say, "I will sell you this brand new Ferrari for $50,000." Well, for those of you unaware, a new Ferrari is going to be, gosh, you know, upper 200 thousands, 300 thousands or even up. Now $50,000 is still a lot of money. But I mean you'd find that money, you would find that money as fast as you can because you understand the value. Now, let's flip it. Let's say that I start a car company and I say, "Hey, I started this new car company. It's called Chris's Cars and I'm willing to sell you one of them for $50,000." Well, now you don't know what to do. You've got no anchors, you've got no frame of reference. For all you know, that car could be made out of solid gold and worth $3 million. You don't know how to navigate that situation. So in large part, the pricing around ceramic, because again, the variable costs, it was so wide and so different from site to site that we had to give it some prominence and we had to do some work to figure it out. So now notice as we go from our three here, the dominant alternative, the gap here, we slide to the right. Now we've done two things. One, we've thrown ceramic over the top. And this is what we would call a top side anchor. And it has to be disproportionately over the top for that to be successful. Meaning it can't be a dollar more or $2 more, it has to sit with prominence. Now why is that important and why does that work? Because of the limited knowledge base of the consumer. Think about yourself. Think about me. When I go into a jewelry store, I know nothing about jewelry. I mean I know what's shiny, I know what's gold and what's silver, but that's about it, right? So how do I navigate that purchase? It's exclusively based on price. The higher price stuff must be better, the lower price stuff must be worse. And if they've got something sitting alone in a glass case over there, I know right away two things. It's special and I can't afford it. It's way over there, right? There's storytelling that goes on. And that's how they navigate this function. 

So the other thing that we've done, you'll notice is from 15 to 16 we nudge that up. Why? The reality of numbers is very, very interesting. Numbers have a feeling. There's what I would call comfortable numbers and uncomfortable numbers. A comfortable number ends in a five or a zero. We like to spend things like that. Oh, up to $5, up to zero, whatever. We can navigate that mentally very, very easily. $16 is a weird price to pay for something. It's an uncomfortable number. So by nudging that up, you can almost think about it like sliding people into a more comfortable number, which in this case is our 18. And that does work really well. It's not uncommon. We've seen people with 5, 10, 15, 20 thinking, "Oh, that's easy," and does it work? Well, sure. And do I care? No. But if you were to ask me could you optimize that? Yeah, with a very simple shift. Often when people work with us, they're looking for big, huge wide changes. That's not how you win. The changes should be effective, but in many cases should be almost imperceivable that something has changed. So now what? So now we've got what we would call a three plus one, meaning I've got the three from before. And in reality, yeah, it's four packages. But from a style and a strategy perspective, it's three plus one. Well, now what? Because this is where a lot of people are today. So now if I slide down here, what's going to guide my next shift? It's the same thing that guided my first shift. It's the distributions. So as you look at the distributions, now we've got this collection of high side buyers and we've left ourself a hole in the market. And remember our histogram? Ultimately, now I'm going to be top heavy here, I'm going to attract these people, I'm going to lock them in. That's going to be great. But what do I want? I want all of it. I got to grow, I got to find fresh blood. What you need to do quite often is find a way to reintroduce yourself to your customer base. And if you go to the older webinars, you'll hear us talk about concepts like frequency blindness and the spotlight effect and a lot of these other things. But let's just use a commonplace example. Domestic beer. Think about Miller Light, Bud Light, whatever. Nothing in that can has changed in a hundred years. So, what do they do? They change what they can, which is often just the can, but it gives them a way to reintroduce themselves. And what people think that they always have to do is come out with something that's the newest and the fanciest, something new on the top to knock everyone's socks off. Why? Who said you got to do that? So in this case, we know we have a hole here. I know I've got a high distribution on my low side. And so what I can do, in this case, we would call these couplets to where now the gap is in the middle to where I've got two low side choices and two high side choices. But notice I cheated the 18 up to the 19, brought my eight to the nine to maintain my $10 spread plus one. So when you've done that, now I'm recapturing some of that middle market while preserving the top. And my distributions are what's guiding this, right? So if we take one more step and now I've got my couplets, my two and my two, well the next evolution of this as we go to the right is another condensing. And again, this is not a roadmap for everyone because your distributions are your distributions, right? But in this case, the last evolution of this brings us right back to where we started with a three pack with a dominated alternative. But from where we started to where we stopped, we've controlled this every step of the way without just hiking prices. It's been subtle, it's been appropriate, but we've had folks who have been through four, sometimes five different evolutions. And again, it gets more nuanced as you go, but the beauty of this is now it just starts over again. So now you have a perpetual plan to keep your pricing in line with the growth strategies that you need to maintain.

