When it comes time to start exploring your LMS (or LCMS), you will invariably get to the pricing component. In fact, I would say, after asking about your key features request (what you need), in your mind you are thinking – “how much will this cost me?”. Welcome to Moneyball!
I call it street pricing, because frankly it is what everyone pays and they assume you will pay it too. Wrong!
It appears in two ways.
a. Web site. Often seen with some small LMS companies, but I have seen it with some mid players as well. Normally they show the standard or base LMS without the add-on modules.
b. Phone. #1 approach. You state what you need – specifics (this is during your nice chat – when they ask you all types of questions) and then you are trying to find out how much it costs – eventually, you can get a number from them – either during the call or post follow up OR you can get an estimate.
Phone – Street Pricing – First Time
This is their standard quote for the specifics you are requesting – based on the seats you need. If you need add-on modules, they may have or very likely have “street pricing” as well, so that is tossed in well. If you need some additional tweaks – maybe it is included “free” (again, already calculated ahead of time, by them (the vendors – as an enticement) or street priced.
End result? You have told them your life story, your company’s story, your needs – built up this relationship in 40 minutes and they are quoting you a street price – that someone who spends 5-10 minutes can grab from as well, with less info.
Worse, you may have to spend numerous calls to get that same “street price” that the person who spent less than 15 minutes called to get.
Score Better Pricing
a. I’m not paying the street price. Think of a street price as a sticker on a car when you go to a car dealership. Do you pay the sticker? Maybe you do, but you shouldn’t. It’s inflated and they are projecting x% will, so they keep it that way.
Same approach LMS/LCMS vendors take when it comes to their systems. Yes, some industries are non-negotiable in pricing, thankfully, this industry isn’t.
b. Talk up your company. Do you want a better price and crush that street price? Talk up your company. What are you great at (everyone is, so think of something!)? Your market – is expanding right? (Absolutely!)
Your company is going places and your LMS vendor could be part of that expansion and more importantly, as you expand – you will need more SEATS – thus MORE REVENUE for your vendor.
c. Seats are only going to increase. Never state that you will forever be stagnant. That is the death kneel for better pricing. You are going to grow, there is a “potential” for more seats, as your company grows – and you continue to build upon your training services.
Remember you are going to sign a three year contract (see my LMS contracts post); so your projections are forecasting greater number of seats (we will discuss discounting later in this post).
d. Sale Yourself! It is a two way street here. They have to sell you on why they want to be your vendor – and you have to sell them on why they should give you better pricing then the person who calls out of the blue.
The statement you are going to walk only works is b) and c) convince them that they are going to lose $$$.
Trust me, they are not going to walk away from current and future revenue growth – I don’t care how big they are. No one is invincible. And every business wants to make money.
Telling them that you are a small company is okay, but saying a “small company that is continuing to grow in market xyz and is projecting rapid expansion in abc in the next two years” – perks up ears in your vendor and their salesperson.
If you can’t think of something that makes your company great, ask someone (but honestly, you should know), and use it to your advantage.
What if I am a non-profit or an association?
Doesn’t matter. All the items I listed above still works. How do I know? Because I have worked in these industries as well, and have scored major deals.
You do not have to be a salesperson or have the sales skill sets to make this happen, just be confident about your company, your training department and that is all you will need. You are in the driver’s seat – so take the wheel!!!
This is going to be the greatest weapon in your arsenal. You want a discount! But, you can’t land one, unless you sign a multi-year deal. And how long will you sign one? 3 years? Yes! No more, right? Yes! Then, you can re-sign up and get what? More discounts!!!
The standard in the industry. If they pitch anything less than that, forget it. I don’t care how much they say they themselves are in difficult economic times, so are you. 15% is the standard – but don’t say that out loud. You want a 15% discount and you want it for each year of your three year contract. That is right for each year.
If you can land a higher percentage, fantastic! So, if they offer 20%, okay take it, but you want it for each year of your contract and not just for one year.
One year is worthless, because what they like to do, is toss it in for the first year, then as you acquire more seats – what happens? Zero discount.. So, what can you do?
Discount Point 2
The multi-year discount, where you get the full discount for each year – is what you want. I cannot stress this enough. And again, you are going to itemize this pricing, so you will have the total price, then you want to see the discount and then the final price. Example: $30,000; Discount: 15%, Final Price: XYZ.
Do not let them tell you the discount is in the price. How do you really know that?
I have done the following in the past, works in the corporate sector and in the non-profit/association sector as well.
Back end the discount
Here is how it works. I take 10% in year one, 10% in year two, then 25% in year three. So, I give them more money in year one and two, but make up the difference in year three. Why would I want to this?
Because, I already have projected that I will be adding more seats and know I will be doing more things to my LMS. The seats though is the key.
Hence, I land a better discount for year three. I have been surprised and delighted how many vendors will strike this deal. Why am I delighted? Because sometimes, I have to reduce my seats due to outside issues beyond my control. And guess what? My discount already exists. Lower costs.
Even with seat increases, because some of my modules are one time up front purchases (for example, an e-commerce implementation), it is not in year costs of 2 and 3, so the fee is lower. There are other items you can do as well. So, that you are in essence reducing costs and still snagging a nice discount, even at that 15% in year two and three.
If you know how to negotiate you can pull it off.
Can I front-end my discount? You can do this as well. Front end by the way, means you want to have a higher discount up front in your contract, and less of a discount in the remaining years.
Personally, I do not recommend it, because as your needs grow – and ideally they will – your costs will rise – so your discount will be more effective – straight across the board 0r if you desire on a tweak on the back-end, rather than front loaded.
Watch the Gotcha
One of the tricks of the trade is not to apply the discount to add-on modules. Even though you purchase them and you see them itemized in your contract, your vendor may state that since it is an add-on, it is not part of the discount.
I have seen this quite a bit with the e-commerce implementation component, where the vendor has to active/install the e-commerce module.
My rule: If I buy it, and I see it as part of my contract, then the discount applies to it. Again, that is like seeing the Navigation package on your sticker on your car, and then the dealer tells you the discount which you see on the sticker doesn’t cover it.
You would bolt from them dealership and go elsewhere. So, why would you put up with it, with your vendor? And this argument or arrogance on some vendors that they are the best and you should go with them, is ludricous.
There are a lot of LMS/LCMS vendors out there that are doing amazing things in social media/social learning that will blow you away and guess what – they are not the big dogs.
If I told you that I know vendors who give you free tech support and customer service today, you would be shocked, right? But they are out there, and they have nice LMS systems. So arrogance, doesn’t work for me.
On top of the discounts, I mentioned above – many vendors offer a non-profit discount. However, you must ask for it. They will not – 99% of the time – tell you.
They will require you to send them – via fax or scan and email your 501c3, and then apply the discount. So, make sure you get a copy of this discount from your business/accounting office, so you have it in your files.
Lastly, about discounts.
In over 90% of e-learning solutions that offer multi-year deals, you can score an across the board, per year discount. Web conferencing? Yep. Social Learning/Social Media only solutions – as a stand-alone? Yep. Off the shelf content from a vendor? Yep.
Just remember, that you never want to pay street pricing, and that discount pricing is known in the industry – and the vendors know it as well – but unless you request and are adamant about it – and are willing to sign a multi-year deal, they won’t do it.
So, remember – you are in the driver’s seat – take the wheel and enjoy the ride!