In the world of custom developed and designed courseware, fuzziness around pricing has become a given. Like many aspects surrounding the realm of workforce learning and development, standardization for outsourced learning project pricing is non-existent. Certainly, each vendor has a method (perhaps a madness?) for how they price their services, but universality—let alone best practices—for pricing is a murky world, indeed.
Meanwhile, both veteran and newbie client organizations alike are becoming even more price conscious. Surely, the recession has something to do with this. Other key (and longer-lasting) factors include the sincere lack of education and experience around outsourced courseware development typical of newbies, or the pressure to hit clear cut ROI numbers in veteran organizations. Further, offshore vendors with rock bottom production prices compete solely on that: their rock bottom prices. Meanwhile, numerous vendors have either folded or been acquired over the past couple of years, creating further pricing confusion as “mom and pops” leverage recessionary market forces to close deals based solely on cut rate prices.
In this moment, pricing confusion is a certainty. More interesting, though, is how these forces are pushing towards the commoditization of outsourced custom developed learning projects. Market pressures are forcing price consciousness while “mom and pops” and India propose to conceivably produce at nearly half the price of “traditional” vendors. The answer from the traditional vendor world regarding pricing? Well, there doesn’t seem to be one, which essentially enforces the idea that our services really are a commodity.
If vendors can’t clearly align their value propositions with their pricing mechanisms, then it is only a matter of time before the market reaches full commoditization, which I would argue is a false commoditization. And that’s why buyers of all stripes should be concerned. It’s simple – saving some green up front may please the CFO…initially. But when the training provided can’t deliver on its promise, there is no true savings, and in fact, it often becomes a liability. I don’t mean to simply indict low-cost production style vendors, because if commoditization fully plays out, all vendors will have to become low-cost or die. Problem is, designing, developing and delivering learning that actually works has real, actual associated costs that can’t be eliminated. The vendor’s only choice is to cut back on quality in order to compete on price.
Here at Allen, we’ve been witness far too often to this scenario: A client goes with a low-cost option, then later has to come back to us as the project goes south, to put it lightly. We’re fortunate, though, in that we have a very clearly delineated pricing mechanism that we can fairly easily align with our value proposition, which is mainly a result of three decades of experience. If you want a light-hearted peek into our mechanism, feel free to visit our “Pricing Tutorial” and let us know what you think. If you want a more substantial discussion, give us a call and let us know you want to hash this out with one of our Directors of Learning Solutions.
Regardless, if the overwhelming rise of price consciousness is a river, we’re smart enough to know that no matter how strong our value proposition is, there’s no turning back a force like that. Still, we continue to ensure our alignment between pricing and value is an island of security for all our clients, no matter how price conscious they may be.
As an addendum, this month’s issue of the Harvard Business Review, coincidentally, includes a great article by Marco Bertini and Luc Wathieu that takes on this exact issue as it pertains to business in general. Here’s a link to their article, if you’re so inclined: “How to Stop Customers from Fixating on Price” (full article requires subscription).
Tags: commoditization, custom courseware development, Pricing