I’ve mentioned the Avectra Academy before in the monthly Association E-learning Newsletter. I think it is a good example of a company using education as way of providing real value (not just inbox fluff) to its customers and prospects. Whether or not you are a user of Avectra’s products, the Academy is likely to leave you with a positive impression of the company and increase the likelihood that you will mention its name to a colleague or maybe even become a customer at some point down the road.

This time around, the Academy has double value for readers here: aside from being a good example of educational marketing, the current issue is actually focused on how to use learning as a strategy for member engagement. I encourage you to check it out.

Jeff

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We started some research on Webinar marketing at the end of 2009. This covers not just the marketing of Webinars (regardless of whether you are selling them or giving them away), but also using Webinars as a marketing tool – i.e., educating prospects to get them to buy or join. We’re keeping the survey open indefinitely – basically until we feel like we have gotten a large and diverse enough set of responses. So, if you haven’t taken the survey already, I’d be grateful if you would be willing to give about 10 minutes of your time to do it. The survey is at:

• http://www.surveymonkey.com/s/8X6R9M3

You can download the data collected from the initial 100 responses at the link below. When you complete the survey, you will also be given the opportunity to sign up to have future data summaries sent to you as they become available.

• Webinar Marketing Survey Summary Data (First 100 Responses)

If you have comments or questions about the survey or the data collected so far, please comment below or e-mail us. If you blog or tweet, we’d also be grateful if you would help spread the word.

Jeff

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I’ve finally managed to update – quite significantly – a piece I wrote a couple of years ago on pricing online learning. It’s based on a framework laid out in two sentences by consultant Alan Weiss. Namely:

There are only a few really vital aspects of pricing: The perceived value of your offering, the price point, the margin of profit, and the volume of sales. You can materially affect all of them unilaterally.

You can download a nicely formatted version of the article at Pricing Online Learning (PDF), or simply read on for the full text.

Pricing Online Learning

rom Balancing Act: The Newsletter (No. 94: June 2007):

There are only a few really vital aspects of pricing: The perceived value of your offering, the price point, the margin of profit, and the volume of sales. You can materially affect all of them unilaterally.

I ran across the above passage from Alan Weiss, author of Million Dollar Consulting: The Professional’s Guide to Growing a Practice nearly two years ago when I was attempting to articulate my thoughts about how to price e-learning. It struck me as a good framework at the time, and it still does. Here are some brief thoughts on how these “vital aspects” apply in our current environment.

The Perceived Value of Your Offerings

What you are able to charge for your e-learning offerings – or anything else, for that matter – is dependent upon the value your prospective customers place upon them. It is essential to recognize that this value is a dynamic phenomenon. It changes over time and from customer to customer, and most importantly, you have the power to impact it through your product strategy, marketing efforts, and ongoing interaction with prospects and customers.

When attempting to assess the value that prospective customers might place on your e-learning offerings (e.g., through surveys, competitive analysis, etc.), I believe it is important to lay aside any biases you may have – or assume your customers have – about the delivery method or how online offerings relate to any classroom-based education you may offer.  If you start with the assumption that education delivered online is inherently of lower value than classroom-based education that is almost certainly where you will end up with your customers.

Instead, consider the qualities your prospects are likely to value across any of the educational experiences you offer – regardless of delivery method – and then determine where each e-learning product fits within your full range of educational offerings.

As a general rule, perceived value of an educational product tends to be lower when,

• the product is highly generic, designed for the largest possible audience
• the product offers users limited or no ability to get input specific to their individual needs
• the intellectual content of the product is produced by an unknown or little known expert
• free or lower cost alternatives to the product are widely known and easy to find

Note also that convenience as a value driver for a product – the driver I most often see associations use for e-learning – almost always correlates with lower perceived value.  The reason for this is that convenience is nearly always based on a transactional relationship with a customer rather than a deeper, more nuanced exchange of value.

The bottom line is that e-learning is not an inherently low-value offering. You have control over all of the factors above, and the strategic decisions you make about each will drive the perceived value of your offerings up or down.  Determine where it makes most sense for e-learning to play a role across the spectrum of educational value your organization offers, and then plan and implement accordingly.

The Margin of Profit

Margin is the spread between what you charge for a product or service and what it costs you to provide the product or service.  It is critical to understand how value is perceived and constructed because it is a key factor in determining the top end of this spread. On the bottom end is cost.

