When you run a cleaning service, knowing how raising your prices can impact your business is crucial. This helps you make better decisions about how much to charge your customers. Let's break down the concept using simple terms and examples.

What is Price Elasticity of Demand?

Price Elasticity of Demand (PED) is a way to measure how much the amount people buy changes when you raise the price. If a lot of people stop using your service because you raised the price a little, your service is called "elastic." If most people keep using your service even if you raise the price, it's called "inelastic."

Essential vs. Nonessential Services

To make it easier, think about your cleaning services in two categories: essential and nonessential.

• Essential Services: These are the services your customers feel they really need, like regular office cleaning or window cleaning. Even if the price goes up, most customers will still pay for these services because they are important for maintaining a clean environment.
• Nonessential Services: These are the services that are nice to have but not always necessary, like deep cleaning or carpet cleaning. If the price goes up, customers might decide they can do without these services for a while.

How Raising Prices Affects Revenue

Let's look at how raising prices can affect the money your business makes. We'll use some examples with simple numbers.

Regular Cleaning (Essential)

• Current Revenue: $100,000
• Price Increase: 10%
• Fewer customers stop using this service (5% fewer).
• New Revenue: $104,500

Deep Cleaning (Nonessential)

• Current Revenue: $100,000
• Price Increase: 10%
• More customers stop using this service (12% fewer).
• New Revenue: $96,800

What This Means for Your Business

• Regular Cleaning: Because regular cleaning is essential, a small price increase won't drive away many customers. You'll make more money even if a few customers leave.
• Deep Cleaning: Since deep cleaning is nonessential, raising the price means you'll lose more customers, and your total revenue will go down.

Practical Tips for Raising Prices

• Know Your Services: Understand which of your services are essential and which are nonessential.
• Test Price Increases: Try small price increases and see how your customers respond. If you lose a lot of customers, you might need to rethink the increase.
• Offer Bundles: Combine essential and nonessential services into packages. This can make the higher prices for nonessential services more acceptable to your customers.

Example of a Price Increase Impact

Here's a simple example to show how this works:

• You raise the price of regular cleaning by 10%.
• Out of 100 customers, only 5 stop using the service.
• Before the increase, you made $100,000.
• After the increase, you make $104,500.

For deep cleaning:

• You raise the price by 10%.
• Out of 100 customers, 12 stop using the service.
• Before the increase, you made $100,000.
• After the increase, you make $96,800.

By understanding how raising prices affects different services, you can make smarter decisions that help your business grow without losing too many customers.