What’s your pricing strategy?

As competition for students increases, intensive English programs should consider the price of their program. The pricing decision must take into account the overhead and operating cost of the program, as well as revenue and margin goals. But a conscious pricing strategy also positions the program in relation to competitor programs. Prospective students evaluate the program price against the perceived value the program will have for them. Here are five examples of intensive English program pricing strategies I have encountered over the past few years, each of which exemplifies a pricing strategy that worked, or didn’t, for the program. Prices are for tuition for a four-week general English program.

Program A was part of a for-profit language school chain, located in the downtown area of a major city. At $2,200 (this was in 1998), it was priced significantly higher than similar programs. The price was intended to communicate high quality, but although this company had developed its own proprietary language learning software and hired only teachers with master’s degrees, it struggled to communicate added value to students. Student feedback included comments such as, “Why is this school so expensive?” This language school chain went out of business.

Takeaway: If you charge a higher price, you must be able to communicate the value you offer beyond the competition.

Program B, also part of a for-profit chain, marketed itself as a kind of ‘business class’ English school. It charged anything from $4,000 to $8,000 in the early 2000s, much more than any other program. Its facility was designed with business executives in mind, classrooms were fitted out as high-end conference rooms, and classes were very small, with additional one-on-one options available for personal attention (which most students opted for). Teachers were trained to push students hard for rapid progress. This school had a clear differentiating factor, and there was an elite clientele willing to pay the price, including corporate HR managers seeking professional development for employees. This was a low-volume, high-margin approach that was successful as long as the school could find and reach its market, which was and remains a challenge.

Takeaway: If you price high to attract a small number of well-heeled students, you must have a strategy and the capacity to reach those students or decision-makers, and clearly describe your difference.

Program C is a university-based program charging  almost $3000, which is about twice what the typical proprietary program in the same city charges. The university and the program have a strong reputation, and the program has a highly qualified and experienced faculty teaching an academically-based curriculum. The program saw a significant drop in enrollments in the past few years. While its price may reflect an ‘elite’ status as a university program and continues to attract students who seek a superior program, its net income is allocated to fund other university programs, and the university has demanding revenue expectations. Students are paying above what the program might need to charge if it were an independent entity. On the other hand, if they choose, students can take advantage of the university’s facilities and its student community.

Takeaway: A university-based IEP must be able to communicate the value inherent in its position on a campus to potential students who have academic ambitions.

Program D is a stand-alone proprietary program outside the main business district of the city, charging $750, or as little as $500 for students who make a long-term commitment. This program has made price its main differentiating factor, and is experiencing growth even at a time of overall declines. This is a high-volume, low-margin strategy that works if enrollment is strong, as it is. The downside is that it attracts a population largely from one country, many of whom stay with relatives who have immigrated from that country, and whose priority may be to stay in the U.S. rather than a strong urge to learn English. This has quality implications in the classroom.

Takeaway: A low price can be successful if you are able to find large numbers of students who may be satisfied with a no-frills program, and recruit them directly rather than through commission-based agents.

Program E: This program is a downtown branch of an international chain of English schools, and charges around $1700, which is about the same as other chain schools in the same city. This school emphasizes its location, its modern facility and technology, and friendly, welcoming atmosphere. It recruits primarily through an extensive network of agents, to whom it pays commissions.

Takeaway: When your price is the same as your direct competitors, you must build and maintain strong relations with your sales network, and develop in your agents a strong brand loyalty.

Information about intensive English programs is ubiquitous, and in an era of high student mobility,  you might say that every program is competing with every other program for students. Price is one of the major factors in positioning your program. Which of the above strategies is yours closest to? Is it appropriate now, and will it remain so in the future?