Some have suggested there is little or no relationship between a school’s tuition rate and its student enrolment level. The truth is, tuition or pricing, coupled with the perceived value of the school has a significant impact on the level of student enrolment. Getting this vital relationship right is an important step toward financial sustainability, which allows a school to focus on Discipleship.
So, how does a school determine the right tuition rate to charge? There are several factors to consider.
First - Why does your school exist?
Having a clear understanding of “why” your school exists is critical.
As Simon Sinek, professor at Columbia University, stated, “people do not buy what you do, they buy why you do it.”
“Why” you exist is the foundation of what business people call your value proposition. Like it or not, parents evaluate the value proposition of your school, which is a combination of your “why” and its cost.
Where there is no prophetic vision,
the people cast off restraint: but blessed is he who keeps the law.
Proverbs 29:18 (English Standard Version)
Vision and purpose provide your school with clarity of direction and alignment of effort. Without a clear direction, schools lose their way and “cast off restraint” which causes the ministry to “perish.” In absence of a clearly defined purpose or directiIf your “why” is to make Disciples of Christ and you achieve your goal, then parents will be willing to sacrifice financially to enroll their children. If you provide a good academic product in a safe and caring environment and build character, then your price will likely need to be lower. IGC believes parents will rightly sacrifice to make sure their children have the greatest opportunity to strengthen their relationship with Jesus. Building character alone is not Discipleship – many public schools profess to focus on building character.
Second - What Will Your “Why” Cost?
You need to understand what it costs you to deliver your “why.” What does it cost by grade level to achieve the reason you exist? What do you have to do to make your “why” a reality? Having a firm grasp on the cost of delivering your value proposition is a fundamental step in the pricing process. This requires a strategic plan that drives an annual operating plan and a zero-based budget that is a numerical representation of that plan. The plan to realize the “why” comes first and then the budget.
Third - Know Your Competition’s Rates
You need to understand the “why” of your competition and what they charge. Your pricing or tuition needs to be in line with other schools that have a similar “why.” By the way, this assumes they are delivering on their “why.” Those that have lower value propositions should be priced lower than you and those that have higher value propositions should be priced higher.
Your marketing effort must clearly distinguish your “why” so that potential new parents and their children will understand how your price and value truly compare to other choices. All Christian schools are not the same.on for your school, teachers, staff and stakeholders create their own “Why” and oftentimes they are counter to each other. This creates division, conflict and disunity.
Fourth - One Size Does Not Fit All
Tuition or pricing for a school, unlike a business needs to fit the audience or market segment. It needs to be variable based on their ability to pay.
Normally, we set our tuition as if we are going to have one rate and then we discount from that point to make the school accessible for those in lower income levels. Instead, we need to expand the tuition rate range in both directions. Raise the level for higher income earners and lower the level for lower income earners.
Lastly - Check for Empty Desks
We need to consider how many empty desks we have in the school when setting tuition. Oftentimes we raise tuition rates because we have experienced student attrition. This means the remaining families must pay more to keep the doors of the school open. Instead, we need to look at potentially lowering the rates to attract new students.
By example, if a school needs to generate $1 million in total tuition revenue, has a capacity of 200 students and has an enrolment of 150 students we think we need to charge an average of $6,667 per student to meet the budget. In reality if we were to fill the empty desks, we could lower the average tuition to $5,000 in this example to get to the desired $1 million.
Tuition and the associated value proposition based on your “why” has a significant impact on your level of enrolment. IGC believes if a school is creating an environment where students are experiencing Christ in an authentic way, its finances will be healthy.
How does Your School’s “Why?” Help Set Your Tuition?
About the Contributor:
From December 2005 to January 2016 Kelly Blake held the position of Head of School at Bearspaw Christian School (BCS) and the President of the BCS Foundation.
For eight years, Kelly held the position of President and CEO at Vantis International Corp. Vantis specialized in electronic travel distribution services, marketing and revenue management for more than 5,000 travel industry clients in 70 countries. Vantis employed more than 360 people.
Prior to his leadership role with Vantis, Kelly held the Chief Operating Officer, Executive Vice President and Vice President of Marketing roles at various times with HARS Systems, Inc. Prior to that, Kelly was Vice President of Marketing for Travel Systems, Inc., headquartered in Albuquerque, New Mexico. Before Travel Systems, Kelly was a Territory Accounts Manager with SmithKline Beecham a Fortune 500 consumer products company headquartered in the United Kingdom.
Kelly is the former Chairman of the Board of The Mustard Seed Foundation. He is the previous Chairman of the Board of TSX traded Guest-tek Interactive Entertainment Ltd and a former member of the boards of publicly traded TRVLSYS, Inc., HARS Systems, Inc., TravelClick, Great Kitchens for Less, Bearspaw Christian School Society, Thornhill Baptist Church, CORPATH and Life Spring Community Church. He is a former member of the Alberta Chapter of Young Presidents' Organization (YPO) and he holds a Bachelor of Business Administration degree from the University of New Mexico and an Associate of Science Degree from the College of Lake County in Illinois.
Kelly has been married for more than 30 years and has three adult children. He resides in Calgary, Alberta and Phoenix, Arizona.