Impact Pricing Podcast

Ep180: What Makes Pricing in Higher Education Difficult with Chris Uthe

Christopher Uthe is the Director of Product Management at Ocelot, where he champions scalable day-to-day organizational changes to transform it to a product-driven company. He’s been working in the education market since 2006, both for an educational institution and for companies that sell education. Chris started his first business at the age of 16.

In this episode, Chris explains how pricing works in institutions of higher education as he discusses the factors that make pricing difficult in that field.

Why you have to check out today’s podcast:

  • Find out how to find value if you can’t get a good and apt pricing metric
  • Understand how pricing in higher educational institutions work, as well as the thing that makes it difficult
  • Discover why higher education should be more focused on B2C pricing than on B2B

“It’s so hard to bundle and discount correctly, that most of the time, that’s not being done right.” 

Chris Uthe

           

Topics Covered:

01:28 – The story behind Chris’ interest in pricing

02:15 – Pricing and purchasing decisions in higher education

04:37 – What institutions of higher education value: The thing that makes pricing in higher education difficult

08:18 – U.S. News and World Report as a metric: The intrinsic value of one’s degree and/or university

11:15 – In B2C vs. in B2B pricing: Where should institutions of higher education be?

14:17 – Talking about RFPs: How it leads us to lose sight of the possibility of a better and smarter solution

19:42 – Chris’ pricing advice for the listeners

21:45 – Connect with Chris Uthe

Key Takeaways: 

“It’s so difficult to come at these purchasing decisions, saying, ‘Okay, we have to do only what’s best for the student here,’ because you’ve got so many competing priorities that are sort of odd for the market.” – Chris Uthe

“Some would tell you that they don’t care. There are a sad few that would tell you they might care a little bit about profit because they do have to pay the bills, still. Not all of them are living on generous endowments, unfortunately, or fortunately, depending on how you look at it. They care about, hopefully, students’ success at the end of the day. They want to talk to you about placement rate. They want to talk to you about probably job acceptance rate. They want to talk to you about average salary coming out of school.” – Chris Uthe

“Some of the value – the unspoken value – of your degree or just going to an institution comes from all the doors that it opens for having it on your resume.” – Chris Uthe

“It almost always starts with a very altruistic need, which I think is amazing in higher ed, because our students aren’t getting the help they need at the right time, for instance, or these students aren’t able to log into the learning management system and do something meaningful at the right time or they don’t know how to do it, they can’t get it done. It starts very altruistic, which is one of my favorite parts of higher education, because it does usually come back to making the student more successful.” – Chris Uthe

People / Resources Mentioned:

Connect with Chris Uthe:

Connect with Mark Stiving:   

Full Interview Transcript

(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)

Chris Uthe

It’s so hard to bundle and discount correctly, that most of the time, that’s not being done right.

[Intro]

Mark Stiving

Today’s podcast is sponsored by Jennings Executive Search. I had a great conversation with John Jennings about the skills needed in different pricing roles. He and I think a lot alike.

If you’re looking for a new pricing role or if you’re trying to hire just the right pricing person, I strongly suggest you reach out to Jennings Executive Search. They specialize in placing pricing people. Say that three times fast.

Mark Stiving

Welcome to the Impact Pricing podcast, the podcast where we discuss pricing, value, and the educated relationship between them. I’m Mark Stiving and our guest today is Chris Uthe. Here are three things you’d want to know about Chris before we start.

He is the Director of Product Management at Ocelot. He’s been working in the education market since 2006, both for an educational institution and for companies that sell the education. And he started his first business at the age of 16, and he’s only 17 now. Not really.

Welcome, Chris.

Chris Uthe

Thank you so much, Mark. I am so excited to be here.

Mark Stiving

So, I’m going to ask the question even though I’m not sure it’s relevant. How did you get into pricing? How did you start caring about pricing?

Chris Uthe

Watching what I thought were foregone conclusions fail in the market. Giving a discount; not working. Not understanding why after years of either giving away or discounting software, we had an unviable software solution. Because we had just destroyed the value of the product in everybody’s eyes, unknowingly, thinking that we were doing the right thing to get it in their hands.

