Pricing is a perennial challenge for learning businesses. But it doesn’t have to be complicated.
Simply put, what you are able to charge for your offerings depends on the value your prospective customers place on them. And once you understand the value of your products and services, figuring out how to price them becomes much easier.
In this installment of our tool talks, an informal series on tools for learning businesses, we revisit the Tagoras Value Ramp™, a simple but powerful tool for assessing your education offerings. We explain why to use it, what it is, and how to use it.
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[00:00] – Intro
Why Use the Value Ramp?
[01:13] – Pricing is a perennial issue for learning businesses. We view our work as helping learning businesses improve their reach, revenue, and impact, and pricing is key to the revenue piece of that triumvirate—and it’s often difficult for learning businesses.
We believe in value-based pricing, where you charge based on the value someone will get from what they purchase. There are other ways to price: pegging the price to what competitive offerings cost, a cost-plus basis, etc. But value-based pricing is good for both the buyers and the learning businesses. It helps the learning business not leave money on the table, and it’s good for the learners because what they’re paying is tied to something of commensurate or even higher value than what they’re paying.
That all flows out of knowing what learners value. It flows out of being in constant contact and communication with your learners, understanding how they perceive value, being able to communicate the value you offer, and delivering that value. What you are able to charge for your offerings depends on the value your prospective customers place on them.
It is essential to recognize that 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 offerings (e.g., through surveys, competitive analysis, etc.—the types of things that you would be doing with the Market Insight Matrix), it is important to lay aside any biases you may have.
If, for example, you start with the assumption that education delivered online is inherently of lower value than place-based education, that is almost certainly where you will end up with your customers. In general, there are a few things that can negatively impact perceived value.
As a general rule, the perceived value of an educational product tends to be lower when any of the following is true:
- 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.
Keep in mind, too, that you have to consider the price of each offering in your portfolio in relation to the other offerings in your portfolio. As we’ll discuss shortly, you want to create an overall value story that makes sense and helps prospective customers see how one offering delivers more or less value than another and thus why it is priced the way it is. The Value Ramp helps you to clarify relationships among and differences in value between the offerings in your portfolio.
Why use the Value Ramp boils down to it helps you think about the value of your products and services and translate that into a logical approach to pricing. And pricing is a critical aspect of what all learning businesses do.
Celisa Steele
Partner with Tagoras
[06:38] – At Tagoras, we’re experts in the global business of lifelong learning, and we use our expertise to help clients better understand their markets, connect with new customers, make the right investment decisions, and grow their learning businesses. We achieve these goals through expert market assessment, strategy formulation, and platform selection services. If you are looking for a partner to help your learning business achieve greater reach, revenue, and impact, learn more at tagoras.com/services.
What Is the Value Ramp?
[07:08] – The Value Ramp is a simple but powerful tool for assessing your education offerings.
You can download the Value Ramp for free on the Tagoras Web site. (Tagoras is the parent company of Leading Learning.)
The horizontal axis of the L represents value, and the value increases up as you move to the right. At the left side is lower value. As you move to the right, greater value. The vertical axis represents price, and the price goes up as you move up.
The curve and its upward slope demonstrate the relationship between price and value. Provide more value in the eyes of the potential purchaser, and you can and should charge more.
A customer could arrive initially or at any point along the curve. Typically, to get to a higher place on the curve, you need momentum. Demonstrating value early and often is one of the surest ways to build significant value. More and more, this means providing significant value before you ever charge a dime—which is why the buzz around content marketing is unlikely to let up any time soon.
You need significant high value at the bottom left of the curve to create momentum. As the example shows, the curve is flat at first before it begins rising. This indicates increasing value without an increase in price. That’s because you need to provide value to pull in learners and customers and to attract them to you out of all the other choices out there. A good chunk of the value you provide at this point needs to be free. This initial part of the ramp, in which you provide significant, increasing value at no or low cost, is what we call the momentum zone.
The impact of brand in this price-value relationship can be dramatic. A strong brand can help you build momentum faster, and it can give more power to the price side of the equation, resulting in a steeper Value Ramp. Basically, the stronger your brand, the more—and more quickly—you are able to charge for the value you offer.
