Most FE Providers ignore Value Based Pricing Strategies and go for Flat Pricing with a single option. For example, a course is charged at £195 per person. There are no other options.
This is a quick and easy way to quote but it means you are going to be compared with your competitors on price. And that means someone will always try to do it cheaper and, even if you get the work, the margins are very slim.
A Different Approach to Pricing Courses
Value Based Pricing takes a totally different approach. It is an approach where the the price you charge is based on the inherent value the buyer perceives in your offer. In other words it is based on the impact your offer is likely to have on the buyers busienss. Normally your fees will be a percentage of the likely impact; say 10%.
So say a prospect has a production problem in their factory. They know that the product reject rate coming off the production line has risen from 2%to 4%. On talking to them they say that this is costing them £1 million a year.
So the prospects can easily see that if your training cuts the reject rate back to 2% it is worth £1 million to them. With this in mind they can be persuaded to agree a fee of say 5% of perceived benefit.
That’s 5% of £1 million. In other words £50,000
Of course few people will pay £50k for a single course. Psychologically it doesn’t work.
But if you offer more than a straight course then it is possible to get this sort of income. Maybe you need to include an initial process audit and/or staff interviews. Maybe you need to include post training audits and include training for new staff over a given period. The options are many and varied.
The Value Based Fee Offer
The main thing is that it is highly likely that you will fail to get a deal if you call this intervention a training course. But if you provide the above and call it something like a productivity booster it is more likely that they will buy. And if you can make it far more specific and name the intervention in the context of the prospect.
So if the prospect makes biscuits you could call it something like a Flour based baked product manufacture line process improvement audit or Confectionery Manufacture Process Audit & Improvement.
The closer the intervention comes to solving a very specific problem the more likely you are to being able to charge value based fees.
The Value Based Fee Mindset
To charge value based fees you need confidence and the ability to change your mindset.