When you’re bogged down in the daily realities of running a studio, it’s easy for Business 101 to take a backseat to the challenges of appeasing students and growing your business. So here’s a reminder: in business, supply and demand rules.
Offer too many classes and the value of those classes will plummet. Provide too few, and class value may be high, but students will begin going elsewhere. The key is to offer almost exactly as many class slots as you are able and willing to fill. To slightly rev up demand, offer slightly fewer classes than demand would allow. In order to manage this delicate balance, dance studio management software is your secret weapon.
Supply and Demand: The Basics
Whether you majored in business or never even sat for a single economics class, it’s easy to forget the law of supply and demand when it affects you. Demand side economics tells us that the amount of a good available falls as the price rises, and rises as the price falls. Put simply, items become more valuable when fewer are available, but as value increases, so too does the number of businesses willing to supply the product. This means:
- Classes that are in demand can be priced higher.
- Classes will become in greater demand when there are fewer of them are available.
- As class prices rise, so too will the number of studio owners. Within an individual studio, a studio director tends to offer more classes as class price rises, thereby undermining the value of those classes by reducing demand.
It’s impossible to balance supply and demand just once. It’s a perennial balancing act—one that requires careful attention to detail and diligent monitoring of enrollment.
Signs of Too Much Supply and Too Little Demand
By the time you have too much supply and too little demand, you’re already losing money. If you’re rapidly increasing course availability without a similar increase in desire for classes, this could signal a crash triggered by too much supply. Here are some signs that you’re already there:
- Classes are consistently not full, or even mostly empty.
- Enrollment has slowed down, or even retracted.
- You’re spending money on classes, but that money is not being recouped in additional tuition and other fees.
- You’re spending more on advertising, promotions, and other measures to bring in business.
- Other studios are opening at a rapid pace, and some are even taking away your business.
- The price of classes increased recently, causing you to offer more classes.
- You’re considering reducing the price of classes, or students are complaining that classes are too expensive.
- You get more business when you slash course prices.
- You’re hiring less expensive instructors, or considering doing so, because you need students more than you need quality instruction.
Signs of Too Much Demand and Too Little Supply
Every business wants a market climate characterized by high demand and low supply. When this happens to your studio, every class will be filled, and you’ll be able to expand your offerings while still turning a profit. Some other signs of high demand and low supply include:
- Classes that are consistently filled, or even overfilled.
- Being able to pay instructors a competitive wage or focus on quality, because so many students want your classes.
- Few other studios in the area, or other studios are also full to the brim.
- Difficulty managing enrollment, student inquiries, and student communications because your studio is so full.
- Long waiting lists.
- Not needing to advertise, or having a very low advertising budget, because you cannot keep up with demand for your courses.
- Offering fewer class slots, or fewer classes, than students want.
Striking a Balance
So what can you do to ensure a proper balance between supply and demand? When supply is high but demand is low, your first step should be to reduce supply. Theoretically, this should drive up demand. Even when it doesn’t, though, it will reduce your expenses until demand shifts. Some other strategies include:
- Shifting your budget toward advertising.
- Offering higher quality classes.
- Lowering your prices. Occasionally, increasing cost actually increases demand, but this is a risky endeavor, so consider talking to a consultant before making hasty pricing decisions.
- Learning more about your competition, and finding a way to set yourself apart. If your competition is performing better than you are, it’s time to carefully evaluate what their unique offerings are.
When demand is high, the key is to gradually increase supply. You’ll make more money, but don’t get carried away. Offer too much supply and you’ll flood the market, constraining demand and lowering the value of—and enrollment in—your classes. Try the following:
- Raise prices to capitalize on high demand without spending more on more classes.
- Add one or two more classes at a time, slowing increasing supply so that it doesn’t outpace demand.
- Consider adding another instructor or two.
- Scale back on your advertising budget.
- Explore the market to assess the number of possible students you have, and adjust offerings accordingly.
- Look at your competition. If there is no competition, or if you offer something highly unique, this might account for the high demand. If it continues, opening a second location could help you make more money.
How Dance Studio Management Software Helps
The Studio Director offers detailed reports on every facet of your business, helping you anticipate supply and demand issues before they arise. We manage enrollment for you, helping you avoid the stress and chaos of over-enrollment. And our inventory management helps you assess supply and demand issues with any products you sell, making it easier to devise ordering and sales strategies.Every business must grapple with supply and demand each and every day. Dance studio management software frees your time and your mind to focus on more interesting issues. Our 30-day free trial can help you weigh whether our program can meet your needs. Give us a try and watch demand skyrocket!