In running a studio, there is a very delicate balance between pricing and retention. Every time you’re asking a parent to make a decision about whether they want to come back or not, it’s like opening the door for them to leave…
They have the power: Do they want to stay or leave?
In fact, every time you’re asking them to pay, it is another decision to make. Do I want to pay this money, or do I want to put this money somewhere else?
I want you to consider pricing from the perspective of retention.
If we reduce the amount of times we ask them to pay, we’re reducing the amount of times we open the door for them to leave. We’re locking down our retention for that whole period.
So let’s start at the very, very extreme end of this…
What if you accepted annual payments for your studio? Upfront, before the year even began, you would receive all the tuition for the entire year ahead, in your bank account, locked in.
The great thing about this is you can order all of your costumes and materials at a bulk rate as well as total cash flow security for the entire 12 months. While this may be at the more extreme end of structuring your pricing, my clients who are utilizing this strategy absolutely love it.
It’s a really interesting concept to think about…
The next level down is to pay by the semester.
Paying for half a year, six months in advance. This is a really good place to be sitting. If you can receive six months tuition in advance, you know that you’ve got great security. You know what your student numbers are going to be until the end of that period. It also means that the parents only have to take care of it once and not think about it again.
Next, there is paying quarterly. In Australia, we would call this by the term, which equates to a 10- to 12-week session.
After that, we’ve got monthly payments. Monthly payments are great, but then again, we’re kind of increasing how often we’re asking parents to pay and put their hand in their pocket.
The more times we’re asking for payment, the more time we have to invest in chasing credit card payments that don’t work.
It means more time that we’ve got to spend on admin sending out invoices. It also means more risk that we have in terms of retention and less control over receiving money within our studio — which is a really big factor to consider.
When we are making these decisions about how to structure and receive payments in the studio, it can be quite a confronting process for a lot of studio owners. You may be thinking, “Oh, well, I know that our students won’t be able to afford it or they prefer being able to pay me cash when they’re able to with their paychecks.”
I want to empower you with the knowledge that the stronger you stand in your position of “this is how we do it in our studio and this is why”, the better that it’s going to be received.
It’s all about how we present the opportunity to them.
Instead of asking, “Would you mind paying us by the semester? If you can’t, it’s okay. We will work something out”, approach it like this: “Here we are in the studio. We are now transitioning to receiving payments by the semester.”
It’s about coming in with that state of authority. Are you able to negotiate flexible payments with your gym? No.
Your studio is a business. You can set the terms of how they’re going to interact with you if you stand with them with confidence: “This is how we do things. Thank you so much. This is why we do it as well.”
I mean it can be as simple as “we want to make it easier for you”. We want to have less transactions, less time spent. We want to be able to focus on what we do best.
Keep it simple. We want to move toward asking for longer periods of payment upfront.
Making every decision in your studio from the perspective of improving retention is the first step to creating a thriving studio.
We’ve put together 52 of our favorite retention tips to make it easy for you to inspire your teachers to boost your retention every week! Download the Free 52 Retention Tips PDF Here >>
So at the moment, if you’re charging monthly, let’s see if we can push it out to asking for quarterly payments. If you’re receiving quarterly payments, let’s see if we can start stretching toward semester payments because it’s going to give you so much more security in your studio and also allow you to concentrate on what you do best.
For example, I was having a chat with a studio owner in Ohio the other day, and she was telling me that she has made the transition from monthly payments to semester-based payments.
While many of her studio owner colleagues are complaining about students dropping off, this studio owner is sitting pretty. She has her whole semester payments lined up. She has a measure of security and has taken that whole element of risk out of her business just by shifting the payment process.
Now it does take a little bit of cajoling to get families to move to the new payment model, and you may offer a grace period to allow your students to transition. Otherwise, it is such a powerful strategy to help grow your business and give you the security you deserve.
So here’s a question for you: How often are you receiving payments in your studio? Do you receive them monthly? Do you receive them by the quarter or by the semester?
It would be really interesting to find out where you’re sitting right now. So post your comments in the section below.
By Chantelle Duffield, Studio Strategist at StudioExpansion.com.