Ep4: Best Practices for Managing Price Increases with Judy Krenz and Melissa Busch

FULL TRANSCRIPT: 

Eric: Welcome, everyone! Eric Smith here with Alliant Systems. If you're new to Laundry Talks, I'm glad you're joining us. This is a podcast where we talk about laundry and learn about what some of the best-in-class textile rental operators are doing in their businesses today. I'm really excited about today's topic, which is going to cover price increases. You know, price increases are just a reality in every business, but how companies approach them varies quite a bit. Today, we're going to hear a story about how one company completely changed the way they approach their price changes with their customers and learn a little bit about how that went for them. So stick around to find out about that.

Recently, I spent some time traveling through the great state of Iowa and made my way to a town on the far east side of Iowa, on the Iowa-Illinois border – Muscatine. I've never been there before.  But also, Muscatine is the home of Phelps, an independently owned industrial laundry. I'm hoping to learn more about what Phelps does today, but first, we're going to meet our guests. And yes, I said guests. We're fortunate today to have not one but two industry veterans joining the podcast, and they both work at Phelps. 

Eric:  Judy Krenz is currently the office manager overseeing the front office. She's worked at Phelps for over 13 years and has also managed the plant operations for the company, as well as the office. So she's the go-to person for anything billing related, and I can tell you that she is a wealth of information. Also joining us today is Melissa Busch, who has been with Phelps for many, many years, even more than 20. I didn't know if you wanted me to say that, but I can't believe that's even true. Melissa is the director of operations at Phelps, and when I was recently on-site, she gave me an amazing tour of the facility. I have to tell you, some of the technology at Phelps is just incredible. Both Judy and Melissa know exactly what they're doing, and I'm hoping to pick their brains a little bit today. Thanks for joining us and welcome.

This is the podcast for the textile rental operator community to learn new things, share ideas, and drive conversations. Welcome to Laundry Talks with your host, Eric Smith. This episode is brought to you by Alliant Systems.

Eric: I can see the new branding of the Phelps logo in the back, and before we get started, tell me a little bit about Phelps. What type of business is it and what services do you offer?

Melissa: We're located in Muscatine, Iowa, so we're right on the border of Iowa and Illinois. We service those two states along with Wisconsin. We primarily do industrial rental, and we have a facility services division as well as Custom Image wear. So we kind of span across those three divisions in our company right now.

Eric: Yeah, we did get a tour of the custom corporate apparel division, which seems like that's a pretty big growing part of your business. And I will give you a quick shoutout. I know that some of us ended up leaving with our really nice Phelps branded baseball cap, so thank you for that. Now that we know a little bit about Phelps, let's learn a little bit about both of you. I always have to know every time I do a podcast, I have to know how someone found their way into the laundry industry. So Judy, do you want to go first? How did you find yourself at Phelps?

Judy: Yes, I can start. So, my mother actually worked in the production plant. So, a summer break is what reeled me in, we can say. So I helped out in a summer and then I didn't leave. So I started off as a utility and then I became the production manager, and then um, I transitioned into the office where I have spent the last nine years.

Eric: Yeah, I've heard that story before. I started and then I never left. That's a common... How about you, Melissa?

Melissa: Kind of the same exact story. I worked in high school. I graduated with Mike's son, so we worked in high school, and we painted poles in the plant. We worked in the stockroom. We were building a new facility at that time, so we did that. I went away to college, graduated, and came back just to help out in the office. And once again, I guess I never left. 20 some odd years later, here I am still at Phelps.

Eric: Do your non-work friends know what you do? Do they know what your industry is? How do you explain what you do to them?

Melissa: Well, everybody thinks we have a bunch of home washers that we put all this laundry in and then sort it out. But clearly, everybody knows in the laundry industry that's not the case. But yeah, everybody knows Phelps. We're very well-known where we're located here, and we have a great gig right now.

