After hearing Mr. Downey on IAQ Radio Episode 545 and reading his article/speech titled, “The Life and Times of John Downey IV”, I knew that I wanted to reach out to him for a deeper dive into the history of the industry from his front row perspective to many of its most significant evolutions. What rose to the surface from our conversation on The DYOJO Podcast Episode 28 was a master class on understanding your value as an entrepreneur and a member of something larger than yourself.
Our goal for The DYOJO Podcast is to bring our viewers and listeners into contact with those who have been there and done that to help them shorten their DANG learning curve. In that spirit, John Downey shares a few key thoughts on pricing that will be critical for entrepreneurs, managers and growth minded professionals to understand if they want to avoid winning the race to the bottom of the pricing wars.
The pros and cons of innovative pricing structures
John’s grandfather, Downey II, took to the elite neighborhoods with a flatbed truck and a loudspeaker proclaiming, “The Downey’s are here. Bring out your rugs” In my mind this is reminiscent of the famous line from Monty Python and the Holy Grail, “Bring out your dead.” Only the Downey’s sought area rugs, which were common in that time as a covering for the predominant hard surface flooring.
It’s hard to imagine, but carpet cleaning was a luxury primarily for the affluent prior to the 1960’s. Door-to-door estimators would price the service which created barriers for those of the middle-class. In an effort to take the guesswork out of carpet cleaning and expand operations to the masses, John’s father, Downey III, invented a flat rate pricing model, $19.95 for living room and hall, $29.95 for living room, dining room and hall, and advertised on radio.
John notes that those were good prices by today’s standards where wall-to-wall pricing schemes have choked the profit out of carpet cleaning. When his dad introduced room pricing his local industry association revolted. The members called a pow-wow to confront Downey III, which also happened to be the last meeting of the now defunct group while wall-to-wall pricing for carpet is still a leading strategy in the industry.
Innovation often has unintended consequences. Solving one problem often opens the doors to many other issues. Flat rate pricing made carpet cleaning much more accessible to consumers, but it also created new avenues for predatory practices such as the “bait-and-switch” where a low price gets a company in the door and then run the pricing up with add-on services.
Pricing shouldn’t be a race to the bottom just to win the business but should be in relationship to your vision and values as a company. John shares, “Economic conditions do not determine our fate. Like my grandfather, I have found there is at least as much opportunity in bad economic times as there is in good economic times. In our business especially, FDR’s famous words apply, “All we have to fear is fear itself.” As Rachel Stewart shared on Episode 20, “Crisis leads to opportunity.”
Do we care about pricing more than our customers?
John Downey IV says, “I’ve been involved in family businesses for nearly 45 years and have the emotional scars to prove it.” From taking the helm of a thriving multi-site family business to running his current niche operation, John Downey has experienced all the highs and lows that the carpet cleaning industry has to offer.
In 1988, John took what was a successful regional paper for his chapter of The United Carpet Cleaners Institute and grew that into a nationally distributed magazine, Cleanfax. The first issue mailed later than the targeted release date and almost broke Downey IV, but it made it off the presses and to the masses. Cleanfax grew in popularity as a magazine with “meaty” content, by carpet cleaners and for carpet cleaners.
Cleanfax sold in 1997 and John experienced personal and professional struggles, including losing his dad and making some overly ambitious investments. John is transparent in his article and on our episode of The DYOJO Podcast. He shares that in his current “pop and kids” carpet cleaning business he has worked hard to build his reputation, benefits from being in an affluent area and has the will to charge what is appropriate for his quality services. Downey IV points out, “Often we care more about pricing than our customers do.” Let that marinate in your mind for a moment.
Too often we are engaged in a race only to realize to late that it’s not one that we should want to win. The pricing wars that exist in many industries are mind-boggling. Low pricing is not a strategy for long term success for your personal ability to build wealth, the growth of your business or the health of your industry. This is one reason I point out in my latest book, Be Intentional: Estimating, that Xactimate, or similar programs with data-driven pricing models, can be a positive thing for those entrepreneurs who are just starting out.
We are always learning
It’s important to remember that anything we know, as seasoned entrepreneurs, hasn’t come to us because we were smarter than anyone else, it’s because we learned by trial and error and somehow survived. Success can be fleeting, grasp at it too hard and it will kick you in the rear. John is currently serving as the Executive Director of the Cleaning Industry Research Institute (CIRI) which conducted their first remote conference this year with great success. John says he combats his workaholic tendencies daily, “I could end this talk by telling you that I am an entirely different man today. But I’m not. Although neither am I the same.” Give The DYOJO Podcast Episode 28 a listen on Apple or Spotify and you can’t watch our discussion on The DYOJO Youtube page.