A key factor that makes e-learning so attractive for associations and other organizations that sell education is that in theory it offers an opportunity for driving down costs substantially, thus creating the possibility of higher margins by managing the bottom end of the spread. In practice, many organizations do not actually have a good gauge on their underlying costs for creating and delivering e-learning. Many also make the decision to price e-learning significantly lower than their place-based offerings without considering the value factors discussed above or the overall impact on margins.  The result is that the full net revenue potential of e-learning is often not realized.

While organizations do not have complete control over value perception, they do have the ability to influence value perception significantly. And certainly they should have control over the amount they invest to construct a desired level of value. In other words, any organization that pursues e-learning strategically and plans properly should be able to achieve and maintain healthy margins. (Or possibly determine that healthy margins cannot be achieved and thus make the strategic decision to stay out of e-learning.)

There is no magic number or percentage for what your margins should be, but whether you operate on a for-profit or a nonprofit basis, my bias is always to try to maximize margins. There will nearly always be downward pressure on prices in the future and you will need to continue to invest in your e-learning offerings. Your margins give you the funds to do that, and the more cushion you can create, the better.

The Volume of Sales

Value is one key factor in determining the top end of your margin spread. Volume is another. High perceived value doesn’t get you very far if the size of the market you are targeting isn’t large enough to cover your total costs. Put another way, if your total product costs are $100, finding two people who value the product at $40 per unit won’t do you much good (you’ll lose $20), but finding 5 people who value it at $25 will (you’ll make $25).

Seems simple enough, but of course, there is more than a little guesswork involved in determining how many potential purchasers value your product and at what level. This is an area in which organizations selling e-learning can benefit greatly from two essential practices of successful Internet marketers:

• Test (and re-test) your market before producing
• To the greatest extent possible, pre-sell before producing

Covering these two items fully is beyond the scope of this article, but the general idea is that you can test a product’s viability by creating a variety of different promotions for it that ask people to take an action – like, for example, handing over their e-mail address in exchange for additional, valuable information.[1] The response rates to these promotions gives you an idea of how many people are actually interested in the product. Based on the size of this group, you can then run an introductory offer at a price designed to at least cover your fixed production costs.

I deal with many groups that are in a position to all but skip the first step simply by going to a member or customer with the ability to make a reasonably large purchase and setting a per unit price that covers total fixed costs for launching the product. Even in these cases, though, I still recommend doing broader market testing: you may have your downside covered, but you also want to know what your upside might be (i.e., how large your overall market it) to help you gauge how much you should invest in promotion and assess the level of gross margin you may ultimately have available to apply against operational costs.

I noted above that my bias is to try always to maximize margins, but of course this has to be done within the context of volume. You want to sell as much as possible at the highest possible margin, but adjusting margin up or down – assuming costs remain constant – can impact the volume you are able to sell. This trade-off is reflected in the final and most visible factor in pricing – the price point.

The Price Point

Although Alan listed the price point second as an aspect of pricing you can affect, I think it is important to understand value, margin, and volume before attempting to establish the price point. When you have really understood these factors and assessed them in your market, you will have the clearest possible understanding of the right products to create (value), the appropriate range of investment for creating them (value plus desired margin), and the size of your potential market (volume). The price point is the synthesis of all of these factors and it should strike a balance between them that maximizes your net revenue.

In truth, it is likely that you will not establish a single price point for an e-learning product. Because your product will be valued in different ways by different audiences, or segments, within your overall market, it makes sense to vary pricing for these different audiences. This doesn’t mean favoring one group with a lower price while pulling the wool over the eyes of another in order to charge a higher price. Rather, because you will have an understanding of value, you can add or remove value based on audience preferences and adjust price accordingly.

For example, a portion of your audience is likely to value receiving credit or some other form of validation for successfully completing an e-learning program. This might be a feature for which you charge extra. So, too, might getting access to a recorded version of a Webinar. And it is certainly fair to give discounts to individuals or organizations that purchase courses or other learning events in high quantities.

What then are typical price points for e-learning in the association market? I am tempted not to cite any because the only other price points that should matter to an organization are potentially those of competitors. (And as Apple, for example, has demonstrated so well, even competitor pricing should be given only so much weight.) Additionally, our research suggests that only 20 percent of associations have any sort of formal process for setting price – which makes me wonder how much thought is being put into value, margins, and volume.

Still, it can be helpful to have some sort of benchmark, however, general, against which to gauge your organization’s pricing. We go into much more detail about pricing in our Association E-learning: State of the Sector report, but the average price per e-learning content hour in the association sector – based on our survey of nearly 500 organizations – is $56.79. Per credit hour the average is $73.97.  So, for example, based on these figures, the average fee for a 90-minute Webinar that offers CE credit would be around $110.

