[G Griffin]

 Perfect Windows/Vin,
   
     The title of the first thread was "Basic economics lesson" but you never mention the key words of economics- supply and demand.
     I don`t think I`ve heard of the "leaving money on the table" theory either. And how do you know you`re following this theory? For example, you mention a £16 job, how do you know you couldn`t charge £18? Are you then leaving money on the table?

      You also say it`s not about supply and demand; but one your last posts is all about that, including the Starbucks example.
     I`m not having a go but interested to hear your views.

[mci services]

don't think he wants to answer

[G Griffin]

He’s post/thread has more to do with microeconomics stu-mac, which is about questioning why do ‘window cleaners’ operate a particular way in there trade, its discussed here everyday by just about everyone who post but never taken seriously enough to be put to good/profitable use.

 
 But the title of the thread was "Basic" economics.
 Do the more professional window cleaners on here actually do supply and demand curves to achieve the equilibrium price then?
 Or is it more rule of thumb like the rest of us? 

[G Griffin]

 I`m not jesting. But someone offers to give a lesson in basic economics and then says it`s nothing to do with supply and demand. Priceless. 

 I realise that we`re all economists in a way, maybe without knowing; but supply and demand is a massive part of our businesses whether we`re aware of it or not too. 
 We supply a service and customers have a demand (or not) for it.

[Perfect Windows]

don't think he wants to answer

Apologies if I have other things in my life than posting on here!.

I'm not an economist by training and any mistakes in the following are all my own work...

Yes, it's all supply and demand, but with subtleties.  So, if I charged £100 per annum, then a number of customers in Southampton would pay for my services.  Increase my prices and the demand would drop,  Decrease my prices and demand would grow.  All simple enough.

However, within all that there are some subtleties.  Some people wouldn't use me at £100 because I was too expensive for them (let's say their limit was £80).  However, if I drop my price to £80, I'm losing cash on every customer who would pay £100. They aren't going to say "Look, I'm prepared to pay £100." They are going to pay the £80 and be very happy.

So, one way of dealing with it is to put a hurdle in the way of a customer paying £80 a year.  In my case, that's having your windows cleaned every 12 weeks rather than six.  They get a bit grubbier, but you pay a lot less.  The people who are happy with £100 will carry on paying it.  The people whose limit is £80 will take the small hurdle and pay.  But there are a bundle of people who won't pay more than £60.  In their case, the hurdle is that they need to ask me if I can charge them less (as it's not on the price list) and they have to accept that their windows will get damned grubby in the 24 weeks between cleans.

So, charging differential prices allows me effectively to offer different prices to people with differing price sensitivities but still keep the revenue from the price insensitive customers.

So, it's all supply and demand, but I'm now getting more money than I would if I just blanket cut my prices.

The Starbucks example is about the same thing.  At price X they will sell Y cups of coffee, but they aren't getting the most out of their price insensitive customers, as they are doing that calculation based on the average customer.  The question to ask yourself is, if there's a way to get X+spmething from 10% of their customers, should they do it?  Yes, they should.

If you want a better explanation, I suggest the book "The Undercover Economist" by Tim Harford.  It's the best idiot's guide to economics that I've ever come across.

 And how do you know you`re following this theory? For example, you mention a £16 job, how do you know you couldn`t charge £18? Are you then leaving money on the table?

I don't know that I'm doing it perfectly, but I'm making an imperfect attempt to.  £16 involves a great deal of guesswork, yes.  And there are customers out there who would pay £18 for the same job.  If I could find a cheap to offer service I could offer at a premium price, I might be able to root them out.  Any ideas?

Also, I'm not taking anything as someone "having a go"; I'm uncertain about this - I'm trying to get better at it, and explaining it helps me to understand it as well.

Vin

[G Griffin]

 Fair enough Vin.
 You pretty much described the supply and demand curves. At lower prices,you are more in demand but less willing to supply your service. As prices increase you are more willing to provide but demand may drop.
  As you say though, it`s a basic way of looking at it.

[Perfect Windows]

Fair enough Vin.
 You pretty much described the supply and demand curves. At lower prices,you are more in demand but less willing to supply your service. As prices increase you are more willing to provide but demand may drop.
  As you say though, it`s a basic way of looking at it.

I'm genuinely interested that you think it's "basic" as I believe I've managed to segment my customers into three separate groups, each with their own supply and demand curves in order to maximise my benefit.

