Procare Blog

Procare is pleased to welcome Kris Murray, President of Child Care Marketing Solutions, as our guest blogger for this article:

Straight Talk about Your Rates… How to Make Price Irrelevant!

The other day, I got a question from one of my Facebook “fans” about price.  She said she was thinking about lowering the rates for her child care business and wanted to know if it was a good idea.  My response— “it depends.”  It depends on a lot of things, in fact:  competitive environment, your perceived price vs. value relationship, your local economy, where your rates stand compared to your competitors, etc.  However, I can tell you that lowering your rates is USUALLY a bad idea.  Many child care owners and directors make the mistake of thinking they HAVE to compete on price and price alone.  This is almost always a huge mistake, because it puts you in a completely wrong mindset. Rather than cutting your rates to undercut your competition, you should be thinking of ways to INCREASE your value and increase the perceived value of your center or school, so you can charge MORE.

Think about it.  Almost every business that goes OUT of business does so simply because of their margins.  The margin is the difference between the price you sell something at and what it actually costs you to deliver the product or service.  The mistake most businesses make is they try and cut their margins in order to increase their volume.  They think, whenever enrollment is down, they’ve got to cut their rates or at the very least postpone an annual rate increase, so they can build enrollment.

Did you know it’s been documented that only about 11% of the general public makes decisions based solely on PRICE?  In fact, your prospects will make their child care decision based on price alone IF you give them no other reasons for which to choose you!  It is YOUR responsibility as the business owner or director to use marketing to communicate the difference between your school and the lower-priced program down the street.

For example, if you can demonstrate your teacher’s high level of degrees and certification, you can say “our rates are slightly higher because we tend to hire teachers with 4-year degrees, and so we have a little higher pay scale than most of the other schools in the area.”   This is a roundabout way of saying “you get what you pay for” to the prospective parent.  Of course, not ALL parents are willing to pay the highest rate in the market… but if you create or re-engineer your business to attract and enroll the higher-end clientele who are willing to pay more, your business has just become a much more valuable asset, and much more profitable as well.

The problem for most child care leaders is that they don’t know about price.  Here are 3 ways this is a problem:

1. They don’t understand that certain people buy at different levels and we as business owners get to choose at what level they come to us.
2. They try to compete on price alone.
3. They pay too much attention to what others are doing.  This is called pricing incest, or me-too-ism.  We do that when we don’t understand the concept of price elasticity.

Price elasticity means that some businesses who choose to invest in great marketing can charge a whole lot more for the exact same product or service.  Examples:

• I can pay 99 cents for the exact same coffee at 7-11 vs. paying $2.50 at Starbucks
• I can drink tap water out of my faucet for free vs. pay $2.00 for bottled water
• I can pay $4.99 for a one-pound bag of Hershey’s Kisses vs. paying $17.95 for a pound of Godiva chocolate

Even though we know it’s cheaper to go to 7-11, drink tap water, and eat Hershey’s, we go ahead and spend more because we want that thing that’s priced higher…for various different emotional and consumer reasons.   Of course, I still highly recommend offering an “Enrollment Special” with a deadline to incentivize your prospect to take quick and decisive action.  In fact, when you are able to charge what you’re worth, you can afford to run those enrollment special offers without worrying at all about cash flow or revenue.  When in doubt remember…be the Godiva of your market, not the Hershey’s!

Kris Murray is the President & Founder of Child Care Marketing Solutions. She is a speaker, author, trainer, and business coach to the early childhood field.  Kris is the author of the new book “The Ultimate Child Care Marketing Guide”, which will be published by Redleaf Press and available in October 2011. Her company offers success coaching, products, and books on enrollment-building, marketing, start-up skills, and business management. Kris is a professional speaker and has worked closely with other leading experts in the early childhood field.  To get a copy of Kris’s free audio program, “The One Big Secret for Growing the Enrollment of Your Child Care Business”, visit http://www.childcare-marketing.com/.  Kris is married with two young children and lives in Northeast Ohio.