Marketing Research, Part 1: Price

This is the first in a 5 part series on the types of marketing research that prove to be most effective for Christian schools and how to think strategically about research. This blog series will explore the following elements of marketing research:

• Pricing
• Satisfaction
• Message testing
• Brand Positioning
• Brand Awareness & Perception

Let’s start with pricing research – maybe the scariest of the five elements.  Christian schools read much more about the philosophy of pricing than on the market factors of pricing itself. In other words, much is said about access or affordability, diversity or other desirable elements of community make up, the cost of educating a child and how to add sources of income for schools, apart from tuition, in order to support a philosophy on tuition. Depending on one’s philosophy on access, tuition is typically set somewhere below cost and a strategy is put in place to cover the difference. Also, add to this an approach to supporting some level of need-based assistance and a school arrives at tuition with a planned discount for some or many of its students. However, none of this includes what is known as pricing research—what will the market bear?

Prior to digging deeper on the issue of pricing research, it is important to consider the case for its appropriateness before we talk about its value. There are two possible ways to think about pricing research with respect to Christian education. First, a school may want to conduct research to find out if they can charge what it actually costs to educate a student. This could be part of a feasibility study or strategic planning. Schools may ask, “Can we even charge what it is costing us?” Research will inform leadership if this is possible. If the answer is “no,” then a new strategy needs to be implemented that focuses heavily on advancement while at the same time seeks to expand the target market for the future.  However, there is another way to think about pricing and that is market based.  In other words, what can one charge for a product?

Market factors are a great way to test more than just price—one can actually test the worth of what they are doing as the market is a powerful judge. This doesn’t mean that one should allow all voices to have an equal say or that they test outside of the target market. However, in testing the market one can get valuable insights based on what the market says is worthwhile. To ignore the value of pricing research is to risk selling something that no one is willing to pay for or charge far less than they are willing to pay—both of these mistakes have real consequences. To charge more than customers are willing to pay without testing why, the opportunity is missed to add elements and increase the value and willingness to pay. To charge too little, one loses the chance to be strategic with tuition revenue to build offerings and support increased access.

Price structure does not make Christian schools (or any Christian organization’s fee structure) non-profit. Christian schools aren’t non-profit because they lose money, but because of where the “profit” or revenue over expenses goes. If it’s where excess revenue goes that qualifies a Christian school as non-profit, shouldn’t the goal be to maximize revenue while maintaining access? In profit making businesses the end result would be “profit” to owners. However, in Christian schools, it’s a greater strategic opportunity to thrive and impact the Kingdom.

Most schools greatly underestimate the financial resources and the capacity of their school families. Anecdotally, from my work with many schools around the country, a far greater percentage of parents are at higher income ranges than what school leader’s estimate. If one does not already know the average income of their school families, they should make it a priority to find out. There are, of course limits to how specific to get and when the best time and way is to get this information. However, passing up on getting this intelligence is a lost opportunity. Additionally, pricing is almost always relative to other things—things just like what one is selling or other things that are different yet competing for the same money.

So, knowing what those same things are (other schools) or what competing things are (other things school parents spend their money on) is more valuable information in the attempt to make decisions with the most information possible. That really is what we are trying to do, right? We are trying to minimize those times where we are scratching our heads wondering what the right course of action is—research is one way to lessen those times. With pricing research, we want to lessen the risks associated with setting prices—and thus make the decision less scary.

Conducting research on price, there are a few things that one should find out. First, what is an optimum price? There will be things gained and lost at each point from an upper limit to a lower one. On the upper side, access apart from support strategies will certainly decrease. However, higher price will likely result in a higher perceived quality—deserved or not. Expectations will increase as a more demanding parent population tends to grow. On the other hand, at a lower price, perceived quality will likely decrease and added offerings will be a challenge. Access, apart from a strategy, that supports viable yet financially marginal families invites more financially at risk families. In other words, it may be preferable to support targeted families with support in order to be strategic than to keep costs low enough for even more at risk families to try and fail to retain.

It’s very important to know what the competition is charging and also know who the competition is.  It is here that one can see how one type of research supports another. A market assessment study explores the market and where one is in the market vis-à-vis the competition. Pricing research then explores where one is as a school against them. When this is known, again, the risk is diminished.

Embarking on pricing research will lead to an important philosophical discussion around a question that a school may need to address—and that is, “who are its owners?” The answer to this question determines whether or not pricing research even matters. If the school is owned by a group of parents for their own interests, then a price that is below market and easy to afford, for them in particular, makes sense. However, if the ownership lies with a board who are stewards for owners less defined and even yet undetermined for the future, then a less parochial answer warrants pricing that both supports future viability and broad access.  Schools that have already faced the reality that not everyone will be able to afford to go to their school ought to consider where that thinking logically leads. Shouldn’t the market determine the price and then the leadership determine who and how they will support in order to have access?