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What are some of the ways (or reasons?) you raise fees, other than doing so on a regular annual/bi-annual basis?

I had a conversation with my student's parent today, and I am about to get a referral because one of my colleagues has just raised her fees. To me, it feels like this family is just out shopping for a cheaper teacher. But the reality is that if we continually raise our fees, sooner or later it will reach a breaking point, and students will leave to find someone cheaper.

AZN, you have raised an always interesting topic. It can seem like a simple one - what do you charge for a piano lesson? - but lurking close behind are a host of complex issues of value.

Here are a few reasons for raising rates. One is simply to keep pace with the rising cost of living. Another is to reward myself for what I assume is my continued improvement as a teacher. Another is to keep pace with what other piano teachers in my area charge.

Balanced against these reasons for raising rates is the issue you have mentioned: a concern that if I charge too much, I may lose students, or not gain as many new ones. Private music study is not a necessity, it is a luxury, and I want to remain affordable, not simply serve the elite class.

Piano teachers are free to charge whatever they want in our society, which just makes all this more complicated. I don't raise my rates regularly, and I fret about setting the figures each time.

I'll be curious to read other thoughts.

People will always be looking for a bargain. Part of the reason my students stay is because I develop significant relationships with both student and parents. There is some loyalty that is built into that, I think.

Please pardon an extended walk through some economic theory …

First, let's distinguish between you (Azn) raising your price relative to your local peers, versus YOU (the whole profession) raising fees over time compared to the inflation rate. The case of one teacher raising fees relative to their peers is fairly straightforward. Unless you can demonstrate to your clientele why you are increasingly better than your peers -- and that is indeed possible -- then continually pushing up the comparative cost of your lessons versus theirs will ultimately price you out of your local market.

I'm going to talk about the latter situation. Can the whole profession raise fees relative to the inflation rate? The answer, perhaps surprisingly, is yes.

The diagram below shows the time path of the price of services and the price of goods, along with the path of the overall national price level.




A quick glance reveals an important fact. Service price increases have continually outpaced the rise in goods prices. This phenomenon long predates the years in the diagram. As far back as 1817, David Ricardo noted the same thing in Britain of his day.

The reason is what economist William Baumol has called "cost disease." It's really not a disease in the bad sense of the word. The cause of the disease is actually productivity growth in making reproducible stuff (like cars, airplanes and bushels of wheat). By contrast, many services are largely immune to technologically driven productivity growth. If you can get labor out of the production process you can increase the number of cars produced per hour of work (that's labor productivity). Unless and until you can deliver an hour's worth of music lesson in a half hour you cannot get the same kind of productivity growth in a personal service like music lessons … or third grade teaching, or haircuts.

The "cost" of the service to society is how much of the good it gives up by putting labor into services instead of goods. As a result, as the productivity of labor in the goods industries rises, the "cost" of the service must go up relative to the cost of the good. In other words, we give up more of the good to keep an hour of labor in the service sector.

This does not mean that the service becomes less affordable. It is "comparatively" more expensive (you have to pay more of the good to get one unit of the service) but the average level of labor productivity in the country (which is our national income) has risen. We can afford more of both things as a result.

So no, raising your fees is a natural process common to virtually all service industries and it does not mean your business will dry up because of it.

There are special circumstances to consider, however. If the overall demand for your particular service is falling (fewer people who want to learn the instrument) then the number of service providers will fall as well. But it's the declining interest in the instrument that is the cause more than you raising your rates as the opportunity cost of your time goes up (you could work in a different business for the right wage, after all). And the people who are most likely to leave the business are those who have the best opportunities elsewhere.

Yes, very interesting discussion.

While the explanation of cost of goods vs. service is quite interesting, I think you also have to consider whether over time is our society is gradually valuing something like piano lessons (and music in general) *more,* or *less.* (I envy your situation if you think it's more.) IMHO, the devaluation of piano lessons and financial inflation sort of cancel each other out. (I've thought for the past 8 years or so that $20/half hour is a very reasonable fee for me.)

Unless inflation truly starts accelerating, then I think that raising fees annually and certainly biannually sounds quite excessive to me! But also... are we talking 50 cents or $5?

And as for reasons to actually present it to parents... I'm not sure you really have to give any. Isn't it just common knowledge about how inflation works, and that just about *everything* increases in sticker price eventually?

Piano Dad, thanks for the economics lesson. A great read for us all, most insightful stuff.

Interesting lecture, piano.dad.

Cost of goods has multiplied by 4 while that of services has multiplied by 12? I had no idea.

