Race to discount: what are the options?

Hello there, education folk! Nicola here, ready to sprinkle some wisdom on how boarding schools, language colleges, and education agents can boost their profitability through strategic discounting - or not. Grab a cuppa, sit back, and let’s dive into this together.

Not All Business is Good Business

Ever felt the pressure to offer discounts because your competitors seem to be "practically giving it away"? Trust me, that path leads to a destructive “Race to the Bottom.” Slashing prices to unsustainable levels is a surefire way to harm your long-term viability. 

For some schools it also damages reputation. 

I liked this quote in an Economist article*:

"A price tells you much more about a product than merely what it costs. A price cut may be sensibly perceived as a mark of mild desperation on the part of the seller…Charging the full price but adding something extra does not convey the same desperation"

I mean, who wants a cheap education that you're basing your future on..?

For some, aggressive discounting might be part of a strategy, but for others, it's just a knee-jerk reaction to short-term pressures. Always evaluate whether a discount is a strategic move or a quick fix.

Whatever route you take, those who are ‘selling’ in admissions or business development, you need to know how your cheeky little discounts here and there affect the bottom line, and potentially, your job.

In fact, check out this very simple graph to see what an extra 'little' 5% can do:

I remember seeing this about a decade ago, before that, the bottom line was kind of white noise.. if I was getting the bookings in, what was the problem!? 🤷

But when you come across a profit-share payment model as a student recruiter - you learn fast!

The Perils of Over-Discounting

Deep discounts can erode your profitability to the point where you can’t invest in essential areas like facilities, teachers, and marketing. This makes your institution or agency less attractive and harder to sell in the long run. I’m not saying avoid discounting altogether—that’s unrealistic. Instead, be smart about it. Again, at the very least, understand the impact of it.

If you are commission or bonus based, you might not care about profitability. Most language school targets are in student weeks, profitability isn’t even mentioned. And frankly - it's a bit dull, isn't it? A commission structure or bonus basis of number of students coming in is easier to track and more motivating, so again, I'm not condoning changing it as a blanket recommendation.

A Real-Life Win: 3.7% Higher Profitability

One of my clients saw a 3.7% increase in profitability by ditching automatic agreement to discounts. They focused on selling high value and other value points that aligned with their agents’ needs. This transformation didn’t happen overnight; it required

✔️boundaries
✔️ technique, and
✔️extensive training in value-based selling.

I’m hugely proud of this school for having the courage to take a stand and am happy to say they are absolutely FLYING now, not just in profitability but in profit levels, too, much of which is being ploughed back into the school for long-term growth. 😍

This might be a step too far. And it might be that nobody really knows the profit margins and the impact a % might have on them.

For the moment, though, just be aware of your cheeky discounts on the bottom line, or you may find yourself with a sub-part offering due to lack of investment, or even without a job. 

So, it's all very well telling you NOT to discount, but what are the real-life choices here?

Here are 5 approaches to consider when negotiating discounts:

1. Give the Discount

 Sometimes, you need to offer a discount. Make sure you can do this without harming overall profitability. For education agents, this might mean selectively offering discounts to meet quotas or attract key demographics. For schools it might mean you can fill up that class at cost to make it a better experience.

2. Scale the Offer

 If you're asked for a 10% discount, see what 10% you can cut from your costs. Are there cheaper alternatives you can offer? Adjust the services or support provided to balance out the discount.

3. Offer Value Instead

 Help agents sell your institution at a higher price by adding value to the offer. This could be additional services or benefits that justify the price. Offering extra support or resources can make a higher price more palatable and even give your agent an extra selling point they can use. I always find I want the extras, the free gifts, the bonuses, rather than a little extra discount. 

4. Exchange for Volume 

  Offer discounts based on the volume of admissions (within reason!). This maintains profitability while incentivising larger enrolments. 

5. Say No

 Sometimes, walking away from a deal is the best choice. Not all business is good business. Maintaining your pricing integrity can be more valuable in the long run.

Wrapping It Up

Understanding the impact of discounting on your bottom line is crucial. Strategic discounting, rather than reactionary price cuts, can help maintain profitability while keeping your school or agency competitive and attractive. By adopting these strategies, you can enhance your profitability and ensure long-term growth. This benefits not only your institution or agency but also guarantees that students receive the high-quality education and services they deserve.

If we haven't met, hello - I'm Nicola Lutz - education sales coach and trainer. I help schools increase admissions with absolutely no compromise on quality; and international education agents boost enrolments whilst saving time and maintaining excellent customer experience.

If you'd like to find out how to work together, you can either email us on [email protected], or book an informal chat with Nicola here

*Something doesn’t add up