The $99 scuba course question

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Thanks for the marketing lesson. I had no idea what a loss leader is.

:D

I think, though, that where the scuba industry is at a loss (see what I did there?) is that they're not doing all that well at the whole "make money in other ways" department.

Ha ha. :) I was just being facetious. And yes, I see what you did there. :wink: However, the question is not about the industry as a whole. The question is about whether a specific individual shop or instructor can have sustainable success while continuously offering a $99 (with extras) class.

A correctly implemented loss leader strategy also requires that the "loss" period be for a limited, strategically opportune time. For example Target will deeply discount deodorant and soap the week before Memorial Day, Fourth of July, and Labor Day. Why? Because those things are located right next to the high-price, high-margin displays of sunscreen. WalMart uses pencils and notebooks as loss leaders during back-to-school sales so that moms come in and also buy their kids clothing.

Nobody can discount a primary product/service (esp one that has a once-in-a-lifetime consumption pattern) ALL THE TIME as a sustainable strategy.

I have more of a layman's standard for whether a loss leader is implemented correctly. Does it directly produce results that, over the long-term cover the cost of the loss leader and yield a subsequent profit?

As I have said, I would not try to argue at all that every shop can do it. But, I would put the cost of my local shop's OW class in that $99 bargain basement category. And yet, with all the money I and my classmates spent there in addition to the course itself - and all voluntarily - we were free to buy our stuff wherever we wanted and they did not pressure us at all to buy there - I strongly suspect they have turned a tidy profit on my class as a whole.

When you say nobody can discount ALL THE TIME as a sustainable strategy, I really wonder about places like Taco Bell selling $0.59 tacos all the time. I suspect that the fully loaded costs are such that those tacos are a loss leader. But, I think they easily sustain a profit by selling $2 sodas. IOW, I'm not convinced of the truth of your statement. :)
 
I really wonder about places like Taco Bell selling $0.59 tacos all the time. I suspect that the fully loaded costs are such that those tacos are a loss leader

[video=youtube;G2y8Sx4B2Sk]https://www.youtube.com/watch?v=G2y8Sx4B2Sk[/video]


Don't confuse a "low-priced product" strategy with a "loss leader" strategy. The key, as you mentioned, is that they sell tacos for 59-cents all the time. By definition, that's not a loss-leader strategy.


IOW, I'm not convinced of the truth of your statement. :)

That's alright... only one of us needs to be. I'll choose to believe decades of rigorous academic research and support. You can choose to not believe me.

:crafty:

Let's go diving and then grab a beer!
 
[video=youtube;G2y8Sx4B2Sk]https://www.youtube.com/watch?v=G2y8Sx4B2Sk[/video]


Don't confuse a "low-priced product" strategy with a "loss leader" strategy. The key, as you mentioned, is that they sell tacos for 59-cents all the time. By definition, that's not a loss-leader strategy.

About a decade or so ago, a fast food company--maybe Burger King--offered a special promotion for a limited time: free french fries!

One evening we went into one of those stores, and only a couple of customers were in the place. One of them, apparently a friend of the manager, wondered aloud how they could afford to do that. "Want to know how?" the manager asked. He went into a back room and came back with a huge bag of frozen french fries on his shoulder. "This bag costs 99 cents," he said. "That's how they can afford it."

I am pretty sure that 59 cents for a taco includes a handsome profit.
 
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Sadly the $99.00 buck courses are seen all over the world, and in some places I have seen them even cheaper, how sustainable it is I dont know, but I just dont see the point in selling a course so cheaply, everything has a value and if you continually trade down that value is diminished until its seen as junk.

I bought a new camera the other day and I decided to go on a photography course to learn how to use it properly, converting local currency it cost me roughly $250.00 bucks for a 4 hour Saturday morning theory class and a 4 hour Sunday morning practical, thats it, and guess what, they were full.

Once a price is rock bottom its very difficult to lift it again, there will be massive consumer resistance, and so, the cycle is perpetuated downward, soon we will be giving courses away.......Oh wait...!
 
[video=youtube;G2y8Sx4B2Sk]That's alright... only one of us needs to be. I'll choose to believe decades of rigorous academic research and support. You can choose to not believe me.

:crafty:

Let's go diving and then grab a beer!

That's just fine! :) And sounds like a plan! When and where?! :D

About a decade or so ago, a fast food company--maybe Burger King--offered a special promotion for a limited time: free french fries!

One evening we went into one of those stores, and only a couple of customers were in the place. One of them, apparently a friend of the manager, wondered aloud how they could afford to do that. "Want to know how?" the manager asked. He went into a back room and came back with a huge bag of frozen french fries on his shoulder. "This bag costs 99 cents," he said. "That's how they can afford it."