Eric: Thanks, that helps out. I will say one other thing that I was fortunate enough to see when I was on-site was, happened to be visiting on a day that you were having an Employee Appreciation event, which was kind of a celebration of some key anniversaries for your employees. One thing that I thought was interesting, and we might be able to get a photo of it for the podcast, but you have a Big Wheel of Fortune wheel that you get your employees to spin in front of the entire crowd. So they get to spin for prizes, and I thought that was really a great idea from an HR standpoint. And I just wondered if you wanted to add anything about how long you've been doing that.

Melissa: Oh yes, we've been doing it for four or maybe five years now. With Phelps, we have a lot of large corporations in our community, so we try to provide a culture that makes employees feel like a part of our family. To achieve this, we have a fun activity called the wheel, where employees can win prizes based on their survey preferences. It's not just about giving them a card and a clock; they can win anything from a Solo Stove to a speaker, or even $1,000 for major work anniversaries.

Eric: So 1,000 is the top prize, and how many times has it been won?

Melissa:I can recall at least five times the wheel has landed on the $1,000 prize. Eligibility for this top prize requires a five, ten, or fifteen-year work anniversary. Otherwise, they get another spin for a chance to win a different prize.

Eric: During our recent lunch, we had the opportunity to see the up-close and personal industrial kitchen you guys have built. It was impressive to see how it was able to cater to around 50 or 60 people that day. I'm curious, what are the benefits of having such a capability on-site?

Melissa: Having the industrial kitchen allows us to provide free lunch to our staff and also prepare cookouts for some of our customers.

Eric: great so it helps keep people around the facility during the daytime, which is great. One of the main goals of this podcast is to give back and share information that can help other operators. Sometimes, even the smallest piece of advice can make a huge difference, saving time and money. During my visit, we discussed price increases, and I found it interesting. When I was on-site, something really jumped out at me, and that is the discussion we had about price increases. If possible, I would like to share a little bit about that discussion today.

It really started with talking about what you used to do from a price increase perspective. Your customers have scheduled price increases, whether it's an annual increase or a scheduled increase. We talked about some of the challenges Phelps used to have with that process. Could you talk a little bit about how things used to be and how you used to manage that process?

Judy: Oh boy, yes. I believe in 2017 is when we finally implemented the set month for price increases. But before that, one of the main pain points was managing almost every single month's price increases. They were yearly increases, scattered across different months, making it so hard to manage. We had to ensure that every customer received their increase, audit if any were missed, and ensure they were set for the correct month and year. That's when we discussed potentially moving the yearly price increase to a set month. It was quite a process to get there, but now we are 100% aligned on a specific month, same day or same week, for all customers.

Eric: So let's go back to the way it used to be, just so people understand. When you would set up a new customer and sign them on, they would basically have their contract start date. That contract start date would essentially serve as a future price increase date on the anniversary of that date. So, you ended up with a situation where you might have 50 or 200 different days of the year where you're actually running price increases through your billing system. Is that accurate?

Judy: That is correct, yes. And it was difficult to get customers on board with these changes. They would call in saying, 'Hey, we had a price increase,' and we would have to go into contact looking it up to ensure its accuracy. Did we accidentally do it a month ahead? Getting everybody on board when we now have a set month and a set week, allows us to expect all the calls and do a lot of prep work before that. We make sure our service department is available, customer service is on board, so that our customers have the best experience and we are fully prepared and know exactly what to expect.

Eric: Previously, not everyone was on the same page because price increases would just happen randomly every day or every other day. A customer's price increase would occur, the price would go up, and maybe the route service representative would show up on site, surprising the customer. The customer would then have questions for the route service rep and your service department. It was difficult to be fully prepared for these situations since they happened so frequently.

Judy: Yes, and furthermore, billing could fluctuate if customers were adding or removing uniforms, and our route reps weren't always sure about the unit cost beforehand. It was challenging to stay on top of it and ensure that the route reps knew when it was their turn for a price increase.  Communication with both our staff and the customers became a cumbersome task.

Melissa: Therefore, we thought simplifying the process would be beneficial for everyone involved.

Eric: So, while you had the ability to implement automatic price increases, and they were entered into the software and scheduled, it created numerous challenges in terms of communication with customers and internal communication within the customer service team. The ability to provide consistent answers and messaging to customers became difficult as calls would come in randomly.

