Myngle breaks the Trend and forces Teachers to take higher Prices

Since language learning platform Myngle have promoted Stefan Booy to Head of Education there is a lot going on. Apparently Stefan is trying to catch up with issues that had been discussed for a while in the forum but never really been attacked by the company before.

For about two months things change rapidly and although the process is not finished Myngle took a major decision yesterday. The platform now has a minimum price of 9 Euro for 30 minutes and 13 Euro for 45 minutes of 1:1 teaching.

Many of you will say “Why the excitement? 9 Euro for 30 minutes is still low.”, and you are right but if you know that a big group of teachers on the platform offered lessons starting at 5 Euro or even 3 Euro for 30 minutes it is a huge shift.

The new policy started with a suggestion in February but teachers were not actually forced to offer the new prices. This time there is no choice. Quoting the Myngle News Bulletin that is sent out to all teachers on the platform:

>> PRICING << From the recent survey and from the analysis we did of the prices on the site, it has become clear that a majority of teachers: a) Want to maintain independence in determining prices b) Don't always know how to price their services and explicitly asked for help c) Would like the prices to go up (which is difficult to do, unless everybody does it at the same time). Myngle wants this too. Therefore, the following changes: 1) Minimum prices: For active teachers with individual class prices lower than the new minimum class prices (9 EUR for 30 min lesson and 13 EUR for 45 min lesson), their prices will be increased to match the new minimum. For example, if a teacher charges €5 for 30 minutes class, we shall place a new value of €9. For most teachers, these prices are still relatively low. If you want to raise them further, please do! 😉 Don't sell yourself short... 2) Maximum discount on packages: Teachers who charge for a package more than 50% discount from individual class price, we will update the package price so package discount is 50%. 3) Inconsistent pricing: Teachers who charge for a package more than the price of an individual class times the number of classes in a package, we will update the package price to be the price of an individual class times the number of classes in a package. There will be no discount. Example: some teachers charge 10 EUR for a single lessons and 120 EUR for 10-lesson package. In marketing terms this is not very effective, because consumers would generally expect a financial benefit by committing to a larger number of lessons. Myngle will adjust the price of the package to 100 EUR, in this example, without any additional discount. (I know, I know, you would think it's common sense, but sometimes math or marketing is a challenge for some of us... 😉 ). 4) Packages. The vast majority of lessons on Myngle are the fruit of packages sold. Packages cater to students who are ready to commit to learning. These are the type of students we want on Myngle and the kind of teacher that should work on Myngle is the one who can help this student. Therefore, if a teacher doesn't offer at least 2 packages options (2 packages or 1 package + 1 subscription), a price of one package with no discount will be added. Please let us know if you are a teacher who is absolutely against this rule. Let's talk face to face and solve it together. So the packages to be created are: * If a teacher does not offer 30-lesson package, it will be added to that teacher; * If a teacher offers 30-lessons packages but does not offer 10-lesson package, a 10-lesson package will be added.

Let’s talk a bit about the reasons for this change and of course the consequences for teachers and the platform.

Obviousely most teachers are not able to create a working pricing structure that reflects the value of their work. And the problem here is that they tend to undersell their services instead of overpricing them. This is of course given to the fact that at the moment there are far too many teachers on the platforms compared to potential clients. In order to get a piece of the pie teachers continuously lowered their rates hoping to get a student. And if all teachers take part in this game you’ll get a downwards spiral.

When I started teaching on Myngle in early 2008 the average price of a teacher was 10 Euro per 30 minutes. As time went on and not enough students came to book lessons (a problem that all platforms are facing, not only Myngle) teachers started to lower their rates. This was also driven by the Myngle Boost offers. In order to keep the students after the boost teachers adapted their prices which absolutely made no sense because you cannot adapt your regular price to a subsidized price.

Another driving force for price dumping was the alleged “success” of teachers who lowered their prices. Teachers never actually made market research or tested the elasticity of their pricing. When they lowered the price and then got a student signed up it must have been for that reason.

I could spend hours writing about all that but to sum it up quickly: most teachers are not entrepreneurs. If you read the excerpt of the email above you get a good sense of it. Hence the decision of Myngle to take care of it and leave no choice for the teachers is in this case a late but good one.

Which brings us to another topic that has been discussed in the Myngle forum and this blog here for a long time: is Myngle still a platform or is it an online school? Taking the new pricing rules into consideration, even with the choice of taking higher prices, I say Myngle is to 90% school.

Now let’s take a look at the consequences and start with the teachers first. Of course all teachers who were up to now taking less than 9 Euro per 30 minutes will go on the barricades as there is a high chance that they will loose at least some of their students. So there will come some hard weeks for the education team, I think.

More forced control by the platform might also drive away some of the teachers who don’t like working in a school environment. Those will be teachers who take higher prices than 9 Euro, have a lot of experience working indepently etc.

For Myngle it won’t hurt that much. 18% of 5 Euro does not make the platform rich or even profitable so setting up new rules now might pay off later.

