Training and Education: Applying Stadium Pricing Strategy

Training and education is an industry that struggles under a ballooning cost structure and a set of challenging constraints. Amongst the constraints is the perceived value of being physically present with the faculty member in a small student/trainee setting.


While the value of being in the room with a “great” teacher and having a setting that is intimate for dialogue is clear, the cost of doing this has grown steadily at a rate that exceeds inflation across all types of training and education.

Traditional colleges have attempted to lower these costs with broadcasted distance education and large assembly halls that can connect a single faculty member simultaneously with a large number of students. Student feedback indicates that simply facilitating a higher student to teacher ration degrades their experience.

This becomes even more of an issue when the education/training is experiential in nature and the faculty member or presenter is an expert or author.


The Opportunity or Threat:

I was given the assignment of optimizing both the revenue plan and the net revenue generation for an experiential education organization. Although the organization had grown by 40% over the previous five years, its margins had steadily eroded and were now negative.
The Insight:

While a college freshman may have no choice but to sit in a large lecture hall or watch a broadcasted lecture to take a required course, this solution is less than acceptable when the student has discretion over when and where they go for their education or training.

Major league sports (NFL, MLB, etc.) have seen an explosion in their costs due to open market competition for star athletes. This has forced average ticket prices to rise drastically and if these costs were evenly passed on to potential fans, it would greatly limit access to attending games and erode the fan base.

A solution to this problem is the modern sports stadium, where 80,000 people may sit and watch the same event but the spectrum of associated services offered covers a huge range. At the bargain end there are standing room and family sections and at the high end there are private suites where one can host a private party in the midst of the game. The common experience of witnessing the game and being part of the crowd is the single shared experience.

The Action:

As I began my review of revenue for this organization, I looked to achieve two simultaneous objectives:
1) Significantly raise the average total expenditure per student by pricing and offering additional services.
2) Keep the entry pricing as low as possible, so that students who were price sensitive would still purchase and those with limited income would not be turned away.

In addition to experiential education the organization had the following to offer, housing of various qualities, a meal plan, open additional activities, spa services and a retail shop.

Each of these areas can be optimized according to the same basic strategy. For simplicity, I will discuss the primary change made to optimize revenue which was the handling of housing.

The attributes which determined the value of a specific housing option were examined in both space (privacy, view, amenities) and time (peak season, weekends and holidays). A pricing strategy was laid out in both space and time that:
1) Increased the step-up differences as a student upgraded their housing type based upon desire and ability to pay.
2) Facilitated up-selling of limited amenities within a housing type.
3) Maintained higher pricing during periods of higher demand and offered lower pricing during periods of lower demand to facilitate revenue capture during peak demand and shift price sensitive demand to off-peak periods.

The initial year, we rolled out a housing price increase which averaged 10% but ranged from -4% to + 24% when each basic pricing configuration was looked at. The impact on net revenue was huge and the net margins swung from -2% to + 8%.

The total strategy took two years to fully implement as we needed to upgrade the software we used to book and bill students to accommodate the complete pricing strategy. We also used the strategy to selectively upgrade housing within the housing portfolio.


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