Startups Stack Exchange Archive

Starting a programming school: How much to charge

My cousin is a school teacher on Vancouver Island, Canada. She wants to start a school to teach local kids (perhaps eventually adults as well; I don’t have all the details) how to program. She’s just getting started, but seems to have the basic structure in place, including instructors, course layout, a schedule… She’s got some open questions, though, such as how much should she charge? The answers aren’t easy, since her target audience, at least for now, is grade-school children (grades 1-7); convincing the parents to shell out their hard-earned cash in the face of all the other after-school programs is a bit of a challenge, so a marketable argument for the value proposition is key.

Here’s what their website says about the curriculum:

We will focus on two programming languages, Scratch and Javascript. The descriptions below provide highlights of what students will learn in these 8-week courses.

Classes are teacher led, with 1-2 objectives for each class. Because students learn at their own speed, some may not achieve all the class objectives during class time. They will have the option to take the assignment home to work on it between classes.

Any suggestions?

Answer 7683

Before you decide on a price, you should give some thought to weather or not you need to charge only one price. It can be possible to charge different groups different amounts, the price charged for each group will differ and be based on what that group is willing to pay.

This is more common than you might think, senior citizen discounts, for example, are a way of charging one group (senior citizen) less than another group (everyone else). Such pricing isn’t all altruistic. Such practices allow you to lower the price for a group of customers (senor citizens) that otherwise wouldn’t buy as much of your product because the price is too high, without lowering the price for everyone (which would reduce your profits). In your case you may want to charge different prices for different grades say one price for grades(1-4) and another for grades(5-7). (ask in the comments if you want more discussion about this).

Regardless of how many different prices you charge you should set each price based on that groups demand for the product.

Demand is the relationship between a set of prices and the amount the group buy when charged that price. When price goes up, demand does not go down! The amount the group buys goes down, but that is different than the demand going down, when demand goes down the group will buy less, even if the price hasn’t changed. (note it’s not true that as price goes up the group will buy less for all goods, but for most goods this is true, and in your case it is safe to assume that as you charge more, the groups will buy less).

So in some cases you can make more profit by lowering your price because a lot more people start buying your product, and this more than offsets the loss in revenue caused by reducing the price. And in other case you can make more profit by raising your price because the increase in sales revenue is not offset by the losses caused by the decrease in the number of items sold.

You also need to keep in mind that price signals quality. If you see a product with a cheap price you assume it is of low quality.

Finally you need to consider cost. When you consider cost, make sure to consider all the explicit and not explicit costs. That is to say make sure that you are are being compensated for you time, and efforts. Price should not be some multiple of your costs, or cost plus margin. Costs set a bar that you should not go bellow. As long as you are making more money per student than it costs to teach a student you are good and you don’t have to consider cost in your pricing scheme. Technically you should be considering the marginal cost per student, but in your case this will be difficult to calculate because most of your per student costs will not be explicit, they will abstract like how adding an extra student will effect the student teacher ratio, and the class dynamic.

OK enough economics mombo jumgo, what does all that mean?

  1. Make sure you are making more than you are spending to teach the class, plus enough to compensate you for your time and the wage that you would otherwise be making.
  2. Try and determine if you can divide your potential buyers into groups that you would be able to charge different prices & would be willing to pay different prices.
  3. Look at similar goods (ie after school activities) that these consumers (student’s parents) are purchasing and figure out how much they are charging and how many students they are attracting and use this to estimate these groups demand (aka willingness to pay for these goods)
  4. Start with a High price because this signals that your class is of high quality, and if you can’t attract enough students lower your price to attract more students, but be prepared to provide partial refunds to your existing clients.
  5. You can also set a high regular price, coupled with tiered early bird prices (ie the first x students to sign up pay y, the next x students pay z, etc). This has the advantage of avoiding signalling that your course is of low quality (because of the high “regular price), while motivating people to purchase now, and allows you the option of extending anyone early bird special if you notice that sales are decreasing more than you’d like) with out giving the impression that you are jacking up the price.

Answer 7688

How interesting!

Well, you should charge purely on the quality of the lessons. If you truly think you are the best and your curriculum is flawless, then you should charge as much as you want. In the end, programming is a very beneficial skill; and if you give parents a good deal on it and let them now how much it will be needed in our future, you could charge anywhere from $400-$600 (For example, for 6 or so lessons).

All content is licensed under CC BY-SA 3.0.