Kayla: Chris, real quick, just we've got about little over 10 minutes, so I just wanted to interrupt for two seconds and say now's a great time to put in any questions that are popping up in your minds.

Chris: Is that 10 minutes or 10 minutes left total?

Kayla: 10 minutes left total. We don't have any questions just yet, so let us know what questions you have otherwise we've got plenty of content to get through. So, Chris, I'll interrupt you in like five minutes to leave five minutes for questions-

Chris: Yes, and please keep those questions coming in.

Kayla: If they come in. Perfect.

Chris: So one of the things that I want to hammer on is basically two different things. So, number one, there's something that started happening and we had to figure it out. It would sometimes happen seasonally. It happened around a price change, a new promotion, ceramic. And it's what we refer to as the winner's curse. And what this basically means is that people, as they were capturing more members, their retail average was dropping, only they weren't really looking at that member count, they were looking at that retail average almost exclusively. Because here's what winds up happening is that when you, I got to lower this thing in similar way, there we go, is what we think intuitively is that the people at the bottom enroll in the bottom membership, the people in the middle to the middle and the top to the top. It's not true. What happens is the people at the top enroll at the top, the people below that enroll all over the place and the people at the bottom tend not to enroll at all. So as the people, because again, it's finite. 

When your top end buyers become members, they're no longer there to buy the retail members, excuse me, the retail option. So you're going to get a natural suppression of that retail average. The other thing that happens is that we're looking at distributions. That base wash percentage appears to be growing. It is not growing. If you go back and look at the actual quantities, they are stable. But people react to that thinking that, oh my gosh, all my high-end buyers are leaving and now I'm attracting low-end buyers. No, the high-end buyers are now members. So if I had a hundred people and 40 of them became members and my bottom buyers, that number stayed the same, it's going to be a larger percentage of the whole. That's what's happening. Follow the revenue, not the averages. That's what we call vanity metrics. And it can really throw people off. So signage is another thing that we'll talk on. Maybe you do another one. But in a price change, eight to 12% of your lift is going to come from your actual signage. And so that's another place to look to see if there's a place to optimize. 

Now as before we get into questions, there are some groups out there right now that have a level of complexity to them that we've never seen. Maybe multiple brands, multiple states. And in fact there's one group with tons and tons of sites. I looked at a hundred of them and out of 100 sites they had 63 different pricing setups. How are you going to maintain that? You can't. So for people who are in that condition, it took me three years to build this tool, but now it learns actively to each, whether it's an individual site, a region, can be set up to do anything. But it shows you the recommended pricing. It shows you the uncertainty or the risk, forecasts what those new distributions are going to be. And then tells you at the end of the day exactly what the outcome's going to be. So, here it's $1.46. Now do most people need to go to this level? Probably not. But at a certain size, if you're not going to this level, you're absolutely leaving money on the table and asking that question, how are you going to manage something that big and that complex if you don't? So just know that these tools are out there and have been developed. But let's get to some questions. I told you I'm just terrible at time management.

Kayla: No, you're great. No one's asking any questions. So if you guys don't have any, I know I have a few that we get asked a lot. So what would you say for like when would you know the right time to move from maybe a three package to potentially adding back in that fourth package? What are a couple signs that you might look for?