I am pretty sure that 50 cents for a taco includes a handsome profit.

Maybe. But I have to wonder. If everyone stopped buying anything else and only bought $0.59 tacos, do you really think Taco Bell would find that to be sustainable? I mean, even if the overall revenue loss from the other products was 100% made up in increased gross revenues for just those tacos, I'm still skeptical. But, maybe you're right.

Regardless, I still think SOME shops CAN offer a $99 (with extras) class and have a sustainable business. Even if the class operates at a loss and the shop makes it up with profits in other areas of the business. :cool2:

---------- Post added April 2nd, 2015 at 11:35 AM ----------

Sadly the $99.00 buck courses are seen all over the world, and in some places I have seen them even cheaper, how sustainable it is I dont know

This seems to me to be an indication that it is sustainable - as part of a long-term cyclical process. And you can't really expect any industry to remain static. So, lots of people have $99 courses. Eventually, the pool of these classes shrinks, as various shops fail because they weren't able to sustain their business. Eventually, the pool shrinks enough that supply and demand results in prices starting to go back up. They go up enough and the pool starts to increase again. It's a cycle. Does that mean that the shop that's offering a $99 class has an unsustainable business? If you somehow think that businesses should never change their prices, ever, then yes. But, if you expect that the shop will change their pricing over time, to reflect market demands, then the sustainability of their business has mostly to do with other aspects of their business. Unless it's not a full-on dive shop and, instead, really just an OW training business.
 
I bought a new camera the other day and I decided to go on a photography course to learn how to use it properly, converting local currency it cost me roughly $250.00 bucks for a 4 hour Saturday morning theory class and a 4 hour Sunday morning practical, thats it, and guess what, they were full.

It has long fascinated me how the public has a different view of scuba pricing, whether for instruction, gear, or servicing, then they do for the rest of their world.

I recently purchased a new toilet. I can do most plumbing, but I hate doing it. I called a couple of plumbing services and found that they all charged about $170 per hour, and they estimated it would take 1.5 hours. My son also purchased a new toilet from an online dealer at about the same time, and they offered installation for "only" $1,000. We each did it ourselves, taking about 1.5 hours each.

I recently had several electrical problems in the house. I normally do my own electrical work as well, but these issues had me a bit worried about making a mistake. I called in an electrician, and he had a book of standard prices for standard repairs. I agreed to do it. The total cost was several hundred dollars, and it took him about 10 minutes to finish the work. I estimate that, counting the time it took him to listen to me explain the problems, he got about $1,000 per hour.

Since those rates were pretty standard across the profession in my area, I assume people must be willing to pay those prices, and they must think they are fair.

My scuba instructional pay, oddly enough, is not standard. I am taught according to the number of students. If I teach a class of 3 students, I get half the pay I would get for a class of 6 students, even though they take the same amount of time. Taking a rough estimate of average class size, I would say it would take me nearly 30 hours of instruction to earn what a plumber makes putting in a toilet in 1.5 hours.
 
It has long fascinated me how the public has a different view of scuba pricing, whether for instruction, gear, or servicing, then they do for the rest of their world.

I reckon people look at doing their own plumbing or electrical work and think "that looks hard!" And maybe even "that looks dangerous!"

But, they look at scuba diving and think "that looks easy." And if they think it looks easy, why would they expect to pay a lot of money for someone to teach them how to do it?
 
Recently someone posted a photo on Facebook with text that read,"No one who offers $99 scuba courses does so because they want to create better divers."

I thought this was an important topic for an intelligent discussion. A founder of the one of the training agencies recently told me that he had research that showed a correlation between the advent of cheap weekend scuba courses and diver retention decline. Another multi-shop owner recently said that he is considering dropping his $99 courses.

What is your opinion?

View attachment 205673

Thank you

p.s. I also posted this in the Instructor forum because I would like to see how the answers differ between forums.

As an instructor I would say they could give the courses away for free for all I care as long as the price of the course does not dictate the level of quality I deliver. A used to (note past tense) work at a shop that remodeled itself the "price fighter" and told us that we had to deliver the course in basically 1/2 the time because that's what customers wanted.

Funny thing is, that this particular shop used to have an outstanding reputation for quality and now nobody talks about them. At the new shop where I work we sometimes get their ex students in because they want to take advanced training but they're afraid to go through the same shop again. In one case we even had a certified OW diver come in and try to sign up for OW because while they had certified him, he wouldn't dare to actually go diving.

This is what shorter and shorter (and cheaper and cheaper) courses do. It sells a dream to someone without making the dream come true. Like promising you sex with a beautiful model and then delivering the playboy. Once you've parted with your money, they have what they wanted and they could pretty much care less about your "dream" at that point.

R..
 
I am pretty sure that 59 cents for a taco includes a handsome profit.

