Posted by Before diving into this week’s post, many of you saw on my LinkedIn thread that I suffered another concussion. One minute I was thinking about my recent trip to Mexico, and the next, I heard/felt the back of my head hitting my cement driveway (and yes, I had a CT scan – all good). The repercussions of a Traumatic Brain Injury are not overnight. It takes time. Texting, no. Watch TV. No. Digital experience – no. Just imagine, no digital anything, nothing to tax your brain. I write this because, in the next few weeks, the posts on the blog will likely be “every other week”. If I can do a week – by week they will be much shorter than usual, at least thru Feb.
Now onto Price Wars.
When I calculate the pricing aspect, you often will notice my range of 2,000 to 2,500 active users. This is because many vendors behind the scenes use “range pricing,” and the ranges often end at 2,500, before moving up to the following range. This is not universal, and there are vendors who will get a better deal if you swing up to 3,000 – and your actual user base is 2,600 or 2,200, for example. It all comes down to numbers. Equally, some vendors offer overage fees – if you go above your stated user base, not a worry; you still get the users at a discounted price point. Some it truly is a discount, others not so much. Always inquire is the X$ per user, per year, or X$ per user, per month.
One vendor once told me that the ‘overage” is not a good deal and that it is better to move up to the next tier, than go overage. The overage seemed like a deal, but once you run the numbers for a year, yeah, tier is better.
When going tiers, find it what that number is – is it a bucket of 50 seats or 500 seats or something in between? If the bucket is 500 seats, and you use only 250, you still pay for 500. A few vendors package their pricing using “X” followed by buckets of seats in the 500 range.
Price Comparison
I’m always surprised on how many vendors require you to sign an NDA, before they provide you, their pricing. Think about that. You are considering their system, and their trust factor is so high of you, that you must sign an NDA, before they provide you the numbers, because you are in the business of posting them online, via your Instagram account. This NDA thing isn’t new to the industry, but even years ago, I wrote how awful an idea this is.
Let’s go with a real-world example. You are looking to buy a car. Can you imagine the salesperson saying, “oh before you can receive the “actual price”, you need to sign this NDA, because we can’t have you sharing the pricing with anyone who isn’t in your immediate household”. How many of you would balk, and walk?
A learning system is a budget item, and can be more expensive then buying a car., depending on the car. People will compare. If I am looking at system Y, system B, and system D, I’m not just comparing the systems, but also the pricing. Again, the people who provide the pricing of their system, in some hush-hush manner, that you would rather go to the dentist for a root canal, are the same ones, who price compare on whatever items. Everyone does. So, why make comparing the pricing of system A to B, assuming it aligns with what you need, any different?
The Numbers
It’s bad out there. There is a recession. It’s here. Regardless if you say micro or macro, it will impact spending for a learning system or any system for that matter. If it is between saving my job, or buying a learning system, try to guess which is my main focus? If my boss says, you have to slash your budget, and go lower for your purchase, what do you think I will do? Say no? If I have to stay in the “pipe” (pipeline) longer, because I can’t greenlight the buy, should the vendor continue to press me, on a weekly or daily basis? Or should they recognize what is taking place, realize that at some point, you might move forward (assuming you are still at the company), but that it will take a bit longer?
What I see, are way too many vendors who just are not getting it. They think due to their verticals or target markets, the recession isn’t going to impact them. They have no plan B – backup plan nor strategy.
I think of the mid 2010’s, after the depression, as sort of the roaring twenties, where every vendor started to boost their pricing, because the good times were here, and lots of buying! Then COVID hit. There were vendors who took a big hit, and have yet to recover, then there were others who broke sales records. One true point seemed universal, as a whole, lower pricing. More deals, better options. Flexibility. Did some price gouge, err, ignore what was happening, and just charged whatever they wanted? Absolutely.
So long, Roaring Twenties, hello Recession Impact
My gut says that in 2023, you will see more vendors who still think the roaring twenties are around, because they are landing a lot of very large enterprises. Or they target more in the 5,000, 10,000 and higher range, and those folks have money (in theory).
It’s a bad premise.
For me – my job is to land more customers and doing what has to be done to make it happen.
Let my competitors charge higher. Let them do this and that. You can counter that will lots of effective marketing, tap into options, and do far better. If I am in the “camp” of ignorance, I will be able to get away with it for so long, but I am going to start noticing that pipe getting extended. Never assume that vendor A, who normally charges high, won’t drop to score the deal, compared to another vendor whose rep is to go lower. The days of this have disappeared.
Speaking of which, I can’t tell you the number of vendors who on the ignorance level, do not realize that if the L&D department they are dealing with, is cut, nobody is going to contact them, and tell them. If RockPaper who runs Talent Development, gets laid-off, you think they will contact the vendor, before they walk out the door? Again, a secondary strategy is needed.
