Is offering Discounted Tuition Fees worth it?

Offering Discounted Tuition Fees?

With the competition increasing between independent schools to secure enrolments, numerous schools are offering special arrangements on tuition fees. These range from early or full payment discounts to having multiple siblings at the same school. The sibling discount can vary vastly from 10% up to 50% depending on the number of siblings attending the school. Although this may be an attractive way to interest new students into your school, there could be future negative effects.

Below is a list of Pros and Cons to assist you in examining the potential outcomes of discounting your schools tuition fees.

Pros of Discount Pricing Strategies

Attract New Students – Discounts are a promotional technique that can make it easier to attract parents to your school and become your customer. New customers can also mean new opportunities to cross-sell, upsell, meaning more revenue in the long run as well.

Increase in Sales – Parents who have numerous children love a good deal for their money. By allowing sibling discounts ensures that it will be a quick sale for future years. Provided no additional staffing costs are incurred an increase in student numbers often results in a direct contribution to the bottom line.

Stronger Client Relationship – Providing discounts will increase loyalty with the parents, as it is always great to be treated with benefits. It will leave the parents with a better impression of the school and that it cares about the community.

Provide Competitive Edge – If other independent schools are not providing discounts, or your discounts are higher, it will give you an advantage by attracting more students.

Cons of Discount Pricing Strategies

Cut in Profit – It is the most apparent sacrifice, the money that you could have earned if you had not provided the discounts. There could potentially be parents who would pay the full tuition amount anyway even if the fees weren’t discounted.

Expectation of Discounts – If you have received the optimal student enrolments and no longer need to attract as many students so you remove the discounts, clients still might come to expect discounts or expect to remain the same for all years. It will be difficult to convince them to pay the full price again.

Lowered Perceived Image – Discounting can often make your school look like it is struggling to attract students in. This could appear that the quality of education is lessor than a school that does not offer discounts.

It is evident that discounts will increase sales however it does not mean that it is a good approach in the long term profitability of the school. Questions need to be asked before this strategy is adopted, for example:

  • What do we hope to achieve?
  • How much profit will you forego?
  • How will competition respond?

For discounting to be effective, it will need to be managed to ensure that you are able to sustain the value and status of your school.

Our Auditors have a wealth of knowledge and experience in the School sector and can assist in answering these questions with you. We help our clients make strategies for the future! For more information, please contact one of our Audit Specialists, complete your details below and we’ll be in touch or give us a call on 03 9835 8200.

About the Author
Accru Melbourne , Melbourne
Accru Melbourne, part of the Accru group, is an award winning financial services organisation. Our highly personalised approach and dynamic advice makes us standout in the fast paced, ever-changing business world.
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