How Teachers Earn More and Students Pay Less, Via Tiered Pricing

How Teachers Earn More and Students Pay Less, Via Tiered Pricing

Classbento CTO

Tags: Site Features

What’s the best way to maximise a teacher’s hourly rates, without imposing minimum class sizes, while at the same time automatically offering discounts to students for bringing their friends? We think the answer is ‘tiered pricing’.

Before I delve into the details, let me share my personal teaching story with you, to set the scene. I was a teacher, and a manger of teachers, for the last decade. Three things left an impression on me.

First: Time is precious, especially for teachers. By definition, teachers are talented people who love knowledge and learning, and so they tend to have lots of other opportunities, things that they could be doing; for example, learning and developing their skills further, researching to expand the world’s knowledge in their domain, practicing their skill for profit or to help others (e.g. performing as part of an orchestra), maybe working their separate day jobs (which utilise their other skills) and of course all the other parts of their lives that aren’t specific to teaching, like spending time with family and unwinding. For teachers to want to teach, having a high hourly wage certainly helps.

Second: Teaching often offers great ‘economies of scale’. That is, teaching two or more students at once is often not much harder than teaching a single student. This isn’t always the case (e.g. when you’re teaching a dance class and the students are all at different skill levels), but it certainly happens pretty often, basically whenever your students can all follow at the same pace. From the teacher’s point of view, the effort and cost required to teach 2 students at once are usually not 2 times greater the effort to teach 1 student, maybe it is more like 10% greater; maybe 50% if you need to provide supplies per student that won’t be re-used (like in a cooking class). Combined with the first observation, time-poor teachers would prefer to teach 3 students in a single hour and earn say $100, than teach 3 students separately over 3 hours to earn say $120 - the extra 2 hours saved might be worth more than $20 to them. Then why does it make sense to charge a class of 1 student say $100, and a class of 2 $100 each? Wouldn’t it make sense to reflect the ‘true’ (lower) cost for the teacher and incentivise more students to book into fewer classes? Teachers in the past have often solved this problem by having minimum class sizes, which leads me to the third observation…

Third: Minimum class sizes can be a tough sell. Students don’t like the idea that the class they’ve booked (and often paid for in advance) could be cancelled, at no fault of their own. In fact, sometimes teachers don’t even tell the students upfront that they need a minimum class size – they’ll just accept enrolments and cancel last minute if the number of students is insufficient. Teachers also lose out on students who don’t mind paying a bit extra for the class (who can then make it worthwhile for the teacher to teacher a smaller class). But teachers sometimes do need to charge a relatively high cost per class; for example, to cover the cost of booking out a venue (like a commercial kitchen).

Putting these 3 observations together, it made sense to provide discounts for groups of students. For example, a teacher could offer a class at $100 per person for a single-student class, $80 per person for a 2-student class, etc. True, this had already been done in the ‘offline’ world, but for some reason (maybe the technical and operational complexity), we’ve never seen this done properly on a website or app.

We thought the complexity was worth it. So on Classbento, there are no minimum class sizes. Instead, for group classes, teachers can choose between private pricing (I'll write a post about this soon), simple pricing (where the price per student never changes), and tiered pricing (which provides discounts for larger classes). For the example above, if Tony is the first to sign up, he’ll pay $100. If Ben then signs up, Tony gets refunded $20 ($100 minus $80). If Tony calls up Ben and they sign up together as part of one booking, they pay $160 altogether and don’t have to wait for that refund.

It’s great for both students and teachers.

For teachers:

  1. Teachers can achieve a fantastic hourly wage
  2. Teachers get more new students, as tiered pricing is great for word of mouth – nothing quite like a discount to get students referring other students
  3. No messy admin required – Classbento takes care of all the refunds, price adjustments and communications automatically

For students:

  1. Students have more choice. If they really want to attend the class and don’t mind paying a higher price, they can do so
  2. Students pay less in general
  3. Students don’t have to worry about how or if the teacher will process price changes (since these can be quite ad-hoc usually) – everyone gets the standard Classbento experience

There’s certainly more we can do with this concept, so watch this space. What do you think? Click through to my profile and send me a message; I’m always happy to hear from our community. Maybe your idea can be the next one that we build!

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