Moving Your Learning Products from a Cost Center to a Profit Center

Thought Industries

March 22, 2021

One of the biggest subjects we tackle at Thought Industries is how to help clients convert their learning products from a cost center to a profit center, or learning output into revenue-generating operations. Maximizing business impact is a critical KPI for any organization that delivers education programs, whether they offer critical customer onboarding for SaaS products or sell continuing education or professional training courses as part of their business. What you’ll find is that pricing and packaging, which go hand-in-hand, are always a work in progress. As you optimize pricing on your existing products, you’ll discover new channels, new ways to package your offerings and new revenue streams.

#1: How do we set pricing for learning products?

This is probably the most common question we hear. If you’re only offering free training, how do you shift to a paid training model? What value should you place on it when you make the switch? Similarly, if you have a mix of freemium and premium training products or learning is your primary business, how do you know you’ve set the right price points?

A big concern, as John Leh discussed in his Thought Industries article, “Customer Training Pricing and Packaging: What’s the Best Strategy?” is if you’re accustomed to educating customers for no extra charge, “will the long-term benefits outweigh any near-term revenue streams you could have captured from selling that content outright?”

There are four main components to consider in pricing:

1) What your business model is
2) How you position your product
3) What the competitive landscape looks like
4) Your customer base

If you’re in hyper-growth mode, trying to attract as many prospects and customers as possible to your product, charging for education can be a challenge, since easy access to well-designed training will help ensure user success and accelerate time-to-value. On the other hand, if your customers are accustomed to paying for training in your market segment and see value in education, it may be more prudent to think about monetizing your learning program too. Adding a price to your learning products helps establish an inherent value for it, which can be useful during the sales process, and as you build out the product offering.

Some companies take a blunt force approach, especially where training is an auxiliary product. Learning product pricing is based on a percentage of the price of the main product. We often hear 10 percent as a good starting point. If your product costs $1,000 per user per year, as an example, training courses would be priced at $100 each per user.

Others prefer a more nuanced approach, basing cost on value delivered, using a combination of factors. That’s the case at online trading education software company, Market Traders Institute, where education is the core of the company’s business. MTI considers:

The amount of content (a couple of hours versus, for example, weeks-long programs);
How many resources are provided (Guide Books, Checklists, Technology for 1 or many platforms (and type of technology), number of lessons, etc.)
Whether the classes are delivered live, in real-time, or delivered as self-study;
What other pieces go along with the training, such as software tools, subscriptions, or access to real-time views into a trading room, where students get to watch traders as they work the markets; and
Who the instructor is — a highly competent individual who knows the topic inside and out and is good at teaching or a well-known industry figure (a “trading legend”) who’s going to share all of his or her secrets.

At the time of this writing, at the low end, an MTI customer might pay $99 per month for access to a single education course. On the high end, the “Rolls Royce” level, there’s an “Ultimate Traders Package,” for a one-time transaction price of $7,995, which includes anything and everything a customer might need to know to learn how to trade the markets successfully, such as eLearning content, boot camps, access to tools such as an investment charting platform, and live, virtual trading room access.

Think about that. Whether it’s making better-informed trades or getting a company on the right track for marketing, sales, production or some other operational aspect, the worth delivered could be in the millions of dollars in revenue generation or expense avoidance. At the level of the individual learner, if the learning leads to somebody getting a new career with a high-paying specialization in a given industry, that could be worth tens or hundreds of thousands of dollars in new income each year.

The value of the offering needs to be held up and compared against what the learner is gaining by getting trained.
Sorting out the matrix of details for your own business leads to another frequent question…

#2: Should the digital version of our product be less than our instructor-led training (ILT)?

As the traditional thinking sometimes goes, if you don’t have expenses related to instructor-led training (ILT) — meeting space, travel, or hospitality — shouldn’t you pass on the savings to your customers?

Not necessarily. Cannon Financial Institute made the switch in its premium product (classroom training held in a resort destination) early in 2020 to virtual instructor-led training (VILT). While the customers no longer have to pay for lodging or meals, they still pay the same price for the training itself. As Chris Nekvinda, PhD, Cannon’s Director of Global Learning Operations, explained, “We will maintain the same price points because we really believe that we are selling the valuable content and the experience that our instructors can give.” The one-on-one give-and-take that has long been a part of the educational experience is now handled through individual web and phone calls.
Cannon’s philosophy is working for them. According to Nekvinda, there’s been no drop-off related to offering only virtual channels. “In fact,” he says, “we’ve seen an uptick in our virtual channel business.”

Thought Industries CEO Barry Kelly agrees with that approach: “Why should it be any different if you’re getting the same value — if you’re providing a quality experience, and then getting a great outcome in the end?” The key there is to emphasize that the learner is still building skills, getting answers to questions, getting feedback and all those other elements of training that are important for in-person training but also now work in a virtual environment.

