Pricing plays a fundamental role in the success of all learning businesses. But determining appropriate prices can be complex.
Dr. Michael Tatonetti is founder and CEO of Pricing for Associations, where he helps associations successfully navigate pricing complexities. As a certified association executive (CAE) and a certified pricing professional (CPP), he speaks, trains, and consults on value-based pricing.
In this episode of the Leading Learning Podcast, co-host Jeff Cobb and Michael talk about value-based pricing, including approaches and tools to use; sponsorship; value propositions; pricing online offerings; addressing cannibalization concerns; and much more.
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[00:00] – Intro
Pricing for Associations
[01:19] – Would you tell us about the work that Pricing for Associations does?
Pricing for Associations is a consulting firm that works specifically with associations, but their work applies to learning businesses in general. They focus on value analysis and pricing analysis to ensure value is meeting audience needs. Then they determine the price that an organization should charge for the value that they deliver.
[02:08] – Is pricing different for associations versus for other organizations?
Some principles are consistent for both for-profit and nonprofit organizations, but some aspects are different. For example, when analyzing and measuring value for associations, Michael and his team tend to stick to people already in the organization’s database rather than doing generalized market research that moves beyond the customer base of the organization.
There are also some unique nuances to the goal of the pricing strategy. For for-profits, the main goal is typically profitability because they have shareholders of some sort. For an association or any mission-drive organization, there is more of a delicate balance between fulfilling the mission and profitability.
Pricing for Associations works to help associations with financial sustainability so that, in the years to come, an association can continue to fulfill its mission.
Common Misunderstandings About Pricing
[04:10] – What do you find are the two to three things that people most often get wrong or misunderstand about pricing?
Two things immediately pop up for Michael. The first is the conception that pricing is about greed. But it’s not about greed. It’s about financial sustainability, and changing that mindset is important.
The second thing is an overemphasis on competitors. Michael uses value-based pricing. You might be aware of the value and brand promise your competitors offer, but unless your audience has also partaken in their products and can compare the value delivered, you don’t know where you sit.
You might look at your competition’s marketing and sales page. But what if your product delivers much more value in return on investment (ROI), and you leave money on the table? You might wonder how you can charge more than the competition, and the answer is that you communicate the value you provide—which is why you need to analyze the value.
Doing a blend of cost-plus and competitive-based pricing is an old-school way of looking at things. That’s a huge misunderstanding, but many organizations don’t know how to measure value.
“And I think it’s a buzzword, value, we throw around. But you can quantify value and then attach a price to that and be able to justify a price against value in ROI.Dr. Michael Tatonetti
Crafting and Communicating an Effective Value Proposition
[07:09] – How do you help organizations craft effective value propositions and communicate them so they can charge in a way that reflects the value?
Michael relies a lot on communicating value and creating a good marketing plan around value proposition propositions. Typically, when he does a project for a product, he might write 20 to 40 value propositions that an organization can use. That may sound like a lot, but the value propositions are usually segmented to be specific to subgroups and part of the organization’s overall audience.
The big thing to understand about value-based pricing and communicating value is that you have to talk to your audience. Discovering the value and crafting value propositions is done through surveys, focus groups, and interviews. It involves asking the right questions and then extrapolating from the answers you get
Often value propositions are reworkings of exactly what members, learners, alumni, etc. have said, polished a bit. So the value propositions are in the voice of the customer. Michael and his team then determine where a value proposition fits and when it might be used in the sales and marketing process. The value propositions address both quantitative and qualitative value.
Depending on the product, you might develop a different ratio of qualitative and quantitative value propositions, but typically you align the qualitative value propositions with Maslow’s hierarchy of needs. They’re often stories of how someone did their job better, got the promotion or raise, etc. It’s about using value stories to really sell the value of the transformation.
The quantitative value propositions are typically easier. They often speak to reducing turnover or increasing retention.
[10:35] – 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.
Translating Value to Price
[11:10] – How do you move from conversations about value and the value propositions to setting specific prices?
There multiple methods, and which is the best depends on the product. At a high level, the process is to first do a value analysis before a pricing analysis.
An open approach asks, “If we make these adjustments, what would that do to your willingness to pay?” There are different models to use, including the Van Westendorp Price Sensitivity Meter.
On the other hand, a closed approach says, “Here are changes, and here’s what those changes would do to the price.” This can be used to determine if customers would rather keep the current price and value, or if they’d be willing to move.
You need to determine whether to leave things as they are, move everyone to the new upgraded value experience, or offer multiple tiers.
Often Michael starts with an open approach and then, through a survey or in focus groups, he might move to a closed approach, trying to get a good read on the potential price. The exact approach depends on the product, the size of the population he’s able to speak with, and the quality of the feedback.
Michael is in favor of asking consumers about prices directly. If you’re a mission-based organization and phrase it as “Help us figure out the best way to serve you,” people tend to be willing to give feedback.
Also keep in mind that if only 20 percent of people pick the new price and value, you’re not hitting the mark. If you have 80 percent, you’re good. But it may not be clear at 60 percent. It ties into the pricing strategy and the goals and objectives of the organization. That’s where it pricing gets customized, and it’s not always a black and white answer.
Watch the video below to get tips from Michael about value quantification and how to define the value you offer with a number.
Pricing Educational Programs and Events
[14:38] – For organizations focused on continuing education, professional development, and other types of lifelong learning, pricing has become more complex . They are wrestling now with pricing online versus in-person versus hybrid. What insights can you offer on pricing educational programs and events?