Is there another chart factoring in income? If real income has risen more than 4 times, then goods are more affordable now than then even if the price is greater. But if it has risen less than 12 times, we've upset the balance between goods and services.

The other factor that might make a difference is something we called "real value" in engineering economics classes. Not all processes add real value to the economy. Some do, like mining or manufacturing. Others, particularly services, do not; they merely reshuffle existing value with of course small losses at each transfer.

Lecture … hmmm. Yes, it was a bit of that.

I think you have the term "real" a bit confused. "Real" means in constant dollars. So as long as "nominal" income has risen by at least a factor of 4, then goods are cheaper in "real" terms. In fact, real income per capita has more than doubled since 1960. In other words, nominal income has risen more than twice as rapidly as the inflation rate. Even the average person who consumes nothing but services (which is no one, of course) would feel higher real income.

The relative price of services has gone up, which is the same thing as saying that the relative price of goods has gone down. But the average person can buy more of both. The real purchasing power of the economy has risen. This is due to rapid technologically-driven growth in productivity.

The problem in our society, and now I risk politicizing the issue, is that the distribution of income today isn't the same as it was in 1975. We are not the same middle class society. People in the bottom quarter of the income distribution have experienced no increase in real income over the past forty years. For them, services whose prices are rising more rapidly than inflation are indeed becoming less affordable. And the absolute number of people who are losers in the current economy is rising as the middle hollows out. On the other hand the top 1% has experienced astonishing gains in real income over the past quarter century. For them, the services of piano teachers are a drop in the bucket of their rising real income.

I have a rather odd system for raising fees.

I had a long term student, and at the outset, I charged 'x'.
Two years in, her mother said, "You have not raised your fee in two years, so we would like to increase our payment to 'y'

This happened three times over the time I was teaching her daughter, and I applied the higher rate, each time to all new students.

Existing students, continue on the rate that they originally signed up, for two years, before any increase is applied.

Some may say that this is not the best business practice, but it works for me, and everyone knows where they stand.

Yes, I used it twice with totally different meanings. Sorry.

Real for income was intended to be constant dollars as you said.

But real as applied to value is something quite different. Shaping steel into a car adds value to the economy in a way that e.g., collecting statistics on it does not. You need a sufficient percentage of your economy to be based on real value adding processes to be able to afford activities which use existing value - like the arts for example.

I've raised my fees twice in the past two years. How have I done it?

1. Tact.
2. Leveraging the strong relationships I've built with students and parents.
3. Proven results (Student awards, achievements).
4. Higher demand by new students (fueled by teaching online as well).

When the parents and students see these four things, they haven't had a problem with the increasing rates. In fact, I will probably raise them again in September.

Bottom line, if you are providing value and results, people will pay for it.

I raise rates by a small amount at the start of each acedemic year (September) which barely covers the cost of inflation. Every student gets a letter in July with information about the following term and also the new lesson fees which are also posted on the website. So far nobody has complained and I haven't lost any students as a result of raising fees.

Getting new business is a different matter. I do get fewer enquiries now than in the past although this doesn't have much to do with fees. It's more that every man and his dog is teaching piano. I think with rising unemployment and the squeeze on family incomes most people who play an instrument, no matter how good or bad, have cottoned on to the fact that they can make a bit of money on the side from tuition. I was told recently by a lady who called me that there were three other local teachers she tried who were charging less than I do. I did explain that there were many factors which determine the cost of lessons. Things like experience, qualifications, reputation and also teaching style. That conversation ended pretty quickly! I suppose it depends on how much people value those things or whether they really do just want the cheapest quote.

The rise in self tuition via the Internet probably plays a part too. Many people, particularly adults would rather try to teach themselves than find and pay for tuition. Most of what you find online is free so no wonder they are reluctant to fork out for lessons.

I do think this is a problem which is likely to get worse in the future.

One other thing for potential teachers to consider is that there can be very little in the way of promotion or wage increase. I knew this when I started so have accepted it. When I entered the profession almost 20 years ago my rates were similar to any other teacher in the area. And they still are. Yes they have increased over the years but in real terms (hope that's correct) I am hardly any better off than I was back then. Some people might pay a slight premium for an experienced teacher but there are limits to how much more than the average you can push for.

I think this point has a more direct impact on my situation. You'd think by the track record I've attained I'd be able to separate myself from some of my local colleagues, but the honest truth is that most parents just don't care about competitions, festivals, and exams, or they are not musically informed enough to make the judgement call. Most potential clients are really out there to shop for the cheapest teacher possible, thinking that "all piano teachers are created equal."