And then how did the service staff had to deal with these calls as part of their day-to-day tasks, often feeling overwhelmed by the volume. There was no specific alert system in place to notify the service staff about customers receiving price increases on a certain day.

Judy & Melissa: It reached a point where managing the situation became increasingly challenging for the service department, causing headaches.

Eric: Regarding your expertise in standard procedures, I am curious to know what percentage of your standard procedure involves price increases for new accounts. Is it a company-wide policy or does it vary based on individual accounts? 

Judy: Mm, it varies by account. When the service agreement is signed between the salesperson and the customer, the agreed-upon information is given to us. We then enter that information into the system, and the system takes care of it for us. It ensures clear communication and everyone is on the same page. It's great and perfect.

Eric: So this was around five to six years ago, in 2017, you stopped and said there's gotta be a better way but who's got the credit for this idea? 

Melissa: I think it was our whole team who realized that there had to be a better way to handle this. It was always such a headache to budget money, not just for us but also for our customers. We wanted to ensure that the price increases were implemented correctly for every item at the right rate. To manage it better, we started running mock scenarios and using double checks before queries became popular in Alliant. Previously, Alliant would create a double report for us, and we would run the price increase forward and then individually verify all the invoices. 

Eric: Before we talk about your solution one of the uh interesting things is that if when you have the price increases scheduled all throughout the year you know sometimes there's this question that comes up is "oh did did we forget to do one or did one happen or not" because they're not all grouped together, they're just occurring sometimes, there's that question and so there's obviously a lot of ways to to handle that in the system and you can run your report to see "hey who's going to get a price increase this week" and let's sit down and talk about those, but sometimes if those processes aren't really in place and those procedures aren't tightly followed and you're not paying attention to it; that's how you end up with kind of this unknown of whether or not the price increases went through so that that kind of brings it  back to your solution, you guys were brainstorming and decided that you were going to move all your customers price increases to a specific date annually, is that correct? 

Judy: That is correct okay

Eric: And so let's talk a little bit about what problems that solves for Phelps. So,  what's the biggest advantage for you having a single price increase date?

Melissa: I think transparency just to our staff and our customer is the number one thing it made it so that everybody's on the same page about what's gonna there no hidden off cycle price increase; it's one you can count on it, you can budget it, we can budget it, everything is accountable. 

Judy: Our salespeople also have a really good relationship with our customers, so they if they got a call they would know automatically if it is you know that set month that they'd say you know it was your yearly price increase that's what the increase was and so just having helping budget and our customers knowing exactly when it is going to be it is life-changing.

Melissa: Judy team prior we work on this with our customer service team our STS we do training on how to handle it confrontation concerns with a price increase prior to this so everybody's on the same page and the same message is delivered.

Eric: So your customers it sounds like that they're aware that the price increase date. Is that part of kind of your your on-boarding process with a new customer you guys showed me one of the most most uh impressive kind of on-boarding customer packets and had a lot of information about you know this is who we are, this is how we do business, this is what you do if you need any help or service, and is that part of that packet? I'm just kind of curious, all that information is in the packet?

Judy: Yes it is all in the packages and well stated on the service agreement too.

Eric: Great, so you kind of mentioned that it was just it's something the customers are aware of there's no confusion. Let's talk a little bit about what problems that you've solved internally just from a kind of internal operation; what benefits have you seen on the service side.

Melissa: Being able to talk about it very easily, that it's on your contract, it's your once-a-year non-off cycle price increase. We don't do off-cycle price increases. That was the main problem that solved for everybody, and I think on Judy's side in the office, they're able to make sure it was done correctly because it's all that we can spend a couple of hours and go through and make sure everything was applied correctly as far as it goes.

Eric: Another thing that I think this solution solves, one of the real beauties of this solution, is that it also kind of gives you if most of your price increases occur on this specific date, it gives you a great place to measure. You always know that you can go back to this specific date and you can see the before and the after, so there's no going through all these individual dates throughout the year. I don't know if that's also been a benefit from a management perspective.

Melissa: being able to budget that added revenue and the customer being able to budget for an increase that is very transparent over time.

