When I started teaching the martial arts years ago, the one label I thought my school needed to avoid more than any other label was “most expensive school in town.” I felt that charging top dollar for teaching the arts was an apostasy. I was convinced that expensive schools could not possibly have the same respect for the martial arts that I had, and that all they were after was money. I was sure that expensive schools had sold out and were teaching inferior, watered-down technique, just to gain as many students as possible. My school was going to be different, I always assured myself.
In the early days, there were only two martial arts schools in my town, mine and my arch rival’s. I hated my arch rival. Oh, don’t get me wrong, he was actually a nice guy and a darn decent martial artists, but in those days, he was the enemy.
My rival and I never actually had cross words, and now that I think about it, all my anger at him stemmed from schoolyard conversations between his third-graders and mine. On more than one occasion, I was ready to charge over to his school and give him a good thrashing, based on the hearsay of a third grader – what an example of maturity and self-control! Thank goodness we never physically acted on any of those ridiculous impulses.
Since my arch rival and I had no real desire for a physical confrontation, we competed in another area we thought would really do damage, We competed to see who could have the lowest tuition in town. We were determined to underprice the other, thinking that the one with the lowest price would certainly have the most students.
A strange thing happened as we lowered the cost of our classes. Instead of our schools filling up, as we had expected, the number of students were signing up and keeping actually began to drop. I didn’t know why at the time, but I do now.
I learned that in marketing there is an important psychological factor called “price perception.” Translated in plain old English, it means people believe they get what they pay for. Besides, price perception, another force at work on our market was something I now call “cost prestige.”
Cost prestige means that people from your demographic target (Baby-Boom parents) are strongly motivated by the need to appear affluent, and to engage in activities that others like them engage in. If your tuition is too low, there is no cost prestige associated with your school, and you will attract people from your town’s lowest socioeconomic-level, alienating the status-conscious Baby Boomers who, believe it or not, would rather pay a little bit more.
Here are two important tips about your pricing:
1. People won’t think your classes are very prestigious if you don’t charge around $60 per month for two classes per week. If you’re currently charging less than $60, start to increase your dues in increments of $5 every three to six months until you get there. You may want to grandfather some of your existing students, but make sure the new students pays the higher tuition.
2. Parents are often proud to say their child attends an expensive private school.
And it’s no different with extracurricular activities. Dance lessons, piano lessons, and martial arts classes are always sought from the most “recognized” school or teacher in town. One of the primary reasons people pay extra money to send their children to the best (most expensive) school is cost prestige.
If you make a commitment to raise your tuition to a proper level, you will experience a different dynamic begin to work in your school. When I increased my tuition to $60 per month, my arch rival across town just knew it would be the end of me. But he was wrong, it was only the beginning. In less than six months, I had twice as many students as he had, and in a year’s time, I doubled that again! Whether you think your classes are worth a little or whether you think they’re worth a lot… you’re right!