Conclusion

I began this discussion by focusing on value, and it seems important to note as I conclude it that the price point is not only dependent upon perceived value, it helps drive perceived value. Part of what gives a Mercedes or a Louis Vuitton handbag its sheen of value is the high price point associated with each. To a certain extent, of course, the price is driven by underlying cost. But it is also true that these companies simply have the audacity – the organizational self-esteem, you might argue – to set a premium price. And people gladly pay it.

Few associations, I find, are willing to take such an approach with pricing their e-learning, and perhaps few would succeed if they did. But my suspicion is that most organizations are pricing at a lower level than they need to simply because they have not fully assessed the value – volume -margin relationship. And this is not a trivial matter: it is well established that an increase in price is one of the most effective ways to increase profit.  A study by the consulting firm McKinsey & Co. way back in the 1990s showed that a 1% increase in price translates into an 11% increase in profits. On the other hand, increasing volume by the same amount resulted in only a 3.3% increase. Cutting variable costs by 1% resulted in a 7.8% increase and cutting fixed costs – only a 2.3% increase.[2]

Given the need that most organizations have right now for finding new revenue sources and getting more revenue out of existing sources, putting some effort into setting the best possible pricing for e-learning offerings seems certain to be time well spent.

[2] This study has been cited in a wide range of places, but I came across it most recently in Todd Sattersten’s excellent eBook Fixed to Flexible.

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People tend to fall into two groups when it comes to predictions.

Those in the first group “catch the train” and leave the station. They commit to seeing whether the predictions are true and where things will go.

Those in the second group remain at the station, waiting for the train to return. Maybe the train will bring them something, maybe it won’t. But whatever it brings won’t be as good – or bad – as whatever those who caught the train got.

Most of us, in my experience, fall into the second group most of the time. I don’t think that is necessarily a bad thing, but there are times when you need to board the train if you actually want to move forward. If you are hoping to move forward in 2010, I think there is a train you should catch – and here’s what it’s hauling:

Social Learning

I put this one first so that I can make a point: this is not a post about professional development, training, or education, though the points here certain apply in those areas. No, it is a post about strategy. There is a large body of research and practice supporting the idea that learning is “socially constructed,” which is a fancy way of saying that we learn through our interactions with each other. And guess what? We’re interacting more often and in more ways than ever before thanks to the social Web. Do you understand the fundamentals of social learning? Are you helping to facilitate social learning among your members and customers as they make decisions relevant to you? If not, you are standing at the station.

Informal Learning

Related to the above, we also know that the vast majority of learning that occurs in our lives does not happen in formal education and training situations.  It happens through hallway conversations, through a friend showing a friend how to do something, through simply observing life around us. Informal learning cannot be controlled in the way that traditional training and education can be controlled, but it can be influenced and facilitated to a meaningful degree. How are your members and customers learning about the issues and problems that your organization addresses? If you don’t have an answer, or aren‘t seeking one, you are standing at the station.

Open Education

In case you haven’t noticed, there is an awful lot of free educational content out there these days. But “free” is only part of the picture. Within the academic world, the movement towards open education has gained tremendous ground over the past few years. Under this model – which has been embraced by many major universities worldwide – content is not just free: it can also be reused, remixed, and redistributed under relatively straightforward conditions. I think there are applications of this model that extend well beyond academia – certainly into the broader nonprofit and association sector, and even into the commercial sector.  It is an area that is ripe for innovation. If you aren’t familiar with open education and  thinking about whether and how open education could apply in your field, you are standing at station.

Curation

One of the key consequences of the three points above is that “making sense” is becoming harder and harder. Even within relatively narrow niches. Even with the help of incredibly powerful tools like Google.  I first wrote about the Digital Curator nearly two years ago and it was hardly a new idea at the time. Its urgency as an issue has continued to grow. If you want to stand out from the crowd and serve your members and customers well, one of the most straightforward paths is to help curate the content, connections, and experiences that you feel create the most value for your audience. Do that, and you secure your position not simply as something that shows up on a credit card statement, but as a true source of value.  If you aren’t thinking about how you can play this role, you are standing at the station.

Personal Learning Management

Finally, another effect (and, increasingly, a cause) of the points above is that people now have a tremendous range of options and more power than ever before with respect to when, where, and how they learn.  Again, I am not just talking about formal education here – that is only part of the picture.  Whether we are conscious of it or not, we continually form and expand our knowledge and learning networks throughout life, and Web 2.0 tools like RSS, social networks, highly advanced search – among many others – have taken that process into new dimensions. How are you helping your members and customers with that process? If you haven’t thought about that question, you are standing at the station.