Speaking of Premises
It is around this proposal. Here is what I see and hear
- Way too many vendors charge higher in the proposal because they believe that procurement will negotiate a lower price. They forget that I am looking at the pp first, and if it is higher than my budget, why would I even think about moving you to the next level? OR, I am the C-level person, and I am buying this system, so procurement isn’t going to stop in my way; OR I have full authoring and the backing of the CEO/COO, so even if procurement wants to get involved, they can’t because that authority coming from the CEO/COO always wins.
- Too many vendors have never heard or understood what a formal proposal looks like. The time to shine and show off, is that formal proposal. It is sharp looking. Has some screens of your system, and add-ons, testimonials, the pricing – itemized, so there is no ambiguity – including that discount is seen. I’ve seen Excel spreadsheets. A word document. Pricing in an e-mail. Equally readers have sent me proposals, that they say they got a discount, but it isn’t officially there – when asked where is it? The reader says, oh, the vendor says it is there.
A few vendors support the higher fee, and then say, we need to sit down and get a better idea around your use cases (which the buyer has already send them), and the buyer already has seen a demo. Why, then, can’t you provide a number or numbers?
I hate TBD. The only time I should see this, is if Professional Services is involved OR it is being outsourced to a partner, and the vendor doesn’t have any idea on costs OR it is a total configuration revamp.
Otherwise, the vendor has an idea or knows the numbers. They have seem more than enough folks to know. I remember a vendor telling me they had to charge for support because it costs them. Tough. It is called Cost of Doing Business. Since support is the #1 reason people leave their system or hate it, you would think support would be free, and stronger.
Another vendor once told me, they couldn’t give X for free, because it cost them dollars to build it. Big deal. That is cost of doing business. If you can’t go that route – as a vendor – then look at deep integration with another provider OR get out of the industry.
I am seeing vendors charge for training (which is for administrators and whoever else in running the dept). If the admin needs more training at some point – it is a fee. Here’s the kicker – if you are a vendor want to reduce your costs for support, giving someone more training, is worth it. That is logical. Not doing it? Illogical.
Plenty of vendors think the person who receives the proposal or offer will negotiate. Hello? A lot of people hate to negotiate, and will just take the number. I see this a lot. On the other hand, there are people who will eat you for breakfast, at the negotiation table. I know many vendors who will attest to this, when dealing with me. Can I be a jerk? Absolutely. But my job – just like yours as the buyer, is to get the best deal as possible. And when the pushback becomes intolerable, you, won’t forget it. If a vendor wants my business, they need do so things they normally wouldn’t do.
Where are we at 2,500 these days?
Be ready to be stunned. On average, the price point is $36 per seat (active user) per year. Some vendors are higher, some are really higher, and plenty is lower – heck a couple of bucks per seat/per year, but this is the avg pp. That is what is called the “list” price, think retail before negotiating. Maybe the vendor gives you a deal, and says, “okay, we will go at $34” – yeah, that is about a great of a deal, of me getting a power cord for my desktop (remember those days, GenX and older folks?)
If I am going with the recession model
The price point at 2,500 users, should be $28 to $30, per active user/per year. Unlimited access to content, blah blah. $32 is often where vendors are sliding in, with your special deal. The pp remember is just one fee here. Then you have setup fee (which some vendors don’t charge), support fees, setting up the system fee, which apparently is different than a setup fee (it’s not), and whatever else can be tossed in.
Add-ins
It is getting worse. I can understand a performance add-on, especially with 360 feedback, or succession planning, and similar; but metrics, that are far better than what the vendor gives you out of the box? An authoring tool – the vendor has built? Mentoring/Coaching? , “Social/Sharing”? These are not one-time costs, they are yearly, based on the number of users you want.
The worst cost you will pay?
If you want 3rd party content (in the vendor’s marketplace). It is shooting thru the roof. I’ve never seen it this bad. Never. There are folks who have to scale back to get the content. 3rd party content is very popular these days, better than ever before, and yet, the cost to get it for your users is unattainable.
One route is to say, okay, I only need 500 seats of X content – maybe a bundle, and 100 for Y content – and they are not the same folks. In other words, you do not have to purchase for everyone.
Still, then it becomes high priced. I’m not talking high fees around an aggregator, I’m talking high fees with 3rd party publishers that are either in a learning system marketplace or stand alone (as a whole).
Bottom Line
As a vendor, you have two choices – think the roaring 20s are still here and do nothing with your pricing and additional fees OR recognize and empathize with your soon-to-be customers.
Offer flexibility on paying – rather than the pay annual upfront. Add some of those add-ons at no fee – I’d recommend the metrics one and the authoring tool. Training when the admin or head of the department – when they need it? Free. Not a recorded video – a real person talking to them (it’s called a walkthrough). Support – Premium is free.
That is what has to be done.
Because the roaring ’20s are gone.
For those vendors who charge a “yearly increase” to cover inflation or whatever garbage they come up with. Yeah, keep doing that.
And watch your buyer go elsewhere.
Then pull out your dancing shoes,
The 24 hr marathon for the Waltz
is just down the street.
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