Sometimes, we fall in love with possibilities. Many EdTech entrepreneurs become business leaders to transform education and to reach students who might otherwise be left behind. We fall in love with our own solutions, with the possibilities of transformation, with equity, and with making a difference for students. Intention comes from the heart, but the reality of just-right pricing comes from insight.
I think we can agree that real-world examples teach us best, and I’ll share some insights I have learned through experience.
Insight #1: Educators use “Expensive” as a four-letter word.
By the time your EdTech product is thought of as expensive, it is difficult to reverse the perception because of a psychological phenomenon called price anchoring. Anchoring is a psychological bias in which people depend heavily on the initial perception of price when making decisions. It’s difficult, if not impossible, to reverse.
Somewhere in the 90’s when EdTech was becoming a thing, I worked for a small early childhood education company in Oregon. I was inspired by the idea that early intervention in preschool significantly impacts student learning. I didn’t know it then, but I would learn about pricing psychology the hard way.
I’ve never forgotten what an educator taught me about pricing at a NAEYC meeting. We had priced our video-based training materials for early childhood education as a complete training package—around $200 to $500 per program, and they were delivered via written training materials and video cassettes. (For Gen Z readers, think analog movie streaming). They were extraordinary programs. We had videotaped in classrooms showing expert ECE teachers interacting with students in authentic ways. No one doubted our quality, and the cost of video production in the 90s was much higher than it is now. The problem, which is not uncommon, was perception.
Educators’ perception of your product is everything.
The educator (we’ll call him Ted) walked into our booth at NAEYC to teach me a thing or two about pricing. He was aware of our quality—how our training was giving ECE educators access to difficult-to-capture role modeling. He was interested. But he had a problem. Ted gave me the talk. He held up a video cassette and said, “Videos sell for $20, and that’s what you should be charging.” I was young(ish), and I’m sure I said something I wished I hadn’t because I wanted to explain to Ted why he was wrong. But Ted wasn’t wrong. The market told Ted the price was too high. And the market is almost always right.
Insight #2: Savvy educators want the highest value, not the lowest price.
Recently, I attended a Penn GSE event and listened to a panel of educators talk about procurement changes in the last couple years. Most of us in EdTech look at revenue patterns, compare those patterns, and think, “Wow, the pandemic changed everything.” It seems that way, doesn’t it?
Listening to the Penn GSE educators shifted my perspective. A district's values and sense of responsibility when it chooses products to increase student learning haven’t changed. It has intensified. One superintendent from Pennsylvania reminded the audience that his job is to be a steward of financial responsibility. Another superintendent helped us understand that he looks ten years out when deciding what to implement because he is building the future.
Educators are building the future, and now more than ever, they consider the entire realm of efficacy, student engagement, teacher support, professional development, and resources available when they invest in an EdTech product. All of these are an essential part of the ecosystem EdTech companies are building.
Pricing is rooted in the science of economics but also psychology. Our buyers are humans who buy with their brain, their hearts, and their budgets.
Consider a few buyer scenarios when pricing on value:
- The superintendent who is accountable to her school board for learning delays (also, referred to as learning loss)—what value can you bring her? Think about research briefs, efficacy studies, and referrals to neighboring districts with similar demographics who have demonstrated learning improvement.
- The superintendent as futurist—what are you building for his community? Can you provide micro-credentials, dual-credit courses, job skills that build the workforce in his community?
- The superintendent as financial steward—what can you bundle together to acknowledge that EdTech tools are just one part of the ecosystem educators need to thrive? Some districts won’t purchase apps with annual recurring costs, and some look to replace consumables with digital products.
Always consider district needs when setting pricing.
Insight #3: Value crushes price every time.
Time and experience have taught me that the psychological component can complicate pricing. Here’s a teeny secret most don’t want to admit: Everyone, including educators, will pay more for technology that buys us time, makes us look smart, or gives us an emotional boost. However, we don’t want to admit this in front of others.
So, how do you know when you are producing enough value relative to price?
- Educator panels or in-depth interviews (IDIs) help uncover what educators are currently paying, what they value, and what is missing in the market.
Tip: always ask pricing questions privately to get more accurate answers.
- Develop your unique selling position (USP) to be so competitive that your price seems just right.
Tip: USPs should be revisited every one to two years because an educator needs change, and your competition is always evolving.
- Work with a procurement expert to help understand what educators are currently paying. I’ve attended workshops from Rye Consulting, and I’ve been impressed with their procurement services.
- Quantitative studies such as Gaber Granger studies, VanWestendorp analysis, and Conjoint analyses help build a financial model for a point in time.
Implementing EdTech pricing is a relentless yet masterful teacher. It feels like dancing the tango with an invisibility cloak draped around your instructor. Missteps are painful, but once you are dancing in sync with the market, educators just may fall in love with the possibilities for student learning.
About the author
Daylene Long is the founder of Catapult X, a market and product development agency that consults exclusively with STEM EdTech Providers to catapult them forward using data-informed insights.