Vin

[Perfect Windows]

hmm

[G Griffin]

Fair enough Vin.
 You pretty much described the supply and demand curves. At lower prices,you are more in demand but less willing to supply your service. As prices increase you are more willing to provide but demand may drop.
  As you say though, it`s a basic way of looking at it.

I'm genuinely interested that you think it's "basic" as I believe I've managed to segment my customers into three separate groups, each with their own supply and demand curves in order to maximise my benefit.

Vin

 I meant a basic way of looking of supply and demand. You can`t really cover it in a few sentences. I was referring to my explanation of it really.

[Perfect Windows]

I agree with perfect windows its all about supply and demand for window cleaners.

By way of explanation, note that my "do not feed the troll" was aimed at the inimitable Ewan, who then deleted his ludicrous post.

Vin

[Sunshine/Cleaning]

Leaving money on the table.

You will never truly know if you have or haven't. The main thing to remember is that there is a % of people who will value your time more than you do or who don't know the value of your time. Either way you need to find them. You do this by valuing your time highly. You will shock some people with your prices, but you don't need these people. Your looking for the others.

You have to have confidence in your price structure, if you do you will find the right customer. Once you have found this type of customer look after them and you will never loose them.

[gewindows]

who then deleted his ludicrous post.

He's attention seeking again.

Its time for him to do his rounds at the mo. He'll be back shortly, once he's done a circuit or two, checked the fences, monitored his security cameras and hand a shuffle with his crinkled old copy of Razzle.

[mci services]

thanks for the explanation vin and fair enough, I could not understand why you locked the other post though. To be honest I was looking for a lesson on basic economics but you have not covered anything we don't already know and it is pretty much common sense,

I just thought you had come with something special that we were all missing

[Perfect Windows]

All economics is applied common sense.

And I locked the other thread because it had been seriously hijacked by an imbecile likely to carry it on forever to make a point.

Vin

[mci services]

To be fair to Ewan he only asks your reasoning behind your thinking, Ewan confuses me sometimes but so do you. But for the most part I can see Ewan's point but I struggle with your's and you do have a habit of locking posts when not everyone agrees, but then again Ewan has a habit of deleting posts, either way just do your business the way you see fit and don't worry about everyone else

well thats my tuppence worth

[Gav Camm lammy 283]

don't think he wants to answer

Apologies if I have other things in my life than posting on here!.

I'm not an economist by training and any mistakes in the following are all my own work...

Yes, it's all supply and demand, but with subtleties.  So, if I charged £100 per annum, then a number of customers in Southampton would pay for my services.  Increase my prices and the demand would drop,  Decrease my prices and demand would grow.  All simple enough.

However, within all that there are some subtleties.  Some people wouldn't use me at £100 because I was too expensive for them (let's say their limit was £80).  However, if I drop my price to £80, I'm losing cash on every customer who would pay £100. They aren't going to say "Look, I'm prepared to pay £100." They are going to pay the £80 and be very happy.

So, one way of dealing with it is to put a hurdle in the way of a customer paying £80 a year.  In my case, that's having your windows cleaned every 12 weeks rather than six.  They get a bit grubbier, but you pay a lot less.  The people who are happy with £100 will carry on paying it.  The people whose limit is £80 will take the small hurdle and pay.  But there are a bundle of people who won't pay more than £60.  In their case, the hurdle is that they need to ask me if I can charge them less (as it's not on the price list) and they have to accept that their windows will get damned grubby in the 24 weeks between cleans.

So, charging differential prices allows me effectively to offer different prices to people with differing price sensitivities but still keep the revenue from the price insensitive customers.

So, it's all supply and demand, but I'm now getting more money than I would if I just blanket cut my prices.

The Starbucks example is about the same thing.  At price X they will sell Y cups of coffee, but they aren't getting the most out of their price insensitive customers, as they are doing that calculation based on the average customer.  The question to ask yourself is, if there's a way to get X+spmething from 10% of their customers, should they do it?  Yes, they should.

If you want a better explanation, I suggest the book "The Undercover Economist" by Tim Harford.  It's the best idiot's guide to economics that I've ever come across.

 And how do you know you`re following this theory? For example, you mention a £16 job, how do you know you couldn`t charge £18? Are you then leaving money on the table?

I don't know that I'm doing it perfectly, but I'm making an imperfect attempt to.  £16 involves a great deal of guesswork, yes.  And there are customers out there who would pay £18 for the same job.  If I could find a cheap to offer service I could offer at a premium price, I might be able to root them out.  Any ideas?

