There’s a lot of confusion when it comes to pricing your child care services. Are you charging enough? Too much? And won’t you lose all your clients if you try to raise prices on an annual basis? To help us answer these questions and others, we sat down with Kris Murray.
Kris Murray is the President and Founder of the Child Care Success Company, through which she’s helped thousands of child care businesses market themselves more strategically and grow revenue. She’s also a popular podcast host and author, and has been featured in major publications like Entrepreneur Magazine, Newsweek and USA Today.
Suffice to say, she’s a rockstar in the industry, which is why we were so excited to host a webinar with her on the topic of pricing myths and how to raise rates.
In this webinar, Kris talked about:
- Price vs. Value
- 3 Pricing Myths
- Ways to Attract More Clients
- And a whole lot more!
If you want to watch the entire webinar and receive all of the awesome tips Kris has to share, you can do so here. For now, let’s dive into the recap!
Price vs. Value
Kris started by addressing the relationship between price and value.
Kris says that, “the price/value relationship is so important to understand, foundationally, for you as a leader, so that you can not only be strong and confident about your pricing, but that you can then help your team understand why we charge what we do.”
The reality is, price is a function of perceived value by a prospective buyer.
According to Kris, child care became commoditized in the ‘70s, ‘80s and ‘90s because every child care business looked and sounded the same. Commoditization makes it harder for child care providers to charge what they’re worth, so providers need to avoid it.
The key to charging more is clearly communicating your differences, unique benefits and value. If you can do that, price won’t matter nearly as much to your customers.
To illustrate the power of differentiation, Kris used Godiva chocolate as an example. Did you know that Godiva charges almost 10x as much as Hersheys for a pound of chocolate? How are they able to do this? Because Godiva’s marketing focuses on what sets them apart.
To boost the perceived value for your child care business, focus on these three things, which Kris told us make up your daycare’s “value platform:”
- Compelling differences that are easy for parents to “get”
- Positive reviews and testimonials
- Your personal story, AKA your “why”
Pricing Myths Shattered
Throughout the webinar, Kris busted three pricing myths that many child care providers believe are true. These beliefs hold them back from charging what they’re worth.
1. People Will Always Choose the Lowest Price Option
Kris reminded us that if this myth were accurate, luxury brands like Mercedes and Godiva Chocolate wouldn’t exist. We’d only shop at Walmart, drive Kia cars and eat fast food.
The truth is, most people only base their purchase decisions on price when there is no differentiation between products/services. In fact, just 10-15% of the population chooses a given product or service based on price alone.
As a child care provider, you should charge what you’re worth. As Kris says:
“Running a child care business is a high risk, high regulation business. It’s difficult to run well, and you deserve to make a nice income from your hard work.”
2. It’s Impossible to Compete with Free
Simply put, this is a misnomer.
Parents are happy to pay for child care—even if they can receive free child care from another provider—if they understand and value the things that make your daycare center different.
Once again, you MUST discover what makes you different. Kris gave us a few ideas:
- Low Ratios
- Indoor Playground
- Organic Meals
- Happy Family Guarantee
- State of the Art Security
- Longest in Market
- Homework Club
- Daily Photos and Videos
- Eco-Healthy Certified
- Free Diapers
These are just a few ways you can add value to your business. Kris encouraged us to experiment with these benefits, then communicate them to parents when raising rates.
3. I Can’t Raise My Rates Because All My Families Will Leave Me
Kris gets it, raising rates can be terrifying. Especially now, when there’s still so much uncertainty because of the pandemic. What if you lose clients?
Kris says to raise prices anyway—as long as you’ve done your market research first. Keep these things in mind when bumping up your child care prices:
- At a minimum, raise your rates on an annual basis by “cost of living” increases.
- Find the best times to raise rates. March 1st and September 1st typically work well.
- Use a well-written letter that explains what the extra funds will support.
- Give people at least one month notice before raising your rates.
- Consider changing rates when children transition to new age groups.
Kris says that almost all of her clients raise rates by 3-10% every year, without losing more than 1-2 families each time. This is proof that you CAN raise your rates successfully.
How to Attract More Clients
How do you attract quality clients who will be willing to pay your elevated rates? Kris shared four proven strategies with us during the webinar, which we outline below:
1. Have an In-Depth Understanding of Your Market
Kris says that, “Understanding where you sit, what you offer and how you’re different—that’s what you need to know.” That means staying on top of market trends is important because it will give you a lot of clarity into your business and your competitors.
Here is the kind of market data Kris recommended looking for:
- Local Household Demographics
- Up and Coming Neighborhoods
- Mid/Large Businesses Coming to Town
- Types of Child Care Businesses in Your Area
- Top Family Neighborhoods in Your Market
After explaining what to look for, Kris talked about how to find it. There are plenty of ways to dig up these kinds of details including Google searches, ChildCareAware.org, Chamber of Commerce, local realtors, business groups like Kiwanis, etc.
2. Find Your Best Clients
When you know who your best clients are, you can go get more of them. Ask yourself, “which of my clients do I like best?” According to Kris, Grade-A client traits include:
- You enjoy serving them
- They appreciate what you do
- They leave reviews
- They pay on time
- They can afford you
- They write positive reviews
Kris suggested making a list of your best clients, i.e. the ones that fit the above criteria. Then go through your list and send a client survey to learn more about these people.
You want to discover information like where they live, where they work and the jobs they do, why they chose your child care business and what keeps them with you.
Kris then pointed out that the closer you get to “waitlist” status, the easier it is to raise rates. Why? Because you’ll have confidence knowing that if you raise rates and one or more parents drop out, you have an entire list of people who are ready and willing to take their place.
3. Communicate Benefits, Not Features
A feature is the fact that your child care center has web-based video cameras in every classroom. The benefit is the peace of mind parents experience.
See the difference there? Features tell parents what your daycare has or does. Benefits tell them why these things are important, which is SO much more compelling. If you follow Kris’s advice, you’ll look to communicate benefits over features in your marketing messages.
4. Secure Testimonials
Testimonials from happy parents help communicate the value your center provides. Use them!
Kris suggested taking screenshots of your positive reviews on Facebook, Google and other review sites. Then put them in your marketing materials and hang them up in your daycare so that parents are constantly reminded of the amazing work you do.
But you don’t want to use just any testimonial in this way. Kris talked during the webinar about the things that make testimonials powerful: depth, detail and specificity.
For example, you want a review that’s a full paragraph long that tells readers exactly how old their kid is and why they love your child care business — and includes a full name and photo from the reviewer. This is much more powerful than a review that says “Love this place — Jane S.”
Kris was an amazing webinar guest and shared so much valuable information. We encourage you to watch the full replay here to get all of her tips and tricks about pricing.