Even the most satisfied customer has a price limit. The manner in which the increase is implemented may have some impact on the buying decision, but ultimately a price hike is a price hike.

Price and rate of change: Price increases inspire people to evaluate the value of the product and services they are paying for. Steep price increases cause the greatest scrutiny, even if they are increases on a smaller dollar amount. You could argue that the Netflix increase was $8, but that $8 represented an eye catching 60% change for some and was several times the price of some of the company's competitors. The most recent increase really grabbed subscribers attention, and has cost Netflix nearly 1 million customers.

Families usually expect a tuition increase each year, but more and more families are attuned to the rate of change. If that rate exceeds the growth of income, or inflationary rates on other goods and services they pay for, their cost benefit analysis will be conducted with even greater attention.

Even if students find a way to absorb the price increase, the rate may be met with negativity which will damage the student's relationship with the institution during their enrollment and then as an alumni. An institution must try to balance current needs and long-term goals.

Transparency has its limits: Transparency is important, but information sharing and collaboration have limits with paying customers. The consumer is ultimately focused on the monthly charges on their statement and not nearly as concerned about Netflix's explanation of why it was necessary to split services and charges.

A school can explain price drivers such as eroding government funding and high costs of facilities, but ultimately students and families grapple with the charges on their accounts, not the school's, and that is the financial analysis on which they focus.

Pricing at equilibrium: The high cost of higher education has given rise to many savvy consumers. Schools are developing price calculators that predict the net educational costs after aid for prospective students. Families consider earning potential, loan payback schedules and interest rates. The price value proposition is front and center and seeks to evaluate the tangible and intangible benefits of the education.

So, what's the right price that covers costs and provides a fair economic proposition for students? This varies from institution to institution as each faces a unique set of conditions, but all schools should consider both sides of the equation. If a school calculates an unreasonable price for a given set of services, then those services need to be rescaled, so price and services are inline with the stakeholders the school hopes to serve.  

Ultimately tuition and fee charges must meet the student at the juncture of supply and demand. Colleges, universities and schools, like Netflix, are facing very real price pressures, but their customers may not be able to absorb them. So schools need to look to alternative sources of revenue and scaling services until they arrive at a price that 1.) students are willing and able to pay; and 2.) sustains the business model. Heartfelt apologies and explanations are sometimes called for, but when it comes to pricing they do not speak to the consumer as effectively as value and affordability.