We’ve been discussing a generic Value Ramp, but the real value in this tool is in moving beyond the generic version to a version specific to your learning business, where you lay out where your offerings fall along a curve.
How to Use the Value Ramp?
[11:15] – The way to use the Value Ramp is to plot your offerings along the curve. Where do your products currently fall? The hope is that once you’ve plotted your products—or categories of products, if you have a large portfolio—your Value Ramp tells a logical, rational story about increasing value and price.
In internal discussions about your products and services, you should be able to clearly articulate the differences in value from one to the next and provide a rationale for increasing price. Whether implicitly or explicitly, it should be easy for your prospective customers to recognize this value continuum.
Once you have your offerings plotted, you can self-assess. You should ideally provide a variety of options along your Value Ramp. The bottom left—where there’s low value and low to no price—might include things like blog posts, curated links that you tweet, white papers, or videos. And keep in mind that these things don’t do you much good if they are behind a member log-in or a paywall. Here you’re trying to cast your net broadly, pull people in, get them used to what you’re offering, and, if they have to log in to do that, that’s a big barrier.
Toward the middle of the curve, should be higher-value, somewhat more cost- and labor-intensive items, perhaps Webinars and on-demand online courses. As you move up the curve, you’ll hopefully have plotted items that are increasingly unique to your organization and the value it can provide. These items tend to be more targeted to specific customer segments, but that does not mean they have to be significantly higher in terms of labor and costs. Participation in an exclusive, lightly facilitated community for people in a specific job role can attract significant fees with relatively low effort.
You might be able to charge a significant fee and still have relatively low effort because, again, this gets back to value. It’s not that cost-plus. It’s not that just because it costs you less to produce something that doesn’t necessarily say anything at all about the value. If you can find a product that delivers really high value and actually doesn’t cost that much to produce, well, then that’s just brilliant.
Celisa Steele
[15:19] – There are typically two problems that become clear once an organization starts to look at its Value Ramp.
First, there are either few or no items at the low and high ends of the curve, which means most learning businesses are stuck in the middle. Without enough at the lower left of the curve, initial momentum is limited, and it’s hard to get coming. The impact of not enough on the high end of the curve is to bring things to a screeching halt just as the prospective learner enters the highest-priced, highest-value areas of engagement.
Think of the ultimate value you could provide to your best customers. What would that look like? What items would you put at the top right end of the curve to get people to that ultimate value? Most organizations have not really thought out the high end of the curve, but it’s an area where some mental effort is merited because if you can crack that nut, then you’re delivering high value, and you’re able to charge commensurately. For example, some high-value, high-ticket offerings may be related to credentialing, coaching, or mentoring. What can do to add value to existing offerings to create different versions of them that you place higher up on your curve?
Second, there are often significant gaps along the curve. Like potholes on a highway, these gaps will slow down your engagement with learners or even risk losing them entirely.
After plotting your Value Ramp, if you see big gaps, that’s something to discuss and address. Think about what you can add to smooth the way and build an easy path from a customer’s first engagement, which is likely to be on the lower left, to high-value, high-ticket items on the upper right of your curve.
One of the best ways to use the Value Ramp is to bring together people from across the organization—representatives from all the “silos” that touch your learning products and services—and discuss the Value Ramp. Discuss together things like the following:
- How are we building momentum?
- What does ultimate value look like for our key customers?
- How well have we told a value story along the curve?
- How are we building and managing brand to positively impact the curve?
And then ask:
- What could we do better in each of these areas?
If you can ask and answer these questions, you’re going to be most of the way there on having a strong product strategy. At the very least you’ll have a nice portfolio analysis and the basis for ongoing work to improve what you’re offering.
Using the Value Ramp doesn’t require a ton of time either, which is one of the things that makes it really attractive. You can make heavier or lighter use of it. Just get the people in the room or on a Zoom call for an hour and maybe over lunch, even with that, just that, a little bit of effort, you may be really surprised what an eye-opening experience it can be.
Jeff Cobb
[19:53] – Wrap-up
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