Chris: So in terms of adding back in one of the lower side options?

Kayla: Adding in a top side.

Chris: So again, think about the distributions like pressure. And so if I've got a larger percentile, that's pressure that's pushing in actually both directions. So again, if I can relieve some of that pressure upward, the higher that distribution, the more upward pressure that there is. But the same thing's true to where if I've got a 16 and I want to open up an 18 and relieve some pressure that way. Well, if I slide my 10 up to 12 or 13. Well, you've got a chance some of them are going to drop down as well. And so figuring out who's going to go where is a big part of the game. But the core question is what do you want them to do once they're there? Once people pull up, what do I want them to notice? There was a situation a couple years ago where initially they started off, I think they had five packages, but looking at the distribution, I'm going to use this sign kind as an example, is they had their first four options just as you as you see it here, you know prices is right on here, but the one on the top was $18 but I can't see their sign, I'm just looking at numbers, right? So the distribution went from something like 60% at $18, but they had a $20 option where the distribution dropped to 6%. Well, it doesn't work like that. Like there's no market out there that essentially cuts off that harm, and so I'm like, "Something's going on here." So poll of the sites started looking at their signage and what they had done was they had that 18 at the top, but then over here to the right in this little box they had what was called the manager's special and it was $20. And so really a lot of the only thing we did, well, we changed a bunch of stuff. But just by moving that back, giving that prominence, it went from 6% up to somewhere in the high 50s, like 58%. That's a $2 jump from just a design change. And this was not a huge group, but just at that site it bumped it by like 160,000.

Kayla: Yeah.

Chris: Oh, go ahead.

Kayla: We did have a few other questions come in. And we have a whole webinar recording we can send out too that's all around menu design. If you miss that one, we'll send it out in the follow up with the recording. Chris, this is a good one I think. How would you deal with competition having lower prices than you have?

Chris: So again, a lot of this goes back to who are you in the market and sometimes you're not who you think you are. So if you are attracting, like let's think about the Midwest in the winter where you get a whole bunch of people who come in, get the basic package just to knock the salt off their car. People who are doing that, that's what we would call a utilitarian purchase. Meaning that it's just serving a function. Think about mowing the yard. I mow my yard because it has to get mowed. Other people, they get joy, they love it, because really everything above the base package is indulgent. It's a luxury play. So I want you to think about your top price and your bottom price like this. Your bottom price is your inclusive play. Meaning how wide do I want my front door to be? Your top package is your exclusive play, meaning what are we capable of, right? So if you are on the high side of that, what I would generally tell people is you got to have the attitude in that case of we never set out to be the cheapest anything, we set out to be the best. And we don't apologize for that, right? In fact, we've had a scenario where price wars, promo wars, all that kind of stuff, it's nonsense. It's fear driven but well, it's predominantly fear driven. So we had a situation where there's a large operator out there starts with a T, rhymes with armies and they have a history of setting up shop real close to folks who are already in operation. And this happened. And so the owners wanted to basically match their go-to-market pricing, so they would kind of lose their advantage. And I said, you could do that. I said, or you could send out an email to all of your members and all of your patrons, everybody that you've got contact information for, which I know you're all doing a good job collecting, come on now. But here's basically the statement that went out. It said, hey, many of you may have noticed this new organization has moved to town and we would love to welcome them to our business community. If you would like to try their wash, we'll pay for it. Because if they can take better care of you than we can, we don't deserve your business. Who do you want to be a member with? And you got to ask yourself that, what's it mean to be a member here? Is it a perpetual coupon or do you actually belong to something? Because that's one of the problems I have with a lot of things. If you want to be on that high side, great, then you got to be different. Because if they can get the same thing down the road and there's nothing notable, there's nothing memorable. What you're selling is a story essentially, right? Give them one. 