Wanna know what the most expensive thing is when you buy a bottle of Tylenol?

Yup. The bottle.

I hope my CDA with McNeil has expired by now. I might need a mod to delete this. :cool2:

---------- Post added April 2nd, 2015 at 12:52 PM ----------

It has long fascinated me how the public has a different view of scuba pricing, whether for instruction, gear, or servicing, then they do for the rest of their world.

Do you mean "the diving public" or "the public at large" when you say that?

As I saw someone post recently "Diving is very expensive hobby that attracts very cheap people."
 


---------- Post added April 2nd, 2015 at 11:35 AM ----------



This seems to me to be an indication that it is sustainable - as part of a long-term cyclical process. And you can't really expect any industry to remain static. So, lots of people have $99 courses. Eventually, the pool of these classes shrinks, as various shops fail because they weren't able to sustain their business. Eventually, the pool shrinks enough that supply and demand results in prices starting to go back up. They go up enough and the pool starts to increase again. It's a cycle. Does that mean that the shop that's offering a $99 class has an unsustainable business? If you somehow think that businesses should never change their prices, ever, then yes. But, if you expect that the shop will change their pricing over time, to reflect market demands, then the sustainability of their business has mostly to do with other aspects of their business. Unless it's not a full-on dive shop and, instead, really just an OW training business.

I know what you are saying but nowhere that I know do businesses dramatically cut prices like that. My feeling is its fine to have a special and knock $50.00 bucks off for a month or something, but dropping the price to almost junk status just diminishes the value of the course in the eye of the customer.

Its my feeling in the scuba world there are few stores worldwide who can survive on one area of the business, diving is just not big enough, and once the customer has a mask for example you are not selling him another for a while, unlike Taco's where he may buy another one tomorrow scuba gear is mostly a once off or at best infrequent purchase, so the store needs to profit from everything they do, courses, air fills, gear sales, tours etc, trying to recover your losses on a course via "possible" future gear sales is a risky business in such a low sales enviroment.

In the photography course I went on you had to have your own camera to even sign on, they dont lend or hire you one for the day and you cant pitch up with an Instamatic or an old Polaroid, you had to make the investment on a specific standard of camera to be committed to the course, I see that as a good thing, the instructor didnt stand there wasting his time talking to folk who may or may not get involved later, we were in the game to learn, boots and all, we had made the investment, but in diving people think its fine to borrow their mates old rubber mask and snorkel with a ping pong ball in the top, a wetsuit, two sizes too big, pitch up late to class, and then complain diving's not for them because they were cold and had water up their nose,... but hey, it doesn't matter, because we only spent the equivalent of a night out at the movies and a restaurant.

Now sure,.... I know not all new students are like that, and some might think thats an extreme scenario, but actually its not, believe me, when there is no real commitment to learn, people see it as just something to do to pass the time and in my opinion that never makes for good diver training and seldom benefits the long term commercial or professional side of the sport.

---------- Post added April 2nd, 2015 at 07:18 PM ----------

It has long fascinated me how the public has a different view of scuba pricing, whether for instruction, gear, or servicing, then they do for the rest of their world.

I recently purchased a new toilet. I can do most plumbing, but I hate doing it. I called a couple of plumbing services and found that they all charged about $170 per hour, and they estimated it would take 1.5 hours. My son also purchased a new toilet from an online dealer at about the same time, and they offered installation for "only" $1,000. We each did it ourselves, taking about 1.5 hours each.

I recently had several electrical problems in the house. I normally do my own electrical work as well, but these issues had me a bit worried about making a mistake. I called in an electrician, and he had a book of standard prices for standard repairs. I agreed to do it. The total cost was several hundred dollars, and it took him about 10 minutes to finish the work. I estimate that, counting the time it took him to listen to me explain the problems, he got about $1,000 per hour.

Since those rates were pretty standard across the profession in my area, I assume people must be willing to pay those prices, and they must think they are fair.

My scuba instructional pay, oddly enough, is not standard. I am taught according to the number of students. If I teach a class of 3 students, I get half the pay I would get for a class of 6 students, even though they take the same amount of time. Taking a rough estimate of average class size, I would say it would take me nearly 30 hours of instruction to earn what a plumber makes putting in a toilet in 1.5 hours.

Indeed. indeed, and this is the issue, instructors get paid tuppence because the course price is so low theres nothing left. Not many full time instructors can make a decent standard of living in the scuba industry and I say that's not right. Living in your Kombi or with 6 other people in a small room in the seedy area of town may be fine when you are 18 and free of any obligations, but you would be hard pressed to survive as a full time instructor on 99 bucks a student and still feed your kids and pay the rent.

The dive industry has for years and years undersold itself, why, I dont know!.
 
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