Summary

In this episode, I explore the psychology and strategy behind pricing for tutors and education business owners. We discuss why market research is not always the answer, how confidence and self-worth can influence pricing decisions, and how to create a pricing strategy that supports the business and lifestyle you want.

Takeaways

• Pricing is influenced by psychology as much as strategy.
• Market research is less useful for unique offers.
• Your prices should support your business goals and lifestyle.
• Fear of losing clients can hold you back from raising rates.
• Pricing often reflects confidence, not just value.
• Tiered pricing and grandfathering can make price increases easier.
• Price increases are a normal part of business growth.
• Build your pricing around your business, not your competitors.

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👋🏽 Hello! I'm Sumantha McMahon, and I've supported over 100 tutors and education business owners.

As a teacher 'dropout' turned professional tutor, combined with my 20+ years as a business owner, I'm in it with you! Yes, I'm qualified too :-)

My training leans on tried-and-tested methods that are completely tailored to our niche.

Work with me to breathe life into YOUR definition of success:

#1 Bespoke 1:1 Mentoring

High-touch 6-month programme for tutors who want to make their business more lucrative, in a sustainable way for the future, while protecting the impact they make.

#2 The Tutors' Mastermind

The leading membership for tutors that combines tailored training (live and recorded), a community of like-minded business owners and exclusive discounts.

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Sometimes, I share links to resources and apps that I recommend. They are all based on my experience - if I don't love them, I don't recommend them. In some cases, I earn a small commission for my recommendation, at no cost to you.

© 2024 Sumantha McMahon

So today I want to talk about pricing and not in the way that most people may talk about it. You will have heard plenty of advice about raising your prices, about charging your worth, about not undervaluing yourself. And while none of that's wrong exactly, I think it skips over something that's actually much harder and much more interesting than the question of whether to charge more. The harder question is this. How do you even know what the right price is in the first place?

Because most of the guidance out there assumes that figuring out your pricing is simply a matter of looking at what everyone else is charging and positioning yourself somewhere on that scale. Do a bit of market research, see what the going rate is, decide whether you want to be at the lower end, the middle or the higher end, and off you go. And for some tutors in some situations, that approach works fine. But what happens when what you're offering doesn't really compare to anything else out there?

What happens when you've designed something that's genuinely different and there's no obvious benchmark to work from? That's a situation I've been in myself more than once and it's a situation I work through with my clients really regularly, especially my one-to-one clients. And I think it deserves a proper conversation. Now, if you're new here, I'm Sumantha and welcome to the Upgrade Your Education Business podcast. I specialise in working with tutors and education business owners who want to build businesses that are more lucrative, but also genuinely sustainable and designed around the life they want to live.

And talking about pricing from this angle is actually absolutely crucial to this. So I want to talk about pricing from the inside out — not just the maths of it, not just the market research of it, but the psychology of it, the strategy side and the practical reality of navigating it when you're not sure you've got it right. I'll start with the psychology because until we understand why pricing feels so difficult, it's really hard to make clear decisions about it.

There are a few things happening beneath the surface when a tutor sits down to think about what to charge. And they're really worth looking at because once you see them, they actually become a lot easier to work with. The first is something called anchoring. And I was introduced to this by a guy called Dan Ariely — I think that's how you pronounce his name — and he's a behavioural economist who wrote this really good book called Predictably Irrational. One of the ideas he explores is what he calls arbitrary coherence.

And what this means in practice is that the very first price we encounter for something — whether that is what a competitor charges, or what our previous employer paid us, or even a number we heard somewhere completely unrelated — becomes lodged in our minds. And from that point on, it shapes every pricing decision we make afterwards, often without us realising it. I can completely relate to this from my own experience. When I left teaching, my first goal was simply to match my teaching salary. That was it.

That number — the salary I had walked away from — was lodged in my brain. And it quietly influenced my pricing for far longer than it should have, because it had nothing to do with the value of what I was offering as a tutor. It was just the first number I had. And that made it feel like a reference point, even though it was essentially an arbitrary one. So if you set your price years ago based on what other tutors in your area were charging, or based on what you used to earn in a previous role, that original number has likely been anchoring you ever since.

Even as your experience has grown, your offer has evolved and the value you deliver has increased — that early anchor keeps pulling you back towards a number that made sense in a completely different context. And the really important thing that Dan Ariely makes clear is that the anchor itself is often arbitrary. It was not necessarily a rational starting point. It was just the first number you encountered. But once it's in your mind, it does feel like something important — and that's the trap. The second thing that makes pricing hard is something called loss aversion.

And this comes from the research of two psychologists — Daniel Kahneman and Amos Tversky. They did research on how humans make decisions under uncertainty, and I believe one of them won a Nobel Prize for it, which gives you a sense of the weight of what they found. What they found, put simply, is that the pain we feel when we lose something is roughly twice as powerful as the pleasure we feel when we gain something of equivalent value. So losing a client doesn't just feel bad — it feels disproportionately bad.

Far worse than the satisfaction of gaining a new client, even at a higher rate, in terms of how good that would feel. In pricing terms, what this means is that the fear of losing a client by raising your price is likely to feel far more powerful than the potential gain of earning more — even when the numbers tell you clearly that the change makes sense. The emotional weight of potential loss, that fear of "what if I lose clients," keeps you exactly where you are. It's not a character flaw. It's a deeply human response. But it's really worth knowing about.

