When it comes to the market for lifelong learning, pricing is a key component of success. But what is the “right” or “best” price for a particular product or offering? There is no black and white answer and because of that, pricing is an area many learning businesses struggle with.
In this episode of the Leading Learning podcast, Celisa and Jeff share their top tips, based on two decades of experience in the learning business, on how to effectively price educational products.
Listen to the Show
Read the Show Notes
[00:18] – A preview of what will be covered in this episode where Celisa and Jeff share tips on how to price educational products.
[00:58] – It’s worth noting up front that pricing is one of those areas that tends to set learning business professionals apart from their peers in the corporate training world where there usually is no “price” charged to those participating in the training. If you are actually selling education in a market environment, though, pricing becomes very important. Most learning business professionals understand, even if only intuitively, that the level at which they are able to price their offerings while still driving sales is one of the most fundamental determinants of their business success. Basically, the higher you can price without causing a major drop in sales volume, the more revenue you will generate. And, if you can keep your costs constant – or better yet, reduce them – while raising prices, the more money you will make overall. What happens more often than not, though, is we feel controlled by what we perceive as the possibilities for pricing in our market. While it is true that the sky is not the limit – there are, of course, prices that will be higher or – we often forget – lower – than customers are willing to pay, it is also true that we have a lot more control than we think over pricing.
Based on years of consulting about pricing and on our own needs to set prices, here are our top tips for controlling your pricing rather than letting your pricing control you.
Top Ten Pricing Tips
1. Be clear about your strategy.
First – really, first – focus on what you are trying to achieve. Not on what the competition is doing, not on what you have done in the past. Your decisions about pricing can help you achieve a range of goals, from greatly increasing penetration in your current market, to entering a new market, to elevating your brand, to impacting the sales of your other products. Each of these goals requires a different approach to pricing. So, again, be very clear about your strategy and the goals you are pursuing.
And note this really does have tactical implications. For example, if you’re going for market penetration, that’s a great area to use bundling or reward discounting. These are two specific tactics that you would use with market penetration that you might not use if something else is your goal, such as branding, where you might go for something like premium pricing—so it really does make a difference. Keep in mind that any of these approaches take into account much more information than simply what the product costs. They recognize the actions of the competition, the preferences of the consumer, the potential power of brand, and in general, the power of price to communicate.
See our “3 Axioms of Pricing” video to learn more.
Sponsor: Blue Sky eLearn
[05:55] – Deciding what you want to achieve comes first, but having a platform that offers the flexibility you need to pursue your strategy is also critical. If you are looking for the right platform to support your strategy, be sure to check out our sponsor for this quarter, Blue Sky eLearn.
Blue Sky eLearn is the creator of the Path Learning Management System, an award-winning cloud-based learning solution that allows organizations to easily deliver, track, and monetize valuable education and event content online. Blue Sky also provides webinar and webcast services, helping you maximize your content and create deeper engagement with your audience across the world.
2. Work backwards.
Don’t work forward from the costs associated with creating your offering. Work backwards from the value it will deliver. If someone learns and applies what you are teaching, how valuable will the outcome be? That may be hard to quantify, but you should put great effort into trying. So will your leaners make more money through sales or salary increases? Will they enhance their personal or professional brand? Will they save large amounts of time? You’ll want to ask questions like these so you can really probe to figure out all of the positive outcomes, and then you can begin to put a price tag on them.
As part of this effort, definitely talk to your prospective learners – through interviews and surveys – to find out what value they place on the outcomes. Based on those conversations and your own thinking, identify ways you could you increase value – particularly with relatively low-cost moves. Based on the value you feel you can credibly say you deliver, calculate a price that represents a high return on investment for the learner – 10x is a good rule of thumb – and then figure out how to produce the learning experience at a cost that provides a strong rate of return to you. Yes, all of this is easy to say and hard to do, but it is certainly doable. Put this kind of work in up front and your business will be leaps and bounds better for it in the medium to long term.