So, like most people in pricing, you end up there accidentally, because you’re forced into it. What you’re doing isn’t working.

Mark Stiving

Yeah. And usually, you see that there’s a ton of power in making smart pricing decisions, and okay, so now, let’s make some smart pricing decisions.

Chris Uthe

Exactly.

Mark Stiving

So, I don’t remember exactly how it happened, but we were on LinkedIn, and someone had said something about pricing at higher education and you stuck your hand up and said, “Hey, I know about pricing at higher education.”

This is an industry that I find fascinating, a) because I used to be a professor and I lived in that world for a little while, but b) it seems like they don’t make logical decisions. And so, if our buyers aren’t going to make logical decisions, how do we even think about pricing?

So, I’ll let you just riff for a few minutes on what do you think about pricing in higher ed?

Chris Uthe

It’s very interesting. Like you said, a lot of it doesn’t seem logical because of the odd inputs on the demand side. You’ve got awkward budgets that are partially publicly funded, partially privately funded. You’re fighting internally across departments, which isn’t unusual for regular businesses, but it’s a different situation when you come into like grant funding and some of those kinds of things, and suddenly, budgets swing wildly. And budgets are budgets in education, especially right now; we’re seeing this very worrying trend of smaller educational institutions running out of those budgets. So budgets are hard, and suddenly, you see a wild swing in something like the CARES Act, for instance, right? Suddenly, higher education can spend a bunch of money for these specific things. Well, if your particular product fits into one of those areas, suddenly, you have a wide-open budget market that you didn’t have before. And everybody’s in a hurry to spend the budget.

It’s the worst kind of budget. It disappears at the end of the year. And if you didn’t spend it, you don’t get it back. It’s all of the worst parts of budgeting combined with all of some very difficult inputs of our end user – our end customer – is a student, and what’s best for them versus the people that are really knocking at my door might be faculty, might be the staff of the institution, might be the board of the institution. What are we getting for what we’re doing, and what’s important to everybody? The student rarely has a voice there. So, it’s so difficult to come at these purchasing decisions, saying, “Okay, we have to do only what’s best for the student here,” because you’ve got so many competing priorities that are sort of odd for the market.

Mark Stiving

There is so much to unpack in what you just said, but let me start with the question or the first comment with what you described – it is obvious that there’s a huge difference between buyers and users.

Chris Uthe

Yep.

Mark Stiving

And we often think of students as users, we could think of the instructors or professors as users, admin people as users, and those people are rarely the people who buy.

Chris Uthe

Exactly.

Mark Stiving

Are rarely the people who make the decision.

So now, the question is what do institutions of higher education value?

So, if I were selling to a company, what I’m going to teach them is, “Hey, here’s how you make more profit,” and that’s easy for me to do. I mean, I understand it. But if I walk into a higher education organization, I walk in and say, “Hey, you can make more profit,” they’re like, “I don’t care.” What do they care about?

Chris Uthe

Some would tell you that they don’t care. There are a sad few that would tell you they might care a little bit about profit because they do have to pay the bills, still. Not all of them are living on generous endowments, unfortunately, or fortunately, depending on how you look at it. They care about, hopefully, students’ success at the end of the day. They want to talk to you about placement rate. They want to talk to you about probably job acceptance rate. They want to talk to you about average salary coming out of school, which I think is a very awkward discussion as well. Because the students value, I think, in their minds, when they talk to you about things like that, is “I paid the X, Y or Z to come to school here. I got a great education, and I make X, Y or Z in return,” right? The value proposition is “Where did I land my career from being here?”

Mark Stiving

Those are nice, and they feel right; they feel good. But here’s the problem. I can measure how much profit I make a company. I can’t measure how well someone gets placed, right? Did they get placed higher or lower than they would have had they gone to a different institution, had they not gone to school?

So, where’s the measurement? What’s the thing I’m selling them?

Chris Uthe

Such a great question, and what makes pricing in higher education so, so difficult. Because again, we can equate things to time saved, money made, but saying comes back to why certain industries have very interesting, you know, did you pass this test? Did you get a high score on this test? Did you get placed into a law school? There are some of those pre-med programs where you can have some recognition of some kind of metric, right?