Also, I'm not taking anything as someone "having a go"; I'm uncertain about this - I'm trying to get better at it, and explaining it helps me to understand it as well.

Vin

do u clean any starbucks m8

[Perfect Windows]

To be fair to Ewan he only asks your reasoning behind your thinking, Ewan confuses me sometimes but so do you. But for the most part I can see Ewan's point but I struggle with your's and you do have a habit of locking posts when not everyone agrees, but then again Ewan has a habit of deleting posts, either way just do your business the way you see fit and don't worry about everyone else

well thats my tuppence worth

The thread had wandered off topic and was going into a discussion about the Aqua-dapter.  I know Ewan will disagree with me whatever I say; he disagrees with everyone.  I just have a personal hatred of threads that disappear into a discussion far away from their original subject.  Some migration is normal, but starting a discussion of another product without bothering to start a new thread is taking the mick.  I was happily answering all the questions that were asked up to that point, as I have on here.  This is something I need to clarify for myself and discussion and debate helps.

I'm possibly having trouble explaining my thinking because this is all complex stuff (for me).  I think I've found a way of being able to publish prices while still being able to get more from the price insensitive without losing those to whom price matters a great deal.  i.e. I can be open with my pricing and get the flush and the short of cash both to buy from it.  If that's not a worthwhile economic point, I don't know what is.  It forms a full chapter of the book I mentioed above and is used by all the world's airlines, all the main supermarkets and many of the world's big retailers.  I'm trying to bring it into our world.

I'm also trying to improve it and all the explanation has already given me some theoretical ideas of how to do it, namely that I need to find additional odds and ends that I can charge for to get a bigger profit out of the customers who are less price-sensitive.  When a thread stays at least somewhere on track, it can lead to good ideas...

Vin

[Ian101]

Maybe simplfying it here but to me basic economics comes down to maximising every 8 hour day worked.

I now have about 2 weeks of work full out of every month as recently took on a couple of underpriced rounds one from a regular poster on this forum and one from a guy whos not on here ( not underpriced because of the reg poster on here but the area has suffered from the beer money brigade)

Now both rounds are compact but a little underpriced so going foward as I can only clean a given number of houses per day is to gently remove / loose the low priced jobs and replace them with a higher paying customer.

This is happening slowly but surely ...... example yesterday collected from a 8 week / £7 job who then said I want to cancel no problem as too cheap and poor access so knocked a few doors and got a £5 for 3 windows front only and a bungerlow at £10 both on a four week cycle so thats now £15 every 4 weeks £180 per year as oppossed to £42 per annum ..... plus the 2 jobs together will take same time as the other 8 week job did

To me thats basic economics ..... making maximum use of the raw materials to hand which for any window cleaner the raw materials are time and man power and the product is clean windows ... simples 

Do I regret loosing the 8 week customer as I still have the other 80 hours a month to fill ... no as I will canvass more customers to fill that time sure this may take a little time but in the long run I will have a better and higher grossing round instead of spending time on low rent customers which if my spare 80 hours are full of these I wont have time / drive to canvass the higher rent customers.

[dazmond]

ian if you  plan to work a 40 hour week youll only actually "work" about 24 hours a week.take off driving time/dinner/tea breaks/bad weather etc.so you will only earn money in these  hours so you need to maximise your hourly rate as much as poss!!

i think it was stu mac who went for a business meeting and the guy told him its the same for other tradesmen as well(painters and decoraters/plumbers etc).


dazmond

[Ian101]

ian if you  plan to work a 40 hour week youll only actually "work" about 24 hours a week.take off driving time/dinner/tea breaks/bad weather etc.so you will only earn money in these  hours so you need to maximise your hourly rate as much as poss!!

i think it was stu mac who went for a business meeting and the guy told him its the same for other tradesmen as well(painters and decoraters/plumbers etc).


dazmond

yup quite correct Daz .... but the way Im looking at it at the moment is not hours on the glass v travelling bad weather etc but more along lines of how much ££££££££ a day I can earn ...... once all my hours are filled then I will prune in earnest from the lowest price up (compact 2 up 2 downs exception as they qualify under income per hour a load of front onlys at £4 ... yes please ! ) but pruning now but not in earnest as still need the income even if its alittle lower than it should be ....

Guess its all about what stage your own particular business is at when Im chocca block full then my outlook will be more technical i.e. hours on the glass v travelling v poor weather etc etc but not at that stage yet however yes Im ever mindful of these things btw whats a dinner break lol