It depends on your audience, your industry, etc., but in general Michael thinks that virtual events should never be less than 60 to 80 percent of in-person. The bulk of what people are coming for is education and networking, and, no matter how hard we try, we can’t do networking as well online as we can in person. As far as the cannibalization question, people who want to network are going to show up in person.
So, again, what’s your objective as an organization? Is it you want to serve more people? Do you want more people in person? Are you afraid of sponsor dollars going down if everyone moves to online? Because we know sponsors aren’t as happy with online formats as well. So it depends on your unique goals. How important is each thing? But I think that, in general, it’s very easy to justify charging for virtual the same way as in-person.Dr. Michael Tatonetti
[18:20] – Another long-term consideration is the repetitiveness of events, where variation in topics and content tends to be slight. The more that things move online, the more we have to think about whether we’re going to be able to differentiate the content year over year so we continue to offer value each year.
Something else to consider, particularly for associations (although this likely applies to all learning businesses), is the existence of adjacent organizations. For example, associations that are national have local and state chapters, which means people can choose where they get content. Sometimes the adjacent competition can also be your own sponsors.
Jeff adds that even the subject matter experts (SMEs) that so many learning businesses rely on to create and deliver their training no longer need those organizations to reach their audience. There has been a huge revolution where SMEs can get themselves an inexpensive LMS platform and offer their courses directly to learners. SMEs now compete with the organizations they used to need.
[24:02] – What are your thoughts on pricing sponsorships?
With learners and customers, many learning business are dealing with for business-to-consumer (B-to-C) marketing. Sponsors are usually a higher-ticket item, and they then to be focused on business-to-business (B-to-B). You often sell learners on the value of transformation. You sell sponsors on the value of reaching their marketing and sales goals.
When talking with sponsors, we need to reframe how we look at value. We should have been doing this before COVID, but a lot of partnerships were set on autopilot, and, because the landscape hadn’t been disrupted yet, everyone was offering the same thing.
We first have to honor that sponsor markets were disrupted by COVID, and they’re figuring out their own objectives and where they will spend. They need some time to recuperate and figure this out, which doesn’t mean they’re not spending sponsorship dollars. It just means things are evolving and changing.
Try to understand where your sponsors or potential sponsors are trying to go, and then figure out how you might help get them there. That might involve borrowing ideas from other organizations or innovating and trying new things, knowing that some things are going to work, and others will fail.
In the learning space, Michael has seen thought leadership work well for sponsors. A sponsor might teach a course, and they might get 100 seats for free as a part of the sponsorship package and work with the organization to target who’s invited to benefit from one of the free seats. He’s seen sponsors pay almost what they would for a whole event for this type of offering because then they’re guaranteed to get in front of these 100 people (compared to hoping attendees stop by their booth).
We’re still in a phase of experimenting and reimagining with sponsors, but we have to align to their marketing goals. Find out what’s working for them, and think about what you can do. Don’t undersell the value that you provide them. It’s a game of negotiation and innovation.
The Fear of Raising Prices
[28:51] – What are your thoughts on raising prices, which is something many learning businesses are reluctant to do?
Specifically for sponsorship, pricing ties into sales and marketing goals and understanding what what you provide does for them. You need to have conversations around what the sponsor needs, who they want to be in front of, and then raise prices based on understanding their needs and how you address them. Michael finds 3x to 5x ROI easy to justify. Anything above 5x ROI feels like you’re leaving money on the table. Keep in mind that sales isn’t the only goal for sponsors. Visibility is another.
It’s okay if a sponsor leaves because, if what you offer is valuable, let them dip their toe in other pools and realize you’re doing a good job. Then they will come back.
I would say that we shouldn’t be afraid to raise prices even right now, even with everything that’s going on. Most of the times we probably can. It’s just are we doing it the right way to justify it and with the right intention and communicating it the right way with value in what we’re doing?Dr. Michael Tatonetti
Pricing in a Competitive Market
[31:46] – What is your advice for organizations in a competitive continuing education market, where courses tend to get commodified?
This goes back to the earlier point about organizations competing against adjacent partners. You have to know your unique value proposition and why people come to you over others. Then promote that as the justification for why they should continue to be with you. Competing on price is a race to the bottom. You don’t need everyone to choose you. But you do need to know the people that choose you choose you.
You then need to figure out how to get them to stay and how to keep getting like-minded people who share those values to be customers. That’s why getting the voice of the customer and understanding the value from their perspective is the best method to justify why they should pay the price and be a part of the value you offer.
Michael doesn’t like the disconnectedness of national versus state keeping track of all of his credits, e.g., for his CAE renewal. He’d love an entity to connect all of it and upload all his credits for renewal every two or three years. He’d be willing to pay a premium for that qualitative value. That’s an example of a way you can justify why learners should pick you.
When talking value, these three general questions to ask:
- What are we doing that we should amplify?
- What are we doing that we should stop?
- What are we not doing that we should be doing?
Lifelong Learning Habits
[37:10] – What are your learning habits? What do you do to keep up to speed on a daily, weekly, or yearly basis?
Michael does a lot of continuing education for his CAE and CPP. He typically takes at least four pricing classes every year, and he goes to conferences frequently. He speaks and attends sessions. He subscribes to certain publications and reviews everything he collects roughly monthly. He has Google Alerts set for certain keywords. Every month he also sets a learning goal as part of his routine planning. He’s very big on learning. He also requires his team to be engaged in continued learning.
[39:42] – Wrap-up
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