If you’re starting a customer education training program, one of your foundational questions will be where it will sit in the business, and whether it will act as a cost center or a profit center. You might have a gut reaction to this question, either instinctively assuming that customers won’t want to pay for product training, or feeling strongly that without revenues any training initiative would be a failure.
In fact – there is no single right answer to this question that you can apply to 100% of your content. Different businesses will have different organizational goals for each education project that will inform this decision.
While there is definitely a place for free training content, that doesn’t mean it can’t be an essential part of a wider monetization strategy. If you can balance this effectively, then some parts of your training will cost you money (as you use the content to achieve other goals), others will break even on their own costs, and hopefully a generous portion will make you a profit.
Understanding various business models for training content
Let’s start with a quick definition of the three main business models that your training program could fall into:
- Cost Center: In this model, you’re spending more money than you’re making. You’re losing revenue – so your program is margin and profit negative.
- Cost Recovery Center: This is also known as a break/even model, and it means you’re spending about the same amount that you’re making.
- Revenue Center: Here, you’re making more than you’re spending. You’re revenue, margin and profit positive. This is also known as a profit center, or P&L.
Being a cost center is often an organization’s landing point for customer education
While it may seem obvious that profit should always be the goal of any department in the business, for some organizations, a cost center is step one. After all, free content may be part of your company’s lead generation strategy. For example, you may be looking to develop solid prospects and gain data such as a marketing list of contact information, or attract a slew of trial adopters that you can convert into paid users at a later date. Gotta spend money to make money, right?
Your team may also have goals that are not associated with revenue-generation, such as deflecting support tickets, reducing churn, or increasing product retention rates. In this case, you may feel that charging for content adds friction to these goals, making it harder to get customers to consume your content. But is this a fair assumption?
Breaking even with your customer education
Being a true cost center is a scary place to be. No one wants to lose the business money. And on top of that, in order to get buy-in for your customer education expansion, you want to be able to prove your worth to the board. Without revenues, you aren’t in control of your own growth. That’s why, in many cases, your monetization strategy may start with a drive to break even. You’ll have costs such as classroom hire, instructor wages and content production – and you may start by working out how much the program is costing you, and simply charge to cover those incremental costs.
Whether you’re sitting as a cost center, or you’re trying to simply break even and keep costs as low as possible for the customer as a cost-recovery center, It’s time to challenge yourself to change the way that you think about your offering to your customers.
Your training is your intellectual property – and that has value
Ask yourself, why is training your customers so important? We’ve spoken before about the ROI of a trained vs untrained customer. And if you accept that trained prospects buy more, trained users are more easily retained, and trained long-term customers become brand advocates, your untrained customers are costing the business money and at greater risk of churn.
The consumption of your training isn’t linked to the cost of your training. Taking away the price tag doesn’t inherently make it more likely that customers will consume the training. In some cases, it may even make it less likely, as people tend to ascribe more value where they have spent money. The Harvard Business Review has found that strategies to mask pricing (rather than highlight the cost) make it less likely that customers will consume the product. The question of fee or free isn’t a full picture of what drives product adoption, it’s more important to think about what makes a transaction worthwhile and then draw attention to that.
If you’re still wondering how you can justify charging customers for product training without it resulting in friction – watch out, here comes that mindset shift.
Instead of thinking about the customer paying for product training, think about the customer paying for product value. Your training is something that only your organization can offer. It’s going to help the customer to get more out of your product, and to do their job more effectively or with greater efficiency. Ultimately, it might help them to get a raise, a promotion, or a certification that holds valuable CV capital. Suddenly, its worth has become a lot clearer.
Don’t be afraid to innovate with your business model
In the words of Alex Osterwalder, your business model will describe the rationale of how your organization captures, creates and delivers value. It doesn’t need to fall into the traditional boxes of cost center, cost recovery or revenue center.
As the customer education market becomes increasingly mature, teams will start to create new models that align with their business goals. Examples include continuously updated subscription-based education that keep skills relevant, or partnering with Marketing and Product teams to funnel customers from initial free content to fee-based upsell opportunities as they move through the customer journey.
In this way, “picking a business model” may be more complicated than choosing a pre-existing strategy – it may make more sense to design your own that reflects how you want to both create and deliver value.
Looking for greater insight into monetization strategies in customer education? In our recent webinar, Free and Fee: Strategies and Considerations for Monetizing Customer Training, our own VP Learning, Daniel Quick, joined up with Maria Manning Chapman from TSIA and Bill Cushard, GM at ServiceRocket. They spoke in more detail about choosing a profit-center business model vs a cost-center approach and how to approach the question of fee vs free in customer education.