#3: Is there anything we can offer between self-study and VILT?

Blended learning offers myriad new ways to refresh your learning product offering with a diverse array of content types and a mix of live and asynchronous options. Innovative companies are taking a fresh look at how they structure their programs to extend engagement, meet learners where they prefer to learn, and optimize their content investment. For example, some have taken learning products that are already offered as self-study and infused them with activities that bring in VILT elements that deepen the instructional experience.

The learner works through the self-paced course and then once a week hops on a moderated conversation with the instructor. More and more, instructors interact via discussion forums or provide feedback on the learning assignments via coaching sessions. Why do this? Adding “connection points” along the self-study route in this “semi-asynchronous” approach lets you boost your margins.

At MTI, for instance, students can learn concepts and theory in the recorded lessons (for one price) or add the option to go into a “live” online room with a professional trader to learn how to apply what they’ve learned (for a higher price).

#4: How much should we add to the price if an instructor is involved?

In the days when face-to-face was the primary mode of instruction, the instructor was the training product. If they were contractors, they’d get a cut of the revenue generated from the class — keeping training prices high.
Now that learning is digital, and much of it is delivered as recorded content, while the instructor is still important, the organization producing and delivering the education holds more leverage.
You can consider the formulation of self-study and instructor participation like coffee brews:

At the simplest level, there’s plain joe: self-study only. Yes, you might add a little milk and sugar — discussion forums and feedback from other participants — but the drink is basic.
A notch above that is the caffe latte: self-study mixed with a knowledgeable instructor who serves as the expert coach, whose job it is to deliver an opening session in real-time to welcome students to the course and then step in once, twice or three times during the learning experience to interact with the students. That kind of scalable experience may allow you to add a third to a half to the price of the learning. A self-study-only course priced at $199, for instance, might be priced at $299 with the addition of the coaching services.
Then there’s the limited-time, special edition concoctions with a mix of ingredients that command a premium. In this learning product, the instructor serves in a deeper way, as an advisor — bringing a celebrity brand to the offering, providing real-time experiences, making himself or herself available for office hours and one-on-one consulting. These kinds of interactions impose a limit on the number of students who can take advantage of any given course. The result: a doubling or tripling of the base price. The extra value is in the personal interaction with the instructor.

No longer is pricing predicated on giving a cut of the revenue to the instructor, except, perhaps, in that upper tier. In the others, instructor compensation is based more on the level of effort required. As a result, the training organization has more flexibility in how it packages learning products and sets pricing.

#5: Should we provide learning product discounts?

Discounting will always have a place, for marketing and for encouraging customer behaviors: to help them make a faster decision or add additional learning products to the order, for trying a new offering for a limited time, for bulk buying, for choosing a bigger product bundle, to get them to buy a version that will soon be updated, and to recognize loyalty.

#6: Won’t new packaging cannibalize our existing learning products?

Numerous education directors have lamented perceptions about pricing in their companies that goes like this: Offering digital training will cannibalize our most profitable lines. After all, if we offer a subset of our training content for a lower price, we’ll never be able to recoup that and the premium products will suffer. Fortunately, 2020 was the year when that kind of thinking went by the wayside. We haven’t talked with a single customer lately who plans to revert to exactly what they had before. Now, diversification is the name of the game. The goal moving forward is to build additional product lines and strategic packaging that will help your company continue to grow in new directions.

#7. How do begin to ascribe value to our professional training?

Whether your business is based on selling software or some other kind of product or selling training itself, begin with this premise: Your training has value because it helps your learners succeed. From there, your job is to ascribe a value to that training. How?

Here’s a four-step plan to transition your learning products from a cost center to a profit center:

Do a competitive analysis to understand your universe.
Establish rules around what kinds of content should be free, as part of marketing, and what will help professionals accelerate their success.
Inventory the elements of the learning products and establish their relative values. If a video explaining an important concept has a value of 1, as an example, what would be the value of the personal interaction with the expert featured in that video — 10, 20, 30? One is highly scalable and the other isn’t. Or, if the topic of the course has particular timeliness, how would the value of that compare to your evergreen topics?
Build a matrix of the learning products based on that inventory, providing entry points at each level — for new customers, those who have an on-going relationship with your organization and big-time fans who can’t get enough of what you create.

Finally, test, iterate and get the basics of the technology right.

Oftentimes, we find that companies face analysis paralysis. Don’t be afraid to test various pricing schemes. The worst that can happen is that nobody will buy. But even then, you’ll have learned something and you can use that information to help close in on the right pricing. Once you’re in the ballpark, see whether incremental shifts up or down affect customer behavior, sales and the bottom line.

Through it all, make sure you use a learning platform that can support flexible packaging plans and pricing experiments provide the analytics to help you understand where in the ecommerce process buyers stumble or make a decision, make purchasing easy, all while still delivering a quality learning experience to your customers.