Who should you blame if you are charging too little for lessons?
Recently, in the hallowed halls of Facebook society, I came across a post about the latest closure of Drive Dynamics. I have to say, I was a little disappointed by two aspects of this particular post. Firstly, the lack of compassion for those who have been negatively affected. There will be people, both ADIs and students, who relied on the firm and will have lost out. Business matters to people; not always the right people, but as in the case of the recent collapse of Carillion, there will be many people who woke up the following morning with much bigger problems than they had the night before when they went to bed.
My articles are designed to help with practical advice on how to run your business, but I’d like to remind you that businesses are made up of people, just like you. They are part of our industry, and whilst people may disagree with companies like Drive Dynamics for their methods, attacking them and everyone involved with them in such a vicious manner is a little callous, often ignorant of the facts, and simply compounds the perceived lack of professionalism in this industry. Those who are truly professional would, I think, show some compassion and at least attempt to understand the realities of the situation. Being a good business person comes from a foundation of being a good person and looking at the bigger picture. Secondly, I want to look again at pricing strategies. Many of the criticisms in the posts about Drive Dynamics’ demise relate to low pricing, and an insinuation that a company employing such a tactic results in a negative affect on everyone else. That is simply not true. The only people who lose out from low prices, are those who follow such a cut price policy without a long term strategy.
Of course, low prices are attractive to people, young, old and you included. Pupils and parents will benefit if they feel they’re getting ‘good value’ for money, meaning there is a clear and obvious market for such lessons, if someone is willing to provide them.
Spirited & Effective
We all measure ‘value’ differently, so there will always be some members of society who accept a low price, even if it’s in return for a low quality service. It fuels the saying ‘you get what you pay for’. Some customers recognise that, while others expect the world on a sixpence or less, so it’s always important to lay out exactly what you will provide for the price you charge, and be able to back up what you claim. Really, the question you need to ask yourself is: do I want to offer low quality for a low price? The answer is most likely ‘No, I want to offer high quality for a high price’. That’s fine, but to ridicule those who answer ‘yes’ is short sighted and unprofessional. They are merely serving a market that has existed since the beginning of trade. There is no rule within our industry that suggests you need to follow any particular pricing model. It’s up to you to decide where you want your price point to be. (A ‘price point’ is the highest price at which demand for your service will remain relatively high). Ultimately, the price you charge is key to your business success. Get it wrong and it can have damaging affects on your business: too high, without the quality to match, bad value for money; too low, whilst delivering a quality service with costs to match, you will soon go under. You cannot afford to be afraid of charging to cover the costs of providing a high quality service, and making a sensible profit, because those who are looking for quality over quantity will be reassured by your higher price, as long as you can demonstrate and provide the quality they’ll receive in return. It will be value for money and probably save them money, if not more, in the long run. Your marketing and advertising has to explain this and target the correct market, whether you are the low cost provider, or high quality vendor. Where do the customers that you want to target actually hang out, physically and online?
Bold & Enterprising
My strong belief is that it is up to each and every one of us to decide if we want to be part of a ‘race to the bottom’, or a ‘climb to the top’. There will always be low prices – it’s a fact of life. It doesn’t determine the industry’s ‘professionalism’ at all, but the way you conduct yourself does. If you have faith in yourself, and your customers are telling you you’re great value as an instructor, you’ve probably got room to increase your prices! If you want to lead from the front, rather than moaning from the back, become the most expensive instructor in your area and prove you’re worth it as the highest quality instructor in town. And remember, if you increase your prices at the top end of the market, the lower end can increase theirs too. Let’s say your local market has a £10 differential in hourly rate, charging lows of £15 and highs of £25. You increase your price to £30, you would soon see the low end increasing to £20. They still get to service the ‘low end’ of the market, but at a higher rate, and you are the trendsetter that is driving the market up, with potential profits to match!
Dan hill – https://www.mydrivetime.co.uk/