Eric: Yeah, we also talked a little bit about exceptions, and I'm kind of curious about how those happen. So, if you've just passed your price increase and then six weeks later you sign up a new account or a new account signs up six weeks before your price increase, how are you handling these exceptions and what's the procedure for dealing with that type of situation?

Judy: Yes, that is discussion between the customer and the sales representative. For the most part, if they are within a few months, our sales team will push that increase to the following month and year.

Eric: Okay, so there are exceptions and you have a way to handle it, and the customer understands that they're basically missing this price increase but they'll get it the following year.

Melissa: Yes, you got it.

Eric:  that's awesome so a couple other things related to price increases and I know, you know, Judy you made some some nice suggestions when I last saw you but the price increases encompass currently not just you know the unit pricing but um kind of what other areas uh are currently part of your price increases right now is it it's not just limited to the price increase of the product it's really all the services on the invoice?

Judy: correct, it is 100% all of the services in the agreement correct um so um not just the product um the programs the service charge any other items everything that is a part of the agreement get price increase right

Eric: and then speaking of pricing it's not really necessarily price increase related but what tell me a little bit about what you're doing you're you are using some of the the size up-charge functions of the software and kind of tell me a little bit about kind of where your where your price points are on on the different sizes of garments.

Judy: so yes, we do a size up charge um on out sizes is what we call them or extended sizes um and that's currently set up forSKU center, there's an option where there's obviously all your sizes, you can select what percentage you want to up-charge that specific size for that specific skew, so it all depends on you know that is something that is in our agreement and so depending on you know what everybody else's agreement states or if it states it or not that is another option um that can help offset the cost for those extended sizes um or special merchandise as well. 

Eric: so if I'm a customer of yours and I'm in an XL coverall or something and I go to from an XL to a 2XL uh do a size change the system is automatically going to recognise that the the operator keying the information in the office it's kind of basically it's it's transparent to them they don't they don't have to do anything they just do the size change to the new size and the new price automatically takes effect is that accurate?

Judy: correct, yes when you set it up at the SKU centre with the set percent set size anytime you do a size exchange you add you remove you know whatever it is the system automatically will calculate that up-charge percentage times the unit rate and it's pretty simple you don't have anything the system does it automatically for you.

Eric: and one of the things that and I get this question a good bit is that when operators are doing the size up charges, say whatever it's 20% for a 2XL or 3XL, having that as a percentage is always preferable because as your unit price for that item goes up the up charges also just naturally follow along and so it doesn't require any maintenance from that perspective unless you want to increase the up-charge percentage but that that automatically follows along.

Judy: correct.

Eric: okay perfect any other thoughts on you know some just kind of final thoughts on any benefits of running the price increase uh people are happier that work at Phelps and your customers are happier it seems by just having a very simple program is that is that um kind of the the takeaway there?

Judy & Melissa: I would say that's the juice of it yes.

Judy: customers know when to expect it they know their set rate um our whole entire office and service everyone's on the same page and it just honestly goes seamlessly.

Eric: so cool um okay I have a couple a couple non-price questions one is um when when I was there you guys gave us a wonderful tour the the facility is relatively new in terms of industrial laundries I would say and  just maybe talk a little bit about some of the technology you're running in your facility right now I mean it seems I know you you basically retrofitted an existing building but tell me just a real quick summary of the operation you're running there right now.

Melissa: well um we are in 80,000 Square ft., we have we just extended our wash aisle. We use all Jensen product um we're also RFID chips so we almost have full fully automated plant and what else you ran the plant forever Judy?

Judy: what else it is from the time  the uh soil is flung up in the slings to the time it comes out to the time it drops in the washer automatically the washer automatically unloads that puts it in the dryer the dryer then gets unloaded we have a whole system that um stores all of our garments upstairs once we know that our routes at are at 100% we can call that that route it comes down and stop um sequence order it then gets stored in route storage when our um RSRs are ready to load it'll come down in that exact same order and it goes out to
the customer.

Eric: yeah I noticed the size of the facility I'll bet when you moved in you probably felt like you'd never fill up that plant and now it seems like you're kind of getting close to it.

