What Does Your Price Say about Your School/Gym/Studio?

What does your PRICE say about your QUALITY?

Hey folks, Jason M. Silverman here.  I’m often asked questions from my clients (in every single business niche) about the “hows” and “whys” of pricing.  What I’ve discovered over the years is that your Price is one of the most important marketing vehicles you have, and as such, it helps to both attract a particular demographic of people as well as repel a particular demographic of people…the kicker here is that when you price yourself inappropriately, you wind up repelling the people you hope to attract and attracting the people you hope to repel!  Yikes!!!

Last week, one of my clients was complaining about the fact that “all her clients are broke and are always complaining about having no money.”  I can totally understand her frustration.  When I dug deeper into what was going on in her business, she confided that she’s been advertising the fact that her program is “the cheapest in town” and that “people shouldn’t be wasting their money at the expensive place down the street.”  Double Yikes.  My comment to her was, “Susan, you can’t complain about your clients when you were the one to attract them with that type of advertising…plus, you agreed to let them become and stay clients, right?”  It was an enlightening conversation for her as she took out all of her advertising for the past few years and noticed that in every single instance, she was focusing on being the cheapest rather than providing the best value.  Which is an entirely different selling proposition.

Some of the Major Pricing Mistakes I’m Currently Seeing in the Industry include:

1.)  Marketing Themselves as Cheap, Inexpensive or Low Price.  One of the really cool things about marketing your business is that you can tell people exactly what you want them to know about you.  If you tell them that you’re cheap…they’ll believe that you’re cheap.  If you think about the connotation that being cheap carries with it (low quality, low confidence, poor training, unsafe, etc.) you can understand the type of prospect that would be attracted to a service like this.  While I’m not necessarily saying that every program should market themselves like the Four Seasons, Mercedes Benz, or other luxury products, I do suggest taking a look at how and who these brands market to as they have been ultra successful in penetrating a segment of society who is willing to pay more for what is perceived as “the best.”

2.)  Pricing Your Program in “No-Man’s Land”  What I mean by this is something I hear from so many owners it drives me crazy.  When I ask them how they determined their pricing model, I’m generally answered this, “Well, the highest price program is $150/month and the lowest is $100, so we priced ourselves at $125 so we’re right in the middle.”  That’s what I consider no-man’s land.  NEVER allow anybody else to dictate your pricing policy.  It’s an enormous NO-NO.  If you really have no idea how to price your program, at the very least, I’d suggest determining who the most “expensive” program is and then matching that.  If they’re in business and have a steady client flow, it proves the level of their pricing.  By doing this, it allows you to deliver more and more value to your clients.  When I owned my School, I was able to have a beautiful, immaculately clean facility  that was always being updated, the most professional and well trained (and well paid) staff, and the ability to totally blow people out of the water when it came to customer service.  Many of the Client Retention systems we implemented were able to be executed because we had sufficient operating capital to continually improve our members’ experience.  The fact that we were “expensive” was actually comforting to many of my clients because they knew that we were in it for the long haul and wouldn’t disappear in the middle of the night one night.

3.)  Dropping your price after a year.  I’ve seen this in a number of businesses and it’s almost always a disaster.  Let’s say you are bringing new clients in and for their first year they are paying $300 per month…then, after their first year, you drop their price down to something ridiculous like $40-$50 (or even less).  You might think at first blush that people would appreciate that gesture, however, here’s what’s really going on.  Once you drop their prices, they will most definitely move to the “back burner” as far as importance goes.  You know it and eventually they will know it to.  People are not stupid.    Realistically speaking, if you are now charging them less, you will have less of an ability to service them and because of that, you risk irritating those clients and then allowing those unhappy clients to infect all of your other ones.  I’ve seen this so many times and in some cases, it’s been the cause for the demise of multiple businesses…Do Not Do This…EVER.

4.)  Pricing On The High Side but Delivering on the Low Side.  A horrible idea at best.  It doesn’t take long for people to figure out that they are being taken advantage of does it?  Absolutely not!  If you are going to charge a high rate, make sure you are delivering a super high rate of service…that way, they are still getting a tremendous value for their investment.  At my academy, we went by the theory that we would always deliver 2 dollars of extraordinary client care for every 1 dollar we collected.  This way the client always WINS…and that’s super important, not just for that particular client, but also for creating a community of success at your business that everybody finds exciting.

5.)  NOT having a pricing strategy at all.  Believe it or not, many owners simply throw a price out that they believe people would be willing to pay without taking into account what it “costs” to deliver your service.  Again, this is a horrible idea.  I remember going through the exercise with my CPA many years ago to determine how much a square foot was worth on my training floor at various times on my schedule.  As owners, we sometimes forget the expenses that must be paid in order to be able to successfully deliver our product (amazing / life changing classes).  Make sure to look at everything that you’re investing and then build in your profit – that’s how you determine the FLOOR for your pricing model.  If you have not yet done this, please get it done.  One of my favorite metrics is to help people grow their profit margins, however, if you don’t know what your margin is, it’s challenging to measure and grow it.  Keep this little phrase in mind – “Know Your Numbers – Grow Your Numbers!”