But I think the second half of your post should be a lesson taught to the entire profession. Some teachers have been teaching 40 years and they're still charging fees from 40 years ago. That is not doing anybody any good.

There have always been hack teachers and charlatans (I studied with some, back in the day), but one can only conjecture that there are more of them now, with the bad economy and all.

And this is precisely the point that is preventing some musicians from attaining an advanced degree. Whether one has a DMA, MM, or BM, he/she still has to compete with hack teachers without a degree. An advanced degree in music does not guarantee more clients and higher pay.

Well, if those teachers are any good, then it's certainly doing their lucky students (actually their parents) some good.

I wonder though, perhaps these antediluvian folks are the ones whose skills have atrophied over the years and they are charging just what they're worth.

But indeed, pricing is a difficult thing when you sell a personal service to a small client base with whom you interact face-to-face. It creates that particular awkwardness in approaching them that, say, a spa owner doesn't face when they push up the massage rate.

I guess all I have to say to the profession is, "get over it." If you place a reasonable weight on your own income stream, and you can raise rates for reasons that you think you can defend, then charge what you are realistically worth. If you lose a certain set of clients, but replace them with others, you are better off financially. If instead you choose to be loyal to a set of current clients, then you give them a bonus by not charging what you are worth. That's your choice.

The risk, of course, is that you will lose more students than you gain, and you actually experience a loss of revenue (and gain of free time ). Playing with pricing is always a bit of an experiment.

But you can reduce the risk by knowing the market. In most reasonably large markets, I'm sure there is a pricing differential between the teachers who are generally sought (because of results, or whatever), and the ones people stumble upon or seek out because they are cheaper. The top teachers' rates are discoverable. Heck, they might even be published somewhere. So you're not blindly trying to pick a price. What you won't know, until you try, is whether there are enough clients out there who think you are worth a top-dollar price based on word of mouth, or on what you have posted on your web page (remember the discussion of those "tedious" results pages …. ).

Food for thought, but not for the purpose of influencing decisions on teaching fees.

There is a difference between the nature of work and customer relationship experienced by a mechanic who repairs cars, and a private music teacher. The music teacher has two goals: he wants to earn a living, and he wants to teach music. If the teacher gets involved, participating, interested students and supportive parents, then he also gets to truly teach music and his work satisfaction goes up. If he gets indifference, lack of respect, is treated like one more commodity, it is demoralizing. The mechanic works with cars, different cars every day, and he builds no working relationship with those cars.

The economic model suggests that to make a good living teaching music, your clientele will be relatively well off and have lots of money to spend. The students you get will be based largely on the ability to pay. Some of the results we've seen reflected in this forum are teachers saying they feel like "used tissue that can be tossed away" by families who enroll their students in multiple activities, burned out students of the same, families competing with each other because of their society and pressuring both their children and the teachers for the wrong reasons, indifferent students taking lessons because they are forced to. At the same time there are students out there who don't have a single extra-curricular activity and would love to learn, but the family pocketbook doesn't support it. The two never get to meet. These students are also likely to live in areas where the quality of education in their schools is lower, so they get less support for the types of things that would make them excel.

There's no right or wrong in making choices that will give you enough to live comfortably and earn what the quality of your expertise suggests. But these are realities.

^ applause!

What??? Of course the mechanic does not build a working relationship with an inanimate object.

What the mechanic does do (to be successful in the long run) is build a working relationship with the owners of the cars.

Which is why good mechanics, like good piano teachers, or dentists, etc, are often referred by word of mouth.

Rocket, please respond to the whole of my post, and not an individual sentence, otherwise you are not understanding or responding to the actual message but a distortion. You have totally missed what I am saying.

The good mechanic builds a relationship with his clients just as the music teacher does with his clients.

The good mechanic takes pride in his work and derives great satisfaction from a job well done, just as the music teacher does.

There are a lot of hack mechanics out there but the music teaching field is far from free of hacks itself.

I'm not convinced the difference is as large as you think, nor that teaching music is a nobler cause than other forms of honest work, as seems to be implied. Some people are drawn to one vs the other.

But there is a difference in the fee structure. Maintaining expensive tools and parts inventories, paying insurance, keeping skilled technicians on board, etc. requires the mechanic to charge a substantial labor rate. We pay that rate, albeit grudgingly, because we have to. We need the car, and for the most part all mechanics charge high rates, because they all have overhead and have to.