But for people who are, you know, my favorite example is a nursing school.  Nursing schools are popping up all over the place. All sorts of, even small private institutions, faith-based institutions, which are just a weird group of schools, sub 2000 FTE that are based on church principles, right? They’re bringing on nursing programs because they’re wildly successful. We have a lack of nurses, and they make a lot of money doing nursing programs.

Mark Stiving

And they have 100% placement rate afterwards.

Chris Uthe

Yep. Exactly.

Mark Stiving

And so, what’s interesting is let’s pretend, let’s pick a few metrics for a second. And so, let’s pick up placement rate as a metric. And now, if you could truly measure that accurately, then it’s really dependent upon what majors you offer. Because some majors like nursing, I’m going to place 100% of those people, some majors I’m not going to be able to place because they really weren’t a trade. It wasn’t teaching you a job. It was just giving you an education.

Chris Uthe

Yep. Geology.

Mark Stiving

Geology is a great example.

And so, it feels hard to say, “Look, I’m going to make that a metric.”

Now, back when I worked with your previous employer, by the way, I worked with them a little bit, and we were always talking about, “Well, what does this company value? What does this buyer value?” One of the things we came up with was where did they rank on U.S. News and World Report?

So, what do you think about that?

Chris Uthe

Well, it’s important, actually. It’s a measurable aspect. Anytime we can get something measurable, it’s important. It doesn’t mean that it’s a good measurement, but it is something that we can measure, which is sort of the point of this conversation we’re having – if you can’t measure anything, how do you find value?

I think U.S. News and World Report is an important measuring stick because it starts to quantify public opinion. Because some of the value – the unspoken value – of your degree or just going to an institution comes from all the doors that it opens for having it on your resume, right? Like the institution that I went to opens very few doors nationally for me, but locally, there are certain business leaders that went there. Those doors are open. And that’s an intrinsic value of education. You get all of the alumni and friends, so to speak, in your corner.

And U.S. News and World Report’s list is actually a somewhat useful list of schools that have placed enough people in enough great positions to be impactful. It’s sort of like an influence index, as annoying as that is, right? It’s like having somebody retweet your tweet who happens to have 20 million followers. Suddenly, you have a little more influence than you did before.

Mark Stiving

Yeah. So now an interesting question – and I don’t know if this is fair to ask or not, what if a university or a college could raise their ranking by two places on U.S. News and World Report? How much would they pay for that?

Chris Uthe

Depends on if you’re going from the marker 100 to marker 98 or if you’re going from marker 52 to 49. You know what I mean? Relative placement there is super important, I think, because the first part of the list is above the fold problem, again.

Mark Stiving

So, pick one; pick anyone you want. Because I think the answer is the same. Maybe the value is different, but I think the answer’s the same.

Chris Uthe

The value’s different, the answer is probably the same, which is they probably wouldn’t write that check, right? That’s not going to be something that they’d be willing to pay for, even if you could promise it to them.

Mark Stiving

Yeah. Even if they believed it. But yet it’s something they value, which is so interesting to me. So interesting. So how do they make these decisions? Maybe I should shift the conversation a little bit.

I often think about B2C versus B2B pricing. And in B2B pricing, I almost always come back to economic value. How much profit am I going to make my customer? In B2C, I stop thinking that way and I start thinking how much do people care about how good they look in a blue shirt? I use a blue shirt all the time, because whenever I taught, I always taught the first day in a blue shirt. And by the way, I did that because that was the only shirt I ever wore that people would complement me on. So, I always wore it on the first day.

Chris Uthe

You’re making a good impression.

Mark Stiving

I know. Exactly. And so, what was that worth to me? And it’s hard to quantify.

So now, do we put higher ed in that same boat? It’s hard to quantify, but hey, you look good. You’ve gotten compliments. I think I’ll spend money on a blue shirt.

Chris Uthe

I put higher ed more in B2C than B2B, because the people who are- so you have a hierarchy of people demanding change, right? So, the reason they’re looking at a piece of software, in my case, is something’s not happening, we could be doing something better, and usually, it’s coming from within, right? So, somebody in a department is telling somebody else at the department head level this isn’t working. It’s rarely ever a CTO that says, “Hey, I feel like I want to spend some money on a piece of software,” right? Even though they’re the one making the last choice. So, you get this groundswell of need, which is classic for any software purchase. “We’re not doing this well enough. It’s not working as well as it could be. Start looking for solutions.”