For the overall brand it should be very helpful. As Myngle is promoting its service as quality language training with professional teachers the pricing has to match. 9 Euro is still very low but at least Myngle caught up with some European competitors like Learn2Lingo, Learnissimo or Lingueo. More importantly it closes the gap between the low cost teachers and the middle priced teachers on the platform who offer 30 minutes for up to 12 Euro. Maybe it will even result in an upwards trend at least let’s hope for it.

Bottom line: fixing the leak of price dumping was due for a long time and finally someone at Myngle got the guts to do it. It will hurt some teachers but in the mid term it will be good for all sides involved. I even believe that it should have a positive effect on the whole market. Myngle is one of the oldest players and also one of the biggest. Hence decisions they take are watched, analyzed and adapted by the competitors.

For me as someone who always demanded higher prices for teachers it is a good day. There is of course more work to do but I consider this an important step for the online teaching industry though I still don’t get the fact that it took them about two years to start taking at least some action.

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  • Anneh

    What a great and hopeful outlook. Thanks for posting! Pricing is a tough one. I've tried lowering and raising it. In the end, I'm sticking with a higher price (though not high enough in my opinion) even it means loosing some students.

    • http://kirstenwinkler.com KirstenWinkler

      Thanks Anne. But by fixing this, Myngle and its teachers can concentrate on other important issues and move on.

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  • chinamike

    This is a great example of how a business model can blind you. The so-called school model at Myngle was resisted by management in the early going even as it was being adopted in small pieces. If the school model is now taken seriously maybe other issuing besides pricing can be handled as well.

    On the other hand the biggest problem I see in the “school” model is the problem of scale. How do you keep growing in size beyond a certain population of teachers. How do you keep everyone happy and give everyone a shot at new students.

    In the offline world new, inexperienced teachers often attract attention (and gain experience) with lower prices. New teachers under price old teachers taking away customers at the margins. It will be interesting to see how Myngle and other schools create an ecology that puts competitive pressure on entrenched teachers while also raising prices.

    In the end I think we found out that quality control in the form of students evaluating teachers is not as effective as the quality control of a business qualifying teachers.

    • stivibi

      Good point chinamike. I wonder if it was you when I saw that “fly on the wall” in our recent Myngle team meeting.. 😉 All jokes aside, you point out the kind of issues that we are also debating internally. We think there can be solutions. We have a few planned, but ideas are always welcome. There is only one issue I don't have a solution for and that is “to make everyone happy”. We gave that up long time ago. We can only do what we think is best for the majority of the stakeholders. Someone will always disagree.
      Thanks again for your thoughts and contributions to making us sharper.

      • http://kirstenwinkler.com KirstenWinkler

        Just set the record straight. You need to make those happy who can identify themselves with your service but for that you need to make clear what you are and what you are not.
        As long as there is room for interpretation you will always get problems.

        • chinamike

          Kirsten, I really like your strong advocacy for clarity. I agree, once you make your position clear, you can probably expect that the people who remain will want to follow along in sync.

      • chinamike

        Thanks for not swatting that fly :). I think these kinds of open conversations help everyone think deeper and achieve more clarity.

        • stivibi

          Thank you for your message.

          I'm currently out of the office with rare access to email.
          I will be back Thursday, April 1, 2010.

          For help with business development, please contact Egbert van Keulen,
          at egbert@myngle.com.

          For any other technical issues, please contact helpdesk@myngle.com.

          For serious emergencies, please call +1-479-427-0005

          Regards,

          Stefan Booy

          Business Development Manager
          Myngle B.V.

  • stivibi

    Thank you Kirsten for covering the change.
    The credit for the changes goes to the whole team who is working to no end to make things happen. In the process we sometimes get it wrong and sometimes get it right. We trust to have chosen the right path, but as you well point out, there is still work to do.
    You are also correct in the sense that we are making very “school-like” decisions. We still think we can capture the best of both worlds (marketplace and school), by allowing the more entrepreneurial teachers to find their space within Myngle and yet give the students greater levels of quality guarantees in their investment in education. It's a nice challenge, a “blue ocean” if you will. We'll keep doing our best.

    • http://kirstenwinkler.com KirstenWinkler

      I don't think that entrepreneurial teachers are the right ones to target for Myngle anymore and frankly, if you keep the direction you seem to have chosen now you won't need them.
      There are enough teachers out there who are happy to work in a more “secure” environment.

      • chinamike

        Kirsten,

        Recently I commented on the divide between “global teachers” and “local specialists” at Myngle. I think this is probably more important than the entrepreneurial mind-set for distinguishing between who is suited to work at Myngle and who isn't.

        Simply in terms of numbers Kirsten is correct. Entrepreneurial-minded teachers are out-numbered by their less market-driven brethren. However, I really appreciate Myngle for acting as a magnet and bringing this brethren together :)

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  • http://twitter.com/Ad_Lib Monica Thomas

    A very interesting article and a very welcome move from Myngle.

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