In general, there are two types of students. Those who just want to learn how to play for their own joy (I'll call them "amateurs"), and those who have professional ambitions (I'll call them "pros"). In the beginning, most of them don't know in which category they belong. Some might want to be professionals in the future, but they don't have the right working ethics, the others might want to learn how to play some songs by the campfire, but they practice really seriously. So, what are the differences in teaching both of those groups?
Firstly, from the beginning, there should be no difference. If an "amateur" wants to know how to strum some chords and sing along, the "pro" has to know how to do that as well. Fundamentally, the knowledge that they both need is the same, up to a certain more advanced level of course.
The problem that teachers often see is, that "amateurs" use "not having professional ambitions" as an excuse for their laziness. What teacher has to make very clear is, that to reach a desired level, the "amateur" has to take the same steps, and has to practice just as determined as the "pro". The only difference is, that "amateurs'" goal is much closer. If you as a teacher can motivate a student to think that way, there's a great chance that his ambitions will grow in time. When he reaches his initial goals, he might not even see it as a great deal, since his new goals might already be bigger. In this case, a student’s ambition might also overgrow his "amateur" ambitions. After all, there is a very small number of people who had professional ambitions when they first held a guitar. Therefore, every competent teachers' initial goal should be to prevent a student from practicing less than necessary, with an excuse of his goals not being that high.
If someone is determined to be a "pro", his improvement will surely be faster and more drastic. Not because of bigger talent or something like that, but because he's more serious, i.e. practices more, has a better practice routine, and takes teachers advice more seriously. That doesn't mean that "amateurs" shouldn't be taught more advanced stuff as well (quite the contrary, they should be). In many cases the songs they like are the same as those the "pro" likes. If, for example, you teach a certain solo, the "amateur" should learn the notes and the rhythm of the solo, while a "pro" should pay attention also to wideness and the rhythm of vibratos, slides, hammer ons and pull offs, etc. The difference should be just the depth of details. Or on the other hand, if you teach the rhythm of the song, an "amateur" can learn simple strumming and picking patterns over simple chords, while a "pro" applies more advanced techniques, as palm muting, more advanced strumming and picking patterns, maybe some hybrid picking, harmonics etc.
In any case, a professional teacher will know how to apply different layers for anything that you're teaching. There's a fat chance that at least someone in the group will be on lower or higher level. The chance is also, that you will have "amateurs" and "pros" in the same group. This way the students can compare themselves to others, and "amateurs" can feel that they're able to learn the same things as "pros", and "pros" on the other hand, feel good about themselves if they see, that they improve faster. In this last paragraph, I've used the words "amateurs" and "pros" a bit more loosely, more to characterize the work ethics, than students' ambitions.
This article is a result of long-time observation of the students, by a Slovenian guitar teacher Nejc Vidmar. His approach to teaching both groups of students the same stuff, just by applying different layers of difficulty, has proved to be very successful.