But that person is so close to the consumer that’s the student, right? The reason that they’re looking for that is that their end user is running out of success. They need value there. So really, it almost always starts with a very altruistic need, which I think is amazing in higher ed, because our students aren’t getting the help they need at the right time, for instance, or these students aren’t able to log into the learning management system and do something meaningful at the right time or they don’t know how to do it, they can’t get it done. It starts very altruistic, which is one of my favorite parts of higher education, because it does usually come back to making the student more successful.

And then it sorts of bubbles up and what it ends up being is – and this is where pricing in the higher ed gets so dodgy – it ends up being a competition of we have to look at least three vendors, because that’s how the procurement process works, and then if all three of them are roughly the same price, then we’re going to have a feature battle because that’s the only thing the CTO knows how to do; they’re not even in tune with the original need, anyway, of what was providing value. So now you end up in a world where software companies are pushing feature parity in higher education as well as pricing parity and pricing competition to try and get this win, even though that’s not what the original request was. It more of says it gets up into the CTO office and the other people that are making these choices.

Mark Stiving

Yeah. So, let’s come back to procurement in just a second, because one of the things you said just seemed so interesting to me, and I would rephrase it as the squeaky wheel gets the grease.

Chris Uthe

Yeah.

Mark Stiving

And so, the reason I’m going to go spend money on a new piece of software is because I have a bunch of students that are complaining.

Chris Uthe

Yep. Or a bunch of faculties that are hearing about it.

Mark Stiving

Yeah. And what I find fascinating about that is most of us only go to school once. Sadly, I’ve been to school way too many times, but most of us only go to school once, and so you don’t know what you’re missing out on. But I would guess that a lot of students, when they start to use old user interfaces and they’re used to using their smartphone and they know what’s possible and I’m playing games, now, they start to complain and say, “Hey, look. This is possible everywhere, but not here in my university? Come on, let’s go get that fixed.” So, I could see how that could drive demand. So, I just find that really fascinating.

Let’s jump to procurement for a second, then. When companies, including universities, want to buy something, we often put together an RFP process, and we put together this RFP process because we want to make sure we’re making a rational decision. We want to make sure that no one is being bribed or no one’s buying from their best friend. But what I find fascinating about that is to put together an RFP, it typically assumes that you already know the solution to the problem.

Chris Uthe

And you know what the problem is, even.

Mark Stiving

Yeah. It would be much more interesting to write an RFP around what is the problem, right? So “here’s the problem we’re trying to solve. Now, how would you go solve it?” And so now, your RFP’s not even similar. They shouldn’t be similar from different vendors.

Chris Uthe

Yeah. And this is one of the things that as a non-salesperson, as a product person, it gets down to what we talk about internally as well, is that’s great that they asked you to show them this widget and these five clicks, but did you ask them why they needed it? Because we solve it in a different way or we solve it better because we do it this way, right?

Those preconceived notions are so difficult to overcome in an RFP process, partly because sometimes, you don’t have the right stakeholders. You’re not RFP-ing in front of students, although I have done that I’ve been in part of a demo where our software was up against other pieces of software and the people in the demo were students, and the university was gathering feedback from the students as part of the demo, which made me so happy to see. But that’s almost never the case, right? It’s somebody else who assumes that they understand the problem and they probably have an idea of how they would like to see it tackled. Maybe they’ve seen it in a different piece of software. Worst case scenario, they had software that did it before and they loved it, right? And so, they’re coming in with all of these solutions to problems, like you said, and it makes the sales process extremely difficult, especially if there’s a disparity in price. You’re trying to prove value out when they’ve got a preconceived notion about what they need.

Mark Stiving

Yeah. What’s fascinating about that is when they ask us for solutions, what it really says is that they’ve already designed a solution, and yet your company does this for a living. You study the problems; you study the possible solutions. Wouldn’t it make sense that your company or other companies could solve the problem better than their internal people could solve the problem?