Now, you can look at all of the above and say, “Well, these matter to how we are doing professional development and training.” You would be ahead of most organizations, in my estimation, if you were to adopt only that perspective and act on it. But I hope you are sensing by now that these trends represent is a fundamental shift in the way that organizations need to engage with their stakeholders. They connect to all parts of your strategy.

In any case, that’s my perspective, and I’ve already bought my ticket. Won’t you join me?

Jeff

P.S. – If you’d like to receive regular updates from the Tagoras blog, be sure to subscribe by RSS or by e-mail.

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We have just finished up a summary report based on initial responses to a survey we are running on the marketing of Webinars (whether as an educational product or as promotional/lead generation tool). Participants in the survey will receive the report within the next day or so, but I thought I’d go ahead and share some of the data we got on pricing.

Here are the questions we asked of organizations that actually sell Webinars:

Highest Webinar Price

Question: What is the highest amount (in U.S. dollars) your organization charges for a Webinar? Please enter a whole number–no commas, decimals, or dollar signs.

Average (out of 62 responses): $199

Question: What is the typical length (in minutes) of one of the Webinars for which your organization charges this highest amount? (For example, enter 60 for a one-hour Webinar.) Please enter a whole number–no commas or decimals.

Average (out of 62 responses): 87.5 minutes

This works out to approximately $2.27 per minute. So, at the high end, a one hour Webinar would run around $136.

***

Lowest Webinar Price

Question: Excluding any free Webinars you may offer what is the lowest amount (in U.S. dollars) your organization charges for a Webinar? Please enter a whole number–no commas, decimals, or dollar signs.

Average (out of 61 responses): $76

Question: What is the typical length (in minutes) of one of the Webinars for which your organization charges this lowest amount? (For example, enter 60 for a one-hour Webinar.) Please enter a whole number–no commas or decimals.

Average (out of 61 responses): 73 minutes

This works out to approximately $1.04 per minute. So, on the low end, a one hour Webinar would run about $62

This is a relatively small sample, but these figures might nonetheless be of some help if you are in the midst of figuring out your Webinar price points. It’s worth noting that they are also pretty well in line with the pricing levels we found in research for the Association E-learning: State of the Sector report. I don’t advocate setting your pricing based on either set of numbers – you should price based on the value you deliver – but these do at least give you some idea of the market expectations with which you may be dealing.

By the way, the Webinar marketing survey remains open. We are no longer giving away a Kindle, but if you complete it, I’ll send you the summary data from this round and you will be eligible to receive updated data as more responses are gathered. You can access the survey at:

http://www.surveymonkey.com/s/8X6R9M3

Jeff

P.S. – If you’d like to receive regular updates from the Tagoras blog, be sure to subscribe by RSS or by e-mail.

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I try to make a habit of going back to books I have read in the past to revisit information and ideas and make sure I haven’t lost too much of what I once knew. It was in that spirit that I recently pulled an old book on learning theory off the shelf and was struck by a passage in the introduction. I’ll quote the entire paragraph here, to provide fuller context, but it was the final sentence and part of the second-to-last sentence that struck me:

How does learning take place? What factors determine what we will learn and how rapidly we will learn it? There are innumerable people in situations in which it would be useful to have answers to these questions. We think at once of students looking for better methods of study, of teachers wanting to improve their classroom techniques, and of people in industry seeking better ways of training new workers. We may also consider the mother looking for the best way of raising her children, the counselor trying to improve his client’s emotional and social adjustment, the animal trainer preparing seeing seeing-eye dogs for their work, and the advertiser trying to develop a preference on the part of the consumer for his client’s product. In all of these cases, knowledge about the learning process represents power. [2]*

I would replace “advertiser” with “marketer,” or better yet “strategist,” but nonetheless, I find it remarkable that this passage was (a) published in 1963, and (b) we still don’t tend to think of the buying process as a learning process to the degree that you might think we would at this point.

Of course, marketing that teaches is a big part of what we are about here at Tagoras, but we recognize that we are hardly serving a mass market with this idea. The idea that consumers want and need to be educated has been around for a long time – as this passage suggests – but relatively few organizations embrace the “teaching sells” approach in a wholehearted and sophisticated fashion.

My bet is that we will be seeing more and more organizations embrace this approach in the very near future as a way to grow their markets. In other words, it’s going to be increasingly important to ask “How does learning take place for my customers?” – and to respond accordingly.

- JTC

P.S. – If you like what you read here on the Tagoblog, we’d really appreciate it if you would subscribe to the RSS feed.

*Learning: A Survey of Psychological Interpretations by Winfred F. Hill

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