3. Create a new category.
Or at least do what you can to radically change your current category. TED did this with conferences—see their pricing table, which shows the standard pricing to attend this year as $10k, and many other categories that are even more! Other examples are how Starbucks did it with coffee and Dyson did it with vacuum cleaners. Your prospective learners will inevitably try to put you in a box – it’s just human nature. Once they do that, the next step is to say “things in this box tend to cost $X.” Don’t let that happen. Instead, put time into figuring out what is distinctive or unique about you and what you do. How could you reframe, rename, reconfigure or otherwise modify your approach to stand apart from the alternatives in your market? If you can redefine the category, then “things in this box tend to cost $X” no longer applies to you. In doing this, you can kind of set yourself in to “blue ocean”.
See our related podcast episode, Blue Ocean Strategy for Your Learning Business.
4. Change the point of reference
Any existing category has an established acceptable price range and, as a result, your learners will have established points of reference that they bring to any purchasing decision. To the extent that you stay within an existing category, one of the main moves you can make is to try to influence your learners’ point of reference. Arguably, one of the easiest ways to do this is to put a “magnet” in your market.
By “magnet,” we mean introducing a high value, premium offering that is priced much higher than anything else you offer. Make sure your customers know about the offering – in fact, make it one of the first things they see. Doing this creates what is called an “anchoring” effect. Exposure to the higher priced offering helps to “anchor” reference point at a higher level, making the price for your standard offering seem much more reasonable. In fact, the higher priced offering helps create room for increasing the price of your standard offering – which is why we refer to it as a magnet. Keep in mind that the “magnet” needs to be in the same category and address the same general issues as your standard offering. It can’t be something completely different or it won’t be perceived as point of reference.
5. Provide options.
Always remember that there is no single customer for your offerings. Some are looking for more value than others; some are willing to pay higher prices than others. To make sure you capitalize on the full potential of any given offering, provide multiple options at different prices. You may, for example, offer a standard version that provides the core value you think most customers want, but also a pared down “basic” version that has less content, no live sessions, or other variations. You could also offer a premium version that bundles in extra content, or coaching, or access to community, for example—TED’s pricing, as mentioned above, is a good example of this. You see this sort of thing all the time, of course, with software companies or event sponsorships where there are perhaps 3 columns of options – low, medium, high – and usually with the medium option marked “Best value” or “Most popular.”
Sponsor: Authentic Learning Labs
[16:56] – Providing the right options is all about knowing what your customers value. To help you get insight into that kind of data, be sure to check out our sponsor for this quarter, Authentic Learning Labs.
Authentic Learning Labs is an education company seeking to bring complementary tech and services to empower publishers and L&D organizations to help elevate their programs. The company leverages technology like AI, Data Analytics, and advanced embeddable, API-based services to complement existing initiatives, offering capabilities that are typically out of reach for resource-stretched groups or growing programs needing to scale.
6. Improve your packaging.
Pricing is perception. Period. We aren’t nearly as rational as we think we are when we set out to make purchases, and variables like packaging can make a huge difference. Naturally, courses aren’t actually “packaged” in any tangible way, but most course sales involve a landing page of some sort. Make sure that landing page:
- Is visually appealing
- Makes use of effective copywriting
- Provides compelling images and social proof (e.g., testimonials)
- Features a crystal clear call to action
To learn more around what should go into a good landing page, see Landing Pages 101 for Selling Online Courses. Note that improving your landing pages is one of the most immediate moves you can make to bolster your pricing.
7. Leverage scarcity and urgency.
If you have never read (or have not recently read) Robert Cialdini’s Influence: The Psychology of Persuasion, drop everything, go get a copy, and read it today. Really: it’s that powerful and that important. We already mentioned social proof above. This is just one of seven “weapons” of influence that Cialdini covers in Influence, a book that is backed up by volumes of research conducted over decades by Cialdini and his colleagues. Another one of these weapons is scarcity, along with its constant companion, urgency. There is a big reason that you continually see Internet marketers use phrases like “Limited number available,” or “Doors close tomorrow.” The reason? It works.
