How Free Offers Lead to Paid Opportunities

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Free_Price_TagHistorically, education services professionals have shied away from incorporating free offers into their business strategy, which is likely due to common misconceptions about what “free” actually means. There’s a big difference between something that is free by design and something that is free by discount, but both offers can benefit your business when applied correctly. In this post, I’ll explain how free offers can fit into your pricing strategy and open up new opportunities to grow your customer base. 

What Does “Free” Mean?

One of the main concerns I hear surrounding free offers is that they’re going to cannibalize the ES business and have a negative impact on profits, when in reality, I’ve found the opposite to be true. Free offers can open up new doors for cross-sell and upsell opportunities by acting as a mini advertisement for the value your solution provides. However, while it might seem like I’m splitting hairs, free offers and offers given away for free are two entirely different concepts that require different strategies. (Tweet this!) Here’s a brief explanation of what “free” really means and how these offers can be used to benefit your business.

Free Offer

A free offer has no price tag and might include a short “how to” video, or a brief 15 minute self-study module, with the intent of enticing new learners to purchase a training course, or an e-learning subscription, and so on. (Tweet this!)

To better illustrate how a free offer is used, in one of my previous webinars, “Learning-as-a-Service: A Deep-Dive Interview with SAP,” I interviewed Jan Meyer of SAP about their LaaS offer called the Learning Hub. In the Learning Hub, anyone who registers has access to what’s called the Discovery Edition, which is free. In the Discovery Edition, access to content is limited to basic content. The intent is that sampling the content in the Discovery Edition provides enough value that learners buy the full subscription.

Discounted Offer

Giving training away for free is different from a free offer, because the item being “given away” has a price tag, it’s just discounted 100%. (Tweet this!) Sometimes learning content is given away for free to placate a customer. For example, if a customer spends a lot of money on the product solution, they may feel entitled to free training. Since any paid offer could be discounted at your discretion for any reason, these types of giveaways are not typically wrapped around a strategy, whereas a truly free offer is based on a strategy, which brings me to my next point.

Building a Strategy Around Free Offers

In TSIA's recent Education Services Benchmark Survey, respondents are asked whether or not they are currently providing free offers. Over half responded "Yes", and I would speculate that this number will continue to rise. 

Education_Services_Free_Offer

Source: TSIA Education Services Benchmark Survey 2015

To find out where free offers fit into your pricing strategy, I will refer to TSIA’s LAER customer engagement model, which stands for land, adopt, expand, and renew. 

LAER_LG

In the LAER model, "land" is when a customer makes their initial purchase (moving from free to fee),
while the "expand" phase is when that customer decides to purchase additional add-ons.

The purpose of the “land” step in the customer engagement life cycle is to get a presence in the account by exposing your customer to the training that’s available to them. This is where free or low-cost offers come into play. 

Once ES is in the account, the next goal is to grow the revenue, or expand, through up-sell and cross-sell opportunities. The operative word to keep in mind when considering both the land and expand steps is “strategy.” Structuring a free offer so that it successfully opens the door and leads to additional education purchases is critical. 

Using Free Offers for Up-Sell and Cross-Sell

SAP’s Learning Hub provides a good example of up-sell opportunity. As mentioned, a learner can sample the Hub’s offerings via the “Discovery Edition.” If a learner wants the next level of content available, which is in the “Customer Edition,” he or she can make the purchase.

The Learning Hub introduces cross-sell through its Live Access offer, which is a virtual lab environment. Users who have purchased a subscription to the Customer Edition can add on lab time by purchasing a bundle of virtual lab hours. Here, SAP has successfully found a way to expand within an existing customer account by offering the option to purchase an offer that sits outside of  the Learning Hub subscription.

Which Offers Should Be Free and Which Should Be Fee?

Now that we’ve covered the difference between a free offer and an offer that is given away for free (i.e. 100% discount), you may be wondering, “What should be free, what should be fee-based, and where do you draw the line?” While the real answer depends on your company’s specific goals, here’s a diagram of TSIA’s Free-to-Fee Continuum, with some ideas for the types of free offers you could provide with no price tag, as well as offers you could use in up-sell opportunities. 

Free_to_Fee_Framework

(Click image to enlarge.)
Here are just a few examples of the types of free offers and fee-based offers
you could use to entice new customers into making a purchase.

You may notice that the line here is dotted, and that is because it’s not a hard line. Depending on your company’s individual strategy, you can see that there’s any number of ways to construct a free to fee offer, and I think the beauty of it is you can get creative! 

Learn How to Engage Your Customers at TSW!

To learn more about how your education services business can build a strategy for landing new customers and growing existing ones, come to our upcoming conference, TSW 2015 Service Transformations! I will be delivering my Power Hour session, “Using Learning Analytics to Optimize Customer Adoption,” where I’ll talk about the “adopt” step in the LAER model, and how data helps you to ensure your customers are finding value with your solution. Hope to see you there!

 About the Author

Maria Manning Chapman

Maria Manning-Chapman is vice president of research, Education Services, for TSIA. She has more than 25 years of education experience in the high-technology industry. Maria is well versed in the dynamics of running an education services business and has held leadership positions in operations, virtual learning, business development, curriculum development, delivery, and partner management over the course of her career. Maria can be reached at maria.chapman@tsia.com.

Maria frequently writes about these topics:
Education Services | Learning-as-a-Service | Adoption

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Topics: pricing, education services, services pricing, learning-as-a-service (LaaS), LAER, free offers

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