Tuition Structure Strategies That Work
If you are struggling to make the revenue and profit of your dreams and not sure how to move forward, increasing your tuition rate actually just might not be enough. You will need to look at your overall profitability and the data before you make a decision on your next move. Let’s talk about pricing structures and what actually works to make your studio more profitable.
Is your tuition structured the way it is just because that’s how “everyone” does it here? How did you come up with your tuition strategy and pricing? How often do you evaluate your tuition structure?
Stop basing your price on someone else’s rates!
Pricing should be location dependent.
Do not base your prices on what your competitors charge in your community. You don't know what their overhead expenses are. You don't know their cost of doing business, their insurance cost, etc.
Do the math. When we are coming up with our pricing structure and strategy, we need to look at what are our hard costs and what is the percentage of profit that we want to make? What's our profit margin that we desire?
The numbers will lead you to what your tuition rate should be. In our industry, you can shoot for a 30-35% profit margin if you have a brick and mortar. That is a really great profit margin where you feel good and you're making some money. You will know you’re taking care of all your costs and you can be saving money. That's important. If you are not currently running at a 30-35% profit margin, we need to look at the math and do something about it.
Stop with all the discounts!
I know you feel like you should give competition dancers in the studio a break because they sign up
for so many classes, and if you don't the parents won't sign them up. That's not really a fact. That's a feeling. As parents, we get to choose what opportunities we give to our children. We get to choose if it's in our budget or not. It's not up to you, the studio owner, to decide their budget, right?
Stop with all the discounts. You don't need multi-class discounts. You don't need sibling discounts. They are not necessary. And..just because you've had them forever doesn't mean that you have to continue keeping them.
Stop trading time for dollars!
Is your structure if they’re in the studio for 30 minutes, it's $30? You are trading time for dollars? When it comes to your tuition structure, I'm not a fan of this structure because people start to equate them and it changes the perception of your value. You will end up with a different tuition rate for a 30 minute class and a 45 minute class, or a 90 minute class. This causes the parent to try to add up all the times and figure out how much their tuition will be. It’s very confusing and it changes the perception of value. They start questioning: why is this tumbling class more expensive than the ballet class, aren't they both the same quality?
There are two models that I really prefer when it comes to rolling out tuition structures and pricing strategy for our clients in the studio industry.
Price Per Class Model. In this model, we look at the value of that room. This is where the math comes in. What is the opportunity for that time slot and the value of renting the room worth? Per class pricing is also really easy for parents because they can do easy math. They like it to be easy.
Membership model. This model looks like a gym membership, with different levels. In your dance studio, the parents like having the options. Develop three tiers where the lowest tier is their monthly tuition for taking classes,the middle level might add on recital costumes, and the highest level might be full access at one fee per month. It's consistent and it includes everything that they need - or will have to pay for during the year separately. This model takes away a parent’s feeling of being nickel-and-dimed throughout the year. Creating something that's an all-inclusive package makes it super easy for families.
Need some help with your tuition structure? Apply for a strategy session with Erin here: https://www.erinburd.com/apply
