Client: I have a question regarding what someone else was speaking to earlier about the rates, and the kind of push back you might get. The question I have is: over the year I’ve been adding students at a higher rate, and I have a bunch of legacy families that I was going to increase tuition for this fall.
Now, I’m at a little bit of a dilemma because I don’t know if I want to increase their tuition to the same amount, and put them into a group class, and how would you phrase that? Or have you run into that before where I wasn’t really planning to do group classes. It’s just something that I’m starting to do because I’m at the point where I can’t take any more students, and I kind of need to do it.
So, what would be a good way of still having them… Well, that’s the question, should I go ahead and raise the rate now, and say okay and we have this accelerated program, or should I hold off and do it differently?
Daniel: It’s a good question. Couple of things. First off, this has been done before by other folks that the… not guidance. What I heard back from people including an alumna named Rudene, who I did a case study on in May. She actually worked with me individually. She didn’t go through the training like this.
This was back before this was all available. She went through the training with me individually, and against my recommendation she raised rates and switched to group at the same time.
The reason I recommended against it was I had never had someone do it before, and I didn’t want her to get a bad result by giving her advice that I hadn’t personally tested myself, or hadn’t personally seen someone do. So, I gave her that disclaimer and I said, “You can do it if you want. I’ve never seen it happen before. It could blow up in your face. If it does, let me know. We can work through it.” She’s a brave soul. She did it.
I went through that with her. It went well. I’ve heard of other people doing it as well over the last 18 months. So, this is what I would say, the way that I know she did it was she essentially put that in the same email. She did the offer letter in advance of announcing the rate change. She wanted people to conceptually agree with the group and getting that initial interest.
Then, when she did her upcoming school year announcements then she just announced that. I don’t know how she did it. I have a specific way that I recommend people do it. I’ve written about it on the blog. I don’t know if you ever read that one, but if you just google studio owners guide to raising rates, google returns that as the number one return. It’s from my blog, and you go read that. I give a whole step how to do it.
I would recommend just doing it that way. Splitting it up, I don’t think it’ll be a big issue. How much are you increasing by?
Client: It’s almost a substantial increase, and that’s why I’m a little leery. It’s going up about 20 dollars.
In our area, it’s actually just coming up to the standard rate. I’m not charging more than anyone else. I’ve just been undercharging for so long because it hasn’t really been an issue. I haven’t made it a priority. Just over the year, the last six months, everyone that’s come in new is at the higher rate, and so I have a large gap.
Daniel: Yeah, you know. Here’s the closest I’ve come to that. I raised rates by 17 dollars one time. I made this announcement two months in advance of the new school year. So, right at the end of the previous school year, letting people know in advance what things were going to be for the fall.
Then, someone missed that initial announcement and then I did a second announcement weeks before the new school year. I did this to like 90 people, over 90 people. I had one person push back on me. She just wrote me this two sentence email. I could go back and look for it, I won’t waste your all’s time by doing that. This was very close. “Daniel, so you’re raising rates by 17 dollars for a group class? Signed name.”
Client: That’s what I’m afraid of.
Daniel: Yeah. And, here’s what I wrote back. Yes. I think I wrote. I just wrote yes. I think what I wrote was… trying to think of the exact way I worded it. ‘Cause a lot of times, I’ll stare at the wall for five minutes and think of the exact phrasing I want to use, and usually I can come up with something that is positive and frames things the right way. It’s all about how you frame it.
I think what I wrote to her was something to the effect of… I think at the time I hadn’t raised rates in seven years, and I was just bringing rates… I still was above the average for my area, for my immediate area, but when you look at the larger metropolitan area there are places where it’s more. So, I just wanted to bring it up to that level. I think I mentioned something like that. I would never give a reason like that in a general email.
Let me be very clear about that. Never defend a rate raise in a general email, but if someone comes back and says something like that, I’m a little more open to giving a defense for why I’m doing what I’m doing. In general, I don’t believe I owe anyone an explanation. I’m the doctor. You’re the patient. What I prescribe you will take or you will die, you know? Whatever.
When someone asks I don’t want to be unkind. I’ll give them a reason if I think it will help them. And, they ended up staying on. That’s kind of the way that I dealt with that. But generally, for you. I’ve been really long winded here and my apologies. Generally for you I would separate the offer email, and get interest into the program, and just treat the raising of the rates as a separate issue.