TechSmith Fights Opaque Ed Tech Pricing

TechSmith puts its pricing for its terrific presentation capture Relay system right on its website.

January 30, 2011

TechSmith puts its pricing for its terrific presentation capture Relay system right on its website.

TechSmith's transparent pricing stands in stark contrast to the industry norms in education technology. Go to the major learning management system, lecture capture, or media management vendor websites and look for pricing. Most likely, you will not be able to figure out what adopting the platform will cost your institution. Further, most pricing deals once made cannot be publicly shared with other institutions.

Please let us know of other companies like TechSmith that offer transparent pricing, this is one of those areas where I'd very much like to be wrong.

Why do ed tech vendors keep pricing opaque? 3 reasons are usually given:

Flexible Pricing Protects Institutions With Limited Resources: The argument goes that not all institutions can possibly pay "list price," and that flexible pricing allows for schools that are resource challenged as well as schools with large budgets to adopt new technologies. If prices that were affordable for institutions with little money were published, then every school would demand that price. This low price is not enough to pay for development and other costs, and would drive the company out of business if everyone paid it. Conversely, if the "true" price was published (one that allows for a reasonable return on investment for the company), the result would be that poorer colleges and universities would not even consider adopting the technology.

The problem with this argument is that the price of the software or platform is seldom, if ever, the main cost for offering that technology. The real cost comes in the people that run and support the technology. Artificially low prices for campus technologies don't do colleges or universities any favors, as the key in evaluating platforms or tools is to look at the total cost of ownership - particularly the people costs. If a school cant afford to pay a fair price for a given platform or technology then that school should probably look for other options to meet its needs.

Flexible Pricing Encourages Early Adopters and Pilot Programs: Transparent pricing would discourage schools from experimenting with new technologies, as the initial costs would be too high. Keeping prices opaque allows for companies to negotiate initial pricing that encourages risk taking and pilot programs.

But even if prices are transparent, there is no prohibition against offering incentives for experimentation and pilot programs. Published pricing, however, insures that schools know the long-term costs once the pilot program ends, and can make informed decisions about purchasing.

Pricing Tiers Are Too Complicated to Publish: Campus installations are seldom simple. The cost of the product or service depends on an enormous number of factors, from the number of FTE's to the organization of the institution to need for integration with existing campus systems. Prices are always custom because each college or university adoption is unique. Publishing pricing would mask this complexity, and could send evaluators and decision makers down the wrong road.

My response would be that if pricing is too complicated then something is wrong with that pricing model.

Of course, the real reason that pricing is kept opaque has to do with the economics of software. The marginal cost to provide the software to a new customer is close to zero, so it is in the sellers interest to price its product at the level that each customer is able and willing to pay.

So why is it that TechSmith can be so transparent with their pricing? I honestly do not know why they decided to adopt this strategy, but I think it is a very good idea.

I think transparent pricing benefits both buyers (colleges and universities) and sellers (the vendors).

Transparent pricing insures that the energy spent in building a relationship between the school and the vendor can be directed towards finding a way for the implementation to succeed rather than negotiating the costs. Transparent pricing makes it easier to research and evaluate products, and make comparisons across companies and platforms. The easier and more efficient the research and evaluation process is, the more quickly campuses can adopt a new technology or change to a new vendor.

Would published pricing allow ed tech companies to invest less money in sales, and more resources in product development and support?

Could following TechSmith's lead and publishing prices help new companies to challenge incumbents who persist in keeping pricing opaque?

Should buyers demand that pricing be transparent before considering buying from a given company?

What do you think?


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