A one hour lesson for a kid to learn to mountainboard seems to range from £8 to £12 an hour. Is that value for money? Is it the best pricing band for lessons? Are centres getting enough customers at these prices? And would changing the price of lessons affect how many people learn to mountainboard?
There are lots of pricing strategies that centres could use, all kinds of things they could do to measure and increase the profitability of lessons, and lots of ways of encouraging more people to visit them for lessons.
Pricing based on cost
Take how much it costs to run a centre for an hour, add paying an instructor per hour, add the margin you want to make on a lesson, equals the amount to charge for a one hour lesson for one per person. Setting the pricing in this way seems to offer some logic and simplicity, and if figured correctly can say how many lessons need to be delivered each year to keep the centre running profitably. The downside of this approach to pricing is that it is quite narrow and assumes a constant flow of people who want to learn on their own, however as a simple exercise it would turn up some interesting results.
Pricing based on competitors
How much do competitors charge for a similar service? A quick look at some of the other activities for kids in the local area will offer some insight into how much a centre should be charging for their lessons. If the theme park down the road sells all day tickets for kids for £13, charging £12 for an hour isn’t going to bring in the kids who would probably rather be on a rollercoaster (unless the centre can really sell the benefits of learning to mountainboard and make them outweigh a days worth of fun at a theme park).
Pricing based on what the customer will pay
If your centre is located in an area of rural deprivation with high unemployment, charging a high price isn’t going to bring any customers in. One the other hand, if your centre is in a very affluent area where the mums in their 4×4’s are used to paying £8 for a coffee, then setting your price low may give the mounatinboard lesson a perception of low quality and so prevent the mums from letting their little darlings have a go. Knowing what price your customers are willing to pay is a good, albeit fluid, indicator of how much to charge.
Pricing based on guessing
Deciding to price lessons without any real research into what it costs to run a centre and/or deliver a lesson comes down to guessing at how a lesson should be priced. Profit equals Price minus Cost. If you don’t know how much it costs, you can’t work out the profit, and so you can’t figure out whether the centre is a profitable business or not, or what you can do to improve it’s profitability.
Pricing based on Standard Retail Price
This approach doesn’t really apply to mountainboard centres as they isn’t an SRP for mountainboard lessons, it’s more of a pricing strategy set by manufacturers and suppliers of products, however, they could be a point in the future where a consortium of mountainboard centres got together and set pricing for lessons with the agreement from all those centres involved that they all charge the agreed price. Weird to think that mountainboard centres would do this, but weirder things have happened.
Pricing based on perceived value
Premium brands charge more for their products and services, not because they are necessarily of a higher quality but because they have a higher perceived value attached to them. This leaves us with the question of whether mountainboard lessons are marketed in a way that creates this perception. Changing the market category a service exists in can also create the opportunity to change the pricing. Do mountainboard lessons exist in the minds of consumers as ‘one off kids activity’, ‘potentially risky extreme sport’ or ‘safe and easy to do hobby’? How centres position their lessons will have a tremendous effect on their perceived value.
Psychological thresholds in pricing
There are certain psychological thresholds that exist for us when deciding what to pay for a product or service. £9.99 is a strong threshold. More people are more likely to buy something at £9.99 than at £10, even though we should think it’s easy to hand over a ten pound note rather than having to wait for the 1p change. £25 is also a well recognised threshold. Another psychological angle people often consider when buying a per-hour service such as a mountainboard lesson, is how the price compares to how much they earn an hour. If they think that the work they have to do in order to pay for an hour of mountainboarding lesson is a greater cost than the value they are getting from the lesson, they won’t pay.
“This is how much the standard lesson costs, but for just a little more you can have a better board/more time/more handsome instructor.” Upselling on a mountainboard lesson should be pretty easy, if the standard price is set correctly. There are all kinds of add-ons that could be offered to increase the price of a lesson whilst still offering the basic lesson at an attractive price.
Offering discounts is a tried and tested method of convincing a potential customer to part with their money. But just offering a blanket 10% discount to everyone only makes each lesson less profitable, it doesn’t increase the number of customers without really strong communication to potential customers, many of whom might not even know they want to try mountainboarding yet. More focused discounts are more likely to be successful but they should be used to increase customers to particular sessions, e.g. a two for one deal on Thursday evenings, or to increase particular demographics, e.g. couples learning together get a third off.
How can pricing be changed to increase customers? The obvious way is to decrease the price, but this would only be successful if the price drop is communicated to all those potential customers so they know what a good deal they are getting. Simply dropping the price and expecting more people to turn up is going to fail, unless the prices are already so high they are creating a barrier. Upselling and discounts are a much better way to change pricing, as not only are they more easily communicable, but they can be temporary and so stopped if they aren’t working. Any change in pricing or pricing strategy needs to be measured to know if it is successful.
Measuring changes in pricing
Does offering a 20% rainy day discount, and marketing it as a fun, messy outdoor kids activity where they can get wet and muddy actually bring in enough customers to cover the 20% loss by offering the discount. Or would the centre have not done any lessons on that day, in which case 80% is better than 0. If changes to pricing strategy aren’t measured and compared to before the change there is no way to know whether they are successful in bringing in more customers.
Developing a pricing strategy
How should a centre go about developing a pricing strategy? The first thing to do is measure and record things as they are now, before any changes are made. Without this benchmarking you’ll never know if the change in strategy has had the desired effect. The next thing is research local competitors. If the free skate park next door has all the kids who are likely to do action sports then you’re going to have to work hard to get their parents to pay for them to do something similar. Once you’ve established how much people are likely to pay for mountainboard lessons you can begin experimenting with different upsells and discounts, but again, the most important thing is to measure them so you know which are successful. Once you’ve found the pricing strategy that works, continue to measure and watch for changes that you’ll need to respond to.