When it comes to selling your courses – and getting the prices you want – scarcity and urgency are your friends. Consider not keeping enrollments open all the time. Rather, only open them up periodically, and really do close the doors at the end of those periods. Or make some of your options (see above) available only for limited periods of time. Or truly do limit the number of seats you will sell (particularly for any offering that are live or have live add-ons). So put some thought into how you can use scarcity and urgency to drive sales and possibly even to help you raise prices.
8. Make discounts count.
As a rule, we’re not big fans of discounting. Even used sparingly they tend to devalue your offerings, and used frequently, they can turn your offerings into a commodity. If you are going to use discounts, our bias is to use them to reward your loyal customers occasionally rather than as a tactic to attract new customers. Also, make sure you discount enough for it to matter. Generally speaking, if you drop (or raise) prices less than 20 percent from the reference point, most prospective customers will not notice or won’t care if they do. This does, of course, vary depend on the price of the product. Ten to twenty percent off of a very high priced product may be enough to move the dial.
Keep in mind that the anchoring principle covered under “Change the reference point” above works with discounts. You may, for example, determine that your target price for a particular offering is “$X,” but publish a price significantly higher than $X and offer $X as the discounted price. This tends to work best if you are only going to run a product for a limited time (like, for example, an annual event) and/or if you very rarely have returning customers for the product.
9. Keep a “just testing” mindset.
Pricing is usually not a “set it and forget it” part of your business. You will almost always need to try out multiple price points for any given offering – initially, and over time. So most of the tactics discussed above will result in your making adjustments to your prices as well. As part of this, you need to be prepared to run pilots to help you test out pricing. Also, try to pre-sell your offerings whenever possible – that is, secure payment for them (by, for example, offering some special bonus content) in advance of producing them. This is an effective way to ensure you have an audience that will pay at a viable price.
If you want to take things a step further, try using a technique like the Van Westendorp Price Sensitivity Meter to home in on the “right” price for your product. Though, again, whatever results you get, you will still need to test them and adjust. We’re not going to go into detail here but note we’ve done an entire Webinar on using Van Westendorp as a way to go out and test your pricing. If you would like a detailed walk through of how we used Van Westendorp to set pricing for our annual virtual conference, Learning • Technology • Design™, please send us an e-mail at email@example.com.
10. Just raise your prices already
We’ve put this last, but to be honest, most learning businesses could probably start right here. Remember the points above about reference prices and discounting? Most people won’t notice or feel much impact if you drop a price by 10 to 20 percent. The same goes for raising prices. In most cases, you can raise your prices by 10, 15, even 25 percent and it will have little, if any impact on your sales volume. What it does impact is your margins – in other words, raise your prices and you will, in most cases, automatically make more money. This certainly goes for existing products, but it goes for new products, too – whatever price you are considering for your product, go ahead and raise it 10 to 20 percent. Again, always test.
[28:47] – A recap of the ten tips covered. As with most things in your learning business, we encourage you not to try and implement all ten of these at once but rather pick one or two that seem to most resonate with where you are and apply them to see what kind of results you get. We’d love to hear from you, whatever those results are, so please comment at the bottom of this page or email us at firstname.lastname@example.org.
[31:22] – Wrap-Up
We’d also appreciate if you give us a rating on iTunes by going to http://www.leadinglearning.com/itunes. We personally appreciate your rating and review, but more importantly reviews and ratings play an important role in helping the podcast show up when people search for content on learning and leading.
Finally, consider telling others about the podcast. You can send a tweet by going to leadinglearning.com/share. You can also Like us on Facebook at facebook.com/leadinglifelonglearning and share us with others there. However you do it, please do help to share the good word about the podcast.
[33:16] – Sign off
- Effective Pricing Practices for Your Educational Products
- Blue Ocean Strategy for Your Learning Business
- Pre-suaded to Learn with Robert Cialdini
This episode is based on an article on pricing originally published on Learning Revolution.