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A Sobering Lesson in Pricing for Carpet Cleaners

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In the amped-up war of commerce and 75-cent pizza on 6th Avenue in Midtown, a perilous moment is approaching. Circumstances suggest that ravenous New Yorkers might soon witness 50-cent pizza, 25-cent pizza or yes, free pizza.

So began an article in the New York Times of 30th March in 2012.

But what has this got to do with carpet cleaners? Well, there’s a very important lesson about pricing here. One that transfers very nicely to our business.

Apparently a price war had developed between competing pizza parlours in New York. A year earlier, pizza was selling for $1.50 a slice at 6th Avenue Pizza. Then a Joey Pepperoni’s Pizza opened nearby offering pizza for $1. So 6th Avenue Pizza dropped its price to $1 too.

All was good until October, when a third player entered the drama.

A 2 Bros. Pizza, part of an enlarging New York chain of 11 shops that sell slices for a dollar, opened virtually next door to 6th Avenue Pizza.

Price stability at a dollar persisted until mid March when both 2 Bros. and 6th Avenue Pizza began selling pizza for the eye-catching price of 75 cents a slice!

The primary owner of 6th Avenue Pizza is Ramanlal Patel 68, who also has a few businesses in Atlanta and holds property in India. His nephew, Bravin Patel 45, oversees the establishment. He and his manager, Mohid Kumar 49, were there the other day complaining about 75-cent pizza. They said that 2 Bros. was trying to drive them out of business, that 2 Bros. unprovoked, slashed the price to 75 cents forcing them to follow and that the property in India had to be sold to keep the place going. “We’re angry,” Bravin Patel said. Mr. Kumar said he was contemplating checking with a lawyer to see if there might be a city law that somehow prohibits a business from selling pizza at outlandishly cheap prices.

At the St. Marks Place office of 2 Bros., its owners, the Halali brothers Eli, 29, and Oren, 27, say they had simply matched the price of 6th Avenue Pizza at 75 cents, and that’s where everything sits. “We don’t sell pizza at 75 cents,” Eli Halali said. “But if they think they’re going to sit next to us and sell at 75 cents, they've got another think coming.”

It appears that 6th Avenue Pizza lowered their prices first. But why?

“He was taking away our customers,” Mr. Kumar said. “How were we going to pay our rent?”

For his part, Eli Halali made it clear that 75 cents was a temporary price point. He said he could not make money at that level and eventually would return to $1. He said that if 6th Avenue Pizza went back to $1 he would as well.

If it didn't he said, it had better watch out.

His father, Joshua Halali, who acts as a consultant to 2 Bros. said, “I suggested to my children to go to 50 cents.” Oren Halali said, “We might go to free pizza soon.”

Eli Halali said: “We have enough power to wait them out. They’re not going to make a fool of us.”

Meanwhile, Mr. Patel remains intransigent. “We’re going lower.”

“We may go to 50 cents,” Mr. Kumar said. Of his next-door rival, he said: “I want to hit him. I want to beat him.”

As for Joey Pepperoni’s, Met Zade, one of the owners, said: “I can tell you we’re absolutely not dropping our price. For $1 a slice, you can still make a profit. For $1, an owner can still sit down and eat. At 75 cents, you’d be a mouse on a wheel.”

While the pizza parlours insult one another, the eating public couldn't be happier.

What are the clear lessons for us as carpet cleaners?

Many, many carpet cleaners think that customers are only concerned about price. And that the only way to win business is to be the cheapest. In the long term, the lowest price seldom wins. There’s always someone who will come in cheaper.

Look at some of the comments above:

  • “For $1 a slice, you can still make a profit. At 75 cents, you’d be a mouse on a wheel.”
  • “I suggested to … go to 50 cents.” “We might go to free pizza soon.”
  • “He was taking away our customers.”
  • “the property in India had to be sold to keep the place going”

Isn't that the situation with so many carpet cleaners? …slowly going broke but not realizing it. Business is all about margins and profit. No profit = no business!

The solution? Find and keep customers who are not concerned with only the cheapest price! Seek out high-quality seekers, maintain a relationship with them…and charge a premium price for extraordinary service.