Melissa: it's getting full.

Eric: what other... go ahead, I'm sorry. 

Melissa: I said it's getting full but that's a really good problem to have again yeah be stretched out a little bit

Eric: yes one other thing that I noticed it was a little bit unique in the world of you know automation and now when you go any public restroom now you know everything's an auto auto paper dispenser and things like that but you guys are doing quite a bit of the older continuous roll towels and um you we talked a little bit about that because you just don't see them as much anymore and for people that don't know what a continuous roll towel is it's that it's the the fabric towel that kind of runs on a on a loop in the bathroom, you know there's still a market for that and you guys do a lot of that do you you want to talk a little bit about that.

Melissa: we do it's very odd, everybody's going green I guess so they don't want the trash, so they love these continuous roll towels that we'll put on a wash program and they turn them in and we send them back without having any trash; so it's very green very friendly, yeah we're one of the only people in our area at least that so do them.

Eric: uh it's interesting to see that and I think that that there's still a market for it may be really driven by like said green concerns and things like that um one of the things I always like to also ask people is as managers and kind of leaders in the industry what are the things that um that keep you guys up at night what what what are things that you worry about is from a business perspective from a business perspective that you know maybe our challenges uh challenges in your role.

Melissa: so you don't mean our kids? 

Eric: we could talk we go on another half an hour if we open it up to that.

Melissa: I think for us right now um The Challenge we're seeing is trucks we're having a really really hard time getting delivery trucks it's getting better and I think it's going to continue to get better but that is one issue that we have really had ever since covid, just like everybody else in the industry I think cost of goods is something that keeps us up because nothing is going down in price everything is going up um um other than everybody wants your service to go down in price which is you know everybody's got to save money somewhere but cost of goods for us.

Judy: lockers

Melissa: yeah is has raised significantly and then I think as everybody feels that same pain is Staffing trying to find the right people for the right positions it's gotten way better um but still it's always a challenge.

Eric: same for you Judy?

Judy & Melissa: yeah it really is other than Staffing in the office actually is great, it's not bad just overall trying once you know a couple positions open it's like you have a hard time filling them but then you find the right staff and you're on a good uphill battle there.

Eric: you know I'm a I do I don't have a lot of time uh but when I when I want to watch something I always love to get a recommendation so book movie TV show something to binge uh tell me what what's the best what are what what have you been watching?

Judy: Painkiller on Netflix. Oh I started that yeah it's good oh my goodness.

Melissa: it's like dopesick

Eric: it's that the kind of opioid crisis uh yeah yeah that's great okay is that how is that a movie or a
series?

Judy: it's a series on Netflix okay so that's two thumbs up for that

Melissa & Judy: yeah

Judy: I yeah pretty intense I'm about halfway through it and it's been pretty pretty interesting

Eric: how about you Melissa?

Melissa: I'm actually watching the exact same one right now, and we didn't talk about this before this podcast eithe but it's you know I watched it DopeSickis the one that was on HBO Max it's kind of the same story perfect yeah it's uh 

Eric: I haven't seen it but it is it is in the queue for me so I wanted to ask if for anyone that finds themselves in in Muscatine, what's something uh fun to do uh in the city uh if you're if you're there for a day anything that you can recommend

Judy: I would say going to the downtown district, see in the riverfront going.

Melissa: we have a historic downtown, it's pretty cool.

Eric: yeah I and I did notice when we went down to the riverfront there is a beautiful new hotel property in town which is was pretty amazing.

Judy: I would definitely hang out at the downtown district there's a lot of businesses down there restaurants um

Melissa: there's a button Museum

Eric: A button Museum?

Melissa: where the bend is in the river that's where we got all the shells to make uh Pearl buttons oh okay Pearl buttons huge in Muscatine way back in the day and uh so there's button museums down there.

Eric: see there we go I didn't know that and that is that is a real service to the listeners of this show but
yeah I really appreciate your time and I think  it's just a fascinating topic and really really you know excited that you were willing to share your thoughts and some of your expertise on that because I think some people will really benefit from from your experience so thank you so much for joining us today.

Melissa & Judy: thank you for having us!