Because once you can identify it, once you see it, you can't unsee it. And it also means that you start to make decisions with that awareness in mind, rather than being controlled by it. The third thing — and I think this one is probably the most significant of all — is the way that price becomes entangled with self-worth. When you set a price for your services, you're not just making a commercial decision. You're making a statement about how much you believe your time and expertise are worth. And if your confidence is not fully there yet, that statement feels enormous. It feels exposing.

And so the price you set ends up reflecting how you feel about yourself at a particular moment, rather than the genuine value of what you're offering. It was only when I started thinking very differently about what I wanted — which I'm going to come onto in a moment — that my whole approach to pricing changed. Okay, so let's talk about what happens when you're trying to price something and the market research route simply doesn't work. When I set up the Tutor's Mastermind, I was in exactly this position. There were other memberships around the tutoring space, but none of them were structured the way mine was.

The format was different, the purpose was different, and the kind of tutor it was designed for was different. So looking at what others were charging didn't tell me anything useful — I wasn't selling the same thing. And I think this is more common than tutors realise. In fact, almost all of my one-to-one clients find themselves exactly in this position at some point. Because when we work together, the whole point is to get creative about what they're building, rather than following well-worn paths that everyone else in the tutoring industry tends to follow. And the more distinctive and tailored that offer becomes, the less useful market research is.

There is genuinely no benchmark to compare it to because nothing quite like it exists. Now that can feel really uncomfortable at first, but it's actually a sign that something interesting is happening. So what did I do when I was setting up the mastermind without a useful comparison? Honestly, I started low. I invited a small, hand-selected group of founding members to join before there was anything fully built or useful in there yet. They were essentially joining an idea and I priced it to reflect that. As the mastermind grew and I could see the value it was creating, my confidence grew too — and so did the price.

I increased it once and then I increased it again, because even after the first increase, it still didn't feel like it was reflecting what members were genuinely getting. What I found really interesting about that process was that it wasn't really about the money — or it wasn't only about the money. It was about finding a price that felt honest, that felt like a fair exchange for what was actually being offered. And that took time and real experience to land on. The mastermind price hasn't changed for a really long time, even though the way it works and what's inside has evolved significantly. And that's really deliberate.

The people in that community tend to stay for a very long time. My longest member has been in there from the very beginning. Most people stay for well over two years and I genuinely value that. So keeping the price at a level that makes it sustainable for people to stay long term is something I've chosen to prioritise. But here's something worth thinking through for your own situation. If your clients tend to stay for a long time, there's a really strong argument for pricing in a way that makes that sustainability possible. But if your clients naturally reach a point where they move on, with quite a high churn rate, the calculation can be different.

You don't need to factor in long-term retention in the same way, and that might mean you can afford to be bolder. This is the kind of thinking that market research simply can't give you — it's specific to your offer, your clients, and what you want your business to feel like. So I'm going to come back to something I mentioned earlier, because I think it's the most useful thing I can offer you in this episode. At some point, my approach to pricing completely changed. The change was this: I stopped trying to work out where I sat in the market and I started working out what I needed and wanted from my business instead.

I thought about what my ideal schedule looked like, how many clients I wanted to work with, how many hours I wanted to spend working each week, what I wanted my income to be — not as a ceiling to aim for, but a genuine goal to design towards. And then I worked backwards. If I wanted to earn this amount, working this many hours with this number of clients, what does that mean my price needs to be? And to this day, I still price like that — for both Upgrade Your Education Business and the offers within that, but also my tuition business. Every year I revise my ideal timetable.

So when that academic year ends and some of my students have taken their final exams and leave, I make sure that I'm working towards that next ideal timetable. I do this every year. When I took this new approach, the answer became really clear. And what surprised me was that it actually had very little to do with what anyone else was charging. It was just the maths of the life I wanted to build. Now I want to address something that stops a lot of tutors from making pricing decisions with any confidence at all — and that's the fear of getting it wrong.

The assumption is that if you set a price and then you need to change it, something has gone wrong. But having your pricing evolve as your offer and your confidence evolves is completely normal. I've done it multiple times. Most of my clients have done it. It's part of building a business, not a sign that you've somehow failed. There are ways to navigate a price increase that reduce the chances of it feeling disruptive. One approach I use myself as a tutor is tiered pricing. Different year groups or stages of a journey are priced differently. When I want to increase my prices, I can do so at the natural point when a student moves into a new stage — it's almost like an invisible price increase.

Another approach is what's often called grandfathering — where you honour the price that your existing clients joined at and introduce the new price only for new clients. Give people plenty of notice. Don't announce a price increase effective immediately. Give your clients time to adjust and feel like you've treated them with respect. And on the question of whether to explain the increase — if you've created a new, enhanced version of what you offer, the increase explains itself. You don't need to spell it out. Sometimes less explanation actually communicates more confidence. Pricing is one of those things that may never fully feel settled, and I think that's actually fine. Your offer evolves, your confidence grows, your understanding of your clients deepens — and all of those things have a bearing on what you should be charging. I hope this episode has given you something useful to sit with, and as always, you'll hear from me on Wednesday.