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Business Operations

Passing on the buck

October 11, 2010
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This July, anticipating substantial rises in beef and chicken costs, McDonald’s Corp. announced it was considering changes to its dollar menu.

“The way the dollar menu looks today won’t be the way it’s going to look next year,” McDonald’s President and Chief Operating Officer Ralph Alvarez said during a conference call with investors. “In this current environment, we’ve got to make sure we’re pricing smart, not just pricing low.”

Alvarez is not incorrect; but it does seem foolish to me that only now, in this “current environment,” that businesses would be worried about pricing smart. Shouldn’t you be pricing smart all the time?

Yes, you should. But what exactly constitutes pricing smart? For some businesses, like McDonald’s and Wal-Mart and express exterior carwashes, pricing smart chiefly means pricing low. I suppose what Alvarez is getting at is that businesses that thrive on a high-volume, low-pricing structure need to get smarter about the services and goods they offer — not just their prices.

Well, then its time for carwash operators to take a page from American food suppliers. According to research to be published this month by Consumer Reports, an increasing amount of suppliers are repackaging foods so that there is less food for the same price. While the tactic itself is not new, its popularity (and therefore coverage in the press) is growing to unprecedented proportions.

So your half gallon of ice cream isn’t a half gallon anymore, although you wouldn’t know it by looking at the total on your grocery receipt. And the changes in appearance are incredibly subtle, too. “Companies won’t change the height or length of a container. It’s the width,” Tod Marks, a senior editor at Consumer Reports, told The New York Times in August. “The Hershey’s bar you pick up at the register looks like the old 3-ounce bar but it’s only 1.5 ounces. Hold it up. It’s as thin as a wafer.”

It’s a fact: The costs of doing business are rising. While you may not be eager to pass on these rising expenses to your customer, you’re bound to discover — just like grocers and food suppliers — it’s the only practical solution.

The easiest way to do it is to get creative. True, some customers and some carwash owners will argue getting creative is also getting “sneaky,” but when it comes to price increases, sometimes sneaky/creative is a much better and more appealing option than the obvious, upfront increase.

Start with your menu options. Re-package your services to include the bare minimum for your basic package and work your way slowly up with extra services like total protectants and undercarriage wash for your top-dollar packages.

Evaluate the cost of each extra service to you and what customers expect for their money. I know several operators who charge $3 for total protectant; in other markets, that might be the total cost of a wash! Don’t forget detail services; consumers expect to pay a premium for these packages.

Along with reviewing your menu, you should also evaluate the names of your packages. Do they suggest value to the customer? One of the key features of the Dollar Menu at McDonald’s is its name; dollar = inexpensive. You’ll want to emphasize the affordability of your basic package, while also highlighting the maximum value of your top package.

In the end, it’s like Alvarez said: Price smart. That means doing research to know your market, your demographic, your customers. Then match this research to your business model and mission; if you want to offer an inexpensive wash to your customers, do it. But do it in a way that you make some money, too. Don’t expect to be successful just by being affordable. It’s a hard lesson to learn, but to make money; you’ve got to pass the buck.

Kate Carr is the editor in chief of Professional Carwashing & Detailing® Magazine and gave up McDonald’s as a New Year’s Resolution this year. She immediately regretted that decision. You can send your grumblings, compliments and suggestions to

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