Chris Uthe

Yeah. If you look at some of the most successful – getting a little off track – you look at some of the most successful companies, they’re solving problems that people hadn’t yet digested. Facebook solved the problem that nobody knew existed. So, there was no preconceived notion about how that should work. You can solve the problem to the best of its ability and find success without being muddy down in the way that we’ve always done it.

Look at what the automotive industry is going through right now as we transition from fossil fuels to batteries. We have this preconceived notion about how a car should work. I should be able to stop and fill my car up in 5 minutes at the gas station. If the first car that came out solved the electric car before we got to the gas car, it’d be a much easier discussion, right?

So, it’s getting over those preconceived problem solution sets; it’s a big challenge, especially in higher education, because they’ve been doing it. You’re literally selling to people who wrote the book on whatever subject they’re in. It’s like me having a conversation with you about pricing and value. It’s difficult to even consider the idea that you’re going to sort of move the needle for them. They’re coming in going, “I’ve got two PhDs and I’m teaching all of these classes. I understand how I want this to work.” So, it’s interesting to try and get through that process.

Mark Stiving

Yeah, it’s interesting to see if people could be open-minded. But then again, we’re back to the whole reason we do RFPs – it’s we don’t want to get cheated or make a mistake. And the act of doing the RFP actually binds our hands and makes it so we don’t make smart decisions. We can’t make optimal decisions.

Chris Uthe

Yeah, we lose sight of the possibility of a better solution.

Mark Stiving

Yeah, which is absolutely fascinating.

Chris, I have so enjoyed talking with you about this. It’s a field that I still don’t understand. Sorry, you didn’t clarify well enough for me. I’m not sure if it’s possible, but let me ask you the final question. What’s one piece of pricing advice you would give our listeners that you think could have a big impact on their business?

Chris Uthe

Don’t bundle. Don’t discount.

Mark Stiving

Wow. Okay. Go ahead and elaborate a little bit on that for me, because I would typically disagree with those things, but go ahead. Let’s see what you’re thinking.

Chris Uthe

I know you do, because it’s so often executed so poorly and as a desperation move instead of how it should be used. It’s so hard to bundle and discount correctly, that most of the time that’s not being done. The risk to the perceived value of your product is so great that it’s not worth doing it wrong. When you bundle a piece of software with another piece of software, especially, what you’re saying is the software has no value because I’m giving it to you for free. And when you discount a piece of software, deeply, what you’re saying is we don’t know what the value of our software is and we don’t know how to convey that to you because we don’t know what price to tell you. If I see another RFP that says, “If you sign by this date, we’ll give you a 5% discount. If you sign by that date, we’ll give you a 10% discount,” the software has not lost value if they wait 35 days versus 30, right? What kind of message are you sending? You’re doing damage to the perceived value of your product.

And you can do it correctly, obviously. You’re a big proponent of that, and I’ve enjoyed all the things that you’ve said about it. It’s just so you see it done wrong too much to justify trying to do it, in my opinion.

You know what? Your products were priced accordingly and stick to it.

Mark Stiving

Yeah, I’m going to say what you just said, but I’m going to use different words, if that’s okay. What you said was don’t bundle or don’t discount unless you truly know what you’re doing.

Chris Uthe

Yes, absolutely.

Mark Stiving

I’ll buy that.

Chris Uthe

A better way to say it, for sure.

Mark Stiving

Alright. Chris, thank you so much for your time today. If anybody wants to contact you, how can they do that?

Chris Uthe

LinkedIn. Just search for Chris Uthe. U-T-H-E. I’m there.

Mark Stiving

Awesome. And there will be a link in the show notes as well.

Episode 180 is all done. Thank you for listening.

If you enjoyed this, would you please leave us a rating and a review? Also, please tell your pricing colleagues about this podcast. I hear from a lot of people new in pricing that they find this invaluable.

And finally, if you have any questions or comments about the podcast or pricing in general, feel free to email me: mark@impactpricing.com.

Now, go make an impact.

Mark Stiving

Thanks again to Jennings Executive Search for sponsoring our podcast.

If you’re looking to hire someone in pricing, I suggest you contact someone who knows pricing people. Contact Jennings Executive Search.

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