How effective are different pricing structures for martial arts studios?

Question

There are several ways for students to pay for martial arts lessons... per month, per lesson, and contracts. What are the advantages and disadvantages of each of these for both the student and school? Specifically, what effect do each of these have on student attrition? Do per month/lesson make it too easy to leave or take a break without any consequence, that its all too easy to not come back?

Answer 1

In my experience as both a student and an instructor, I've found that there are advantages and disadvantages to both parties from all forms:

• Per lesson

  – Instructor:

  • Advantages: Able to demand higher rates for the convenience. More flexibility in asking students not to return. Students pay or are not taught.
  • Disadvantages: Students feel more free to come and go, meaning less reliable income. Higher rate of attrition in the long term since students don't commit.

  – Students:

  • Advantages: More flexibility in their scheduling. Not held to a contract, so they can leave at any time.
  • Disadvantages: Higher cost per lesson.

• Per month

  – Instructor:

  • Advantages: More reliable income. Lower attrition rate (students commit to at least the month). Better overall quality of students. Able to teach at a higher level because of larger class sizes.
  • Disadvantages: Students can still come and go with only the loss of the rest of a month.

  – Students:

  • Advantages: Per lesson cost reduced (more you attend that month, the lower the per-lesson cost). Greater flexibility than contracts. Better lesson quality. Reliable training partners.
  • Disadvantages: Must commit more money up front.

• Contracts

  – Instructor:

  • Advantages: Commitment of payment for a whole year or longer with legal recourse. Strangely, lower attrition rates.
  • Disadvantages: General mutual distrust between the school and its students. Fewer students join out of distrust for contracts.

  – Students:

  • Advantages: Possibility of higher training quality (since many of the students commit, they tend to work harder. If the instruction is good, the training quality goes up because those that commit do so for longer meaning higher level students). Reliable training partners.
  • Disadvantages: Stuck with the contract. Contract break fees. Higher probability of McDojo.

There are exceptions to the rule in every scenario, and many that offer monthly rates also offer per-class rates which combines the two advantages and disadvantages somewhere in the middle.

While easier to leave does usually mean easier to not come back, contractual billing can lead to extremely bad press for a dojo and is usually not a good sign. Many of the contract billing services for martial arts schools have horrible reputations and lead to more threats from lawyers than happy students.

Remember, every choice has a consequence; choosing a specific type of payment plan can have both good and bad repercussions. If at all possible, schools should offer all three at staggered rates – this way, you can maximize your benefit, put the consequence of the choice upon the shoulders of the client, and you'll have an easier time managing threats and have a better chance of winning any small claims you choose to pursue. A great example of this is:

Assume a monthly rate in line with your environment (other teachers in your art locally). If the market is at $100 a month, make this or slightly higher your monthly rate. Now, figure a two month termination fee ($200, equivalent to charging for first and last month). Divide this by 12 to get $16.66. Subtract this from $100 and round back up to the nearest $5, which gives you $85. This is your contract rate. This way, you're offering a non-trivial (15% discount), but making clear up front that there is a termination fee, and if they plan to leave, it might be better to pay month-to-month. For your per-lesson rate, figure out how many lessons your students will be attending each week for an average (4 week) month. My students, for instance, attend 2 classes a week, so about $12.50 a lesson (in this case). Of course, we have a convenience factor to this, so we raise this rate a non-trivial amount (I would round up to the nearest $10, so each lesson would be $20). By doing this, you're creating a fair and scaled pricing schedule, and offering them an advantage to committing longer.