1. The product is perishable, which means that it is expensive or impossible to store excess inventory. Language schools offer a temporal product. Classes start frequently, typically every week or every four weeks. Once a class starts, empty seats are worthless.
2. Future demand is uncertain. Given the global composition of the customer base, demand is vulnerable to a wide array of circumstances including geopolitical events, financial crises and pandemics (eg. 911, Iraq war; financial crises in 1994, 1997 and 2008 in, respectively, Mexico, East & Southeast Asia and much of the globe; 2002 SARS epidemic, 2010 swine flu outbreak).
3. The capacity to offer the product is limited and it is expensive or impossible to increase capacity quickly. Language schools are constrained by the physical capacity of their premises and their ability to hire staff with specialized skills. Expansion is expensive and time consuming; the long time frame of property leasing commitments also makes it risky.
4. The market can be segmented (i.e., customers are willing to pay different prices for the same product). Students can be differentiated by planning horizon, geographical origin, native language, ability to pay and whether they book directly or through an agent.
5. The fixed cost of offering the product is high, while the marginal cost is low. Language schools are most often located where the cost of leasing premises is the highest, in central business districts or other areas close to amenities and public transportation, and employ faculty and support staff with specialized skills that can be difficult to replace if they are laid off. The marginal cost of serving one more student in terms of faculty resources, administration and materials is low compared to fixed costs.
Until now, language schools have lacked a mechanism to dynamically price course tuition in the way that airlines and hotels price their products. Lingonexus brings yield management to language schools with a flexible, affordable, self-managed course booking platform.