Price-cutting strategies rarely work. Marketing guru Jack Trout, in his book Differentiate or Die, says, “When price becomes the focus of the message, you are beginning to undermine your chances of being unique. What you are doing is making price the main consideration for picking you over your competition. That’s not a healthy way to go.”
Most companies can’t compete on price. As a private-independent school, some of your competitors,—public and charter schools—are free. Rather, you compete on quality and value. Your program and mission are what your families buy into for their children’s education.
Asking if your school is “affordable” means guessing how much your families can afford to pay. And frankly, that guess is often way off base. ISM’s 2008 37-school parent survey revealed that 89% of all parents had a gross annual income of $75,000 and above, while 50% had an income of $175,000 and above. Your families CAN afford your tuition.
The truth is, you need to set your tuition at a level that can support your program. Yes, some of your families have taken a hit from the grinding recession. Most private schools are tuition-driven and cannot count on investment income and do need to discount tuition to retain enrollment.
Now is the time to take a look at your financial aid program. Through the use of strategic financial aid, you can make your school more accessible. Your financial aid program is not a “freebie.” It is not a “loss.” It is a strategic program designed to serve your school and your mission. Your program should have its own mission statement, goals, objectives, and priorities.
Discounting without regard to financial need is another story. Do you have families who are currently receiving aid but don’t need it? Do you have a discount program that rewards families who can fully pay with a discount simply for having more than one child enrolled? And what about tuition remission for faculty and staff? Is that “perk” putting an undo in your financial aid budget?
You want to entice families with more than one child to enroll in your school. But when those families are capable of paying your tuition, aren’t you taking financial aid dollars away from a family that you want in your school, but who can’t pay? And tuition remission gives away seats to faculty and staff without necessary need. This is probably a touchy subject, but one way to remedy this is to promise financial aid to all faculty and staff at 100% of demonstrated need.
Your financial aid program can be a great tool for filling empty seats. Let’s say you have 50 spaces in the second grade, but only 40 are filled. Your operating expenses for 50 students are the same as 40 students. Using your financial aid program to fill those ten seats is not a loss of income, but in fact, a gain. Simply, receiving a partial tuition is better than receiving no tuition. Plus, you put more mission-appropriate students in your school. Think of financial aid in this manner—it’s a subsidy, that permits mission-appropriate families to afford your school and still pay for reasonable living expenses.
For an interesting look at the futility of price-cutting and pricing for value and quality, check out Raise Your Prices! that appeared in the Wall Street Journal. Although the article focuses on for-profit companies, the philosophy works the same for private-independent schools. Don’t miss the sidebar “Seven Mistakes of Poor Pricers.” Number 7: “The Customer ‘Tells’ Us the Price.”