Obviously, there are a bunch more, however, these are the major issues to avoid in your pricing strategy.  Hopefully, you’ll find this little nugget of info helpful as you head into another amazing year!

Please let me know how I can be helpful to you going forward, ok?

IMPORTANT NOTE:

I’m considering running either a 1 or 2 day Marketing and Business Systems Intensive for a small group of top level owners like you.  The plan would be to host this in New Jersey (where I live) as it’s alway easy to get a flight into Newark for those coming from out of state…Would you be interested in attending?  I’d like to keep it to less than 25 owners if possible in order to really ensure that everybody gets what they need to really launch your business this coming year.  Please send an email to [email protected] if this sounds like something that’s right for you!

best,
Jason

Jason M. Silverman

4 replies
  1. chris massie
    chris massie says:

    I have experimented with pricing over the past 15 years and now am charging more than I ever have. We have a basic with two step up programs. My question is how so you determine your base price when over 3/4 of the public schools have kids on free of reduced lunch programs within a 5 mile radius of my school and when two of the major industries in Our area are laying off workers? We have a base price for little dragons at $69 per month with DRagon Club step up to $85. My basic kids program 7-12 year olds is $79 per month with Black Belt Training step up to $110 then step up to Master’s Training to $130. Is this in line? I have three schools within a 10 mile radius and I really dont know what they charge. I just want to make sure I am charging what I need to be for my area. Let me know your thoughts.

    Thanks,

    Chris Massie

    Reply
  2. jason
    jason says:

    Hi Mr. Massie,
    First off, congrats on raising your prices. I’m confident that you overdeliver when it comes to your members, so I’m glad to hear that you’re being compensated for it!

    Now, to answer your question regarding based price levels — we always allowed the market to tell us what it could bare. By this I mean that if we found less than 10% of the people who we presented the price to, complained that it was unaffordable, we continued to raise rates (and of course we also continued to add extra value as well). If it got to the point that more than 15% felt the rates were unaffordable, we re-examined our levels.

    One question I have for you is why charge different prices for little dragons vs. basic kids programs? Do they get a different value for the different classes? (I’m not talking about the step up programs here). We originally charged less for the youngest age group until I realized that they were the most challenging group to work with, had the most demanding parents, and were a group best taught by somebody who was not me. Eventually, we charged the same monthly rate for each of the different basic level programs (young kids, school age kids, teens and adults) and it worked out much better for us in the long run.

    As far as whether or not your rates are in line…I don’t know enough about your demographics to properly answer your question. However, have you price shopped other activities like Gymnastics, Cheer leading, Figure Skating, Dance, Academic Tutoring, Hockey, etc.? That would be a good indication of what people are investing for after school activities and at least fill in some blanks for you. Make sense?

    As always, we’re thrilled to have you in the Powerful Words family. Please let me know how we can be helpful to you!

    best,
    Jason M. Silverman

    Reply
  3. Greg Tearney
    Greg Tearney says:

    We are constantly bombarded by our competition with “No Contracts- lower Tuition” as their mantra, we have been in business since 1969 with a great reputation, should we be concerned??

    Reply
    • jason
      jason says:

      Hi Mr. Tearney,
      Great question…and one that I’m presented with on a regular basis. My answer is one that my wife’s dad used to say to her while at the dinner table, “Keep your eyes on your own plate!” Whatever the “competition” is doing is irrelevant as long as your unique selling proposition is different from the one they’re using (and it sounds like they are trying to use the no-contracts / low price as their version of a unique selling proposition). Big mistake on their part. The problem with advertising that they don’t treat their business professionally with a professional service agreement and / or they are proud to place a lower value on the education and experience that their clients get is that it’s not special. Obviously, at our academy, Powerful Words Character Development was our USP. People EXPECTED to invest more in their kids’ education at our facility because they were comfortable with the extra value we were providing to them.

      While I’m sure it’s annoying to see people slashing their own rates (and their profitability in the process) as a way to get more students…the kind of students that they will be getting are drastically lower quality. Remember, those who tend to invest the least are the least invested. I’m not saying to gouge anybody – rather to charge a real rate and overdeliver on quality and service.

      Your time in the market and your reputation speak for themselves – I wouldn’t concern myself with what these other folks are trying to do regarding their marketing…sounds like a silly thing to me!

      Does this make sense?

      sincerely,
      Jason M. Silverman

      Reply

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