One of the simplest ideas that we've promoted for years are what are called tenure towels. Tenure meaning the length of time somebody's had their membership and people, oh gosh, I mean if you've ever been a bartender or a DJ, people will murder each other over a free T-shirt. It's very weird. But imagine this. Imagine that six months, nine months, 12 months, 15 months and so on, what they received when they came in, they got an email with a QR code, oh I got this, scan it. They go and they get their own microfiber towel and it's a different color. People love rankings, they love being recognized, because right now you treat the people who've been coming to you for years the exact same way that you treat people there who have been there twice. That's not okay. But the beauty of tenure towels is, let's say that the most exclusive one, your best customers, let's say that it's bright red. Well, where are they going to use those towels? More than likely in the vacuum area, right? Now, I've given my team the ability to recognize my VIPs and they don't have to go and bother them because they don't want that. Just walk by and say, "Hey, thank you again for being a member. It means a lot to us. If there's anything we can do to take better care of you, please let us know." That's different. That's easy. Costs about nothing. And now they have a story. Nobody does it, right? Nobody. So if you want to be on that high end, be on that high end. It's the same thing with Costco. You think Costco can't afford carpet? They absolutely can. What they're selling you is the relief that you're not overpaying. What I can promise you where what they're selling you again is not having to pull your phone out, seeing if you can get it cheaper elsewhere, even though you can. But that's what they sold you, so you don't have to do it. And it's wonderful, it's gorgeous, but it's all by intention. What other questions do we have?

Kayla: Let's do one more and then we'll let you guys get back to your day. How about that? So I like this one. Should you move membership and one-time washes at the same percentage? And what would you expect if you raised retail washes by let's say $2 but you didn't increase the membership pricing?

Chris: Yeah, so again, this is where we call it buy intention. As I mentioned earlier, you've got competition based pricing, you've got cost plus pricing. Only about 8% of all companies in any industry actually have a pricing strategy. Like that's straight from MIT, right? So when we think about it, we work backwards from your goal, what do you want to have happen? Some people need more members, some people have more opportunity on the retail side. So what you want to look for is where can I get the greatest value with the minimal risk? But what people have done for years is they've attached those two things using either a multiplier or something to that effect. What you don't want people doing in their heads is math because by teaching them when it's worth it, you're also teaching them when it's not, right? Don't make that decision for them. And what we've seen often is those membership prices staying still while the retail prices creep up. Because you'll get it to the point eventually where it's no brainer land. Like why in the world would you not just get the membership, right? And so you have to think about them again independently. And the shifts within there typically they're close meaning that that if it's a three plus one or something to that effect, usually they will match but not as it relates to the multiple because I don't care about that, right? I don't want them doing math. So it's all the distributions of your membership in large part is going to dictate that shift, but more than likely there is going to be continuity within the style.

Kayla: Perfect. Okay, so we're at time, a little bit over. Thank you for sticking around with us. Chris, we've got a few more questions, so we'll huddle up and type up all the answers for you. We'll send out a document with all the questions and answers, the recording to today's webinar and any of those other resources we've mentioned we can include for you as well. So just want to thank you guys again for joining us today. This was great. I learned a ton. So thank you so much, Chris, for hosting us today.

Chris: You bet. And again, keep those questions coming. And all I would say in closing is don't guess, you don't have to. That's too much stress. We've had people that we had done pricing changes before and then they decided they wanted to do one on their own. That's okay. The outcome was bad, the outcome was painful. And they picked that phone back up and we helped get him out of it. I don't care. Like all we want to do is we need people growing and starting companies in this country, so don't hesitate to pick up the phone and say, "Hey, where do we have opportunity?" Because if you're a large group, we don't say, "Oh yeah, we can help." How would we know? What we do is we look under the hood first and we'll tell you, we say, "Hey, I think you probably got between four and 7 million in opportunity. I think we can capture three of that with a 90% chance," so if you want to go forward, now you know. Take the guesswork and the stress out. You got enough going on. So thank you, guys, so much. And if we want to do more of these, just let us know.

Kayla: Thanks, all.