Should You Charge for Customer Training?

Computer in someone's lap with online learning on the screen
Thought Industries
July 31, 2018

It makes good business sense to give away customer training — especially if you’re a SaaS company. Let me explain.
Many companies take a short-term view and emphasize revenue on a quarter-by-quarter basis. Their view is that training costs money, and that cost should be passed on to the customer. Let the longer term take care of itself. They’d rather recognize the revenue in the short term.
Other companies take a longer-term view and want to maximize their growth and return over time. These companies do not charge for initial training and view it as an investment in their customer base. This investment produces customers that gain more value from their product, and over time pays the company back in loyalty, longevity, and renewals.
Samma Hafeez, VP of Customer Success at Thought Industries, takes the latter approach. “Our customers purchase our technology to solve real business challenges,” she says. “To overcome these challenges, they need a consultative, dynamic, and patient training partner that understands their business, delivers relevant, consumable insights, and knows that new users take time to learn a new technology. Our investment in training our customers pays real dividends and results in a win-win scenario for both parties.”

The Power of Training

Training may be the single greatest lever to ensure your customers’ success and satisfaction, and improve your company’s profitability. The success metrics, as illustrated in the infographic below, are compelling. A 5% improvement in renewal rate can generate up to 95% more profit. On the other hand, acquiring a new customer can be 25x more expensive than retaining a current customer.

Charging for training creates friction for your customers. If training is a budget hit, do I, as a new customer, resent it or take it in stride? What about a two-year customer? Do I send my entire staff for paid training or do I just send our super-users and have them train the staff? Do we need the training and the upgrade now, or can we just work with the previous release for a while?
Either way, this translates into less training for your customers, which means they will use the product less, submit more Customer Help tickets, and renew less often. Your profit will inevitably shrink.

Focus on Time to Value

But sometimes, the reality is that there are hard decisions to be made about what to give away and what to charge for. The general rule of thumb is that customer onboarding should be free because it reduces the amount of time it takes for your product to start adding value. Studies have shown that the faster you get your customers to value, the more likely they’ll stick with you for the long term.
On the other hand, if you’re offering very advanced training that has a very small audience, should you charge for that? Maybe not.

Do as the Joneses

Another caveat is that you may be in an industry where everyone charges for training. In some cases, customers may think it’s odd that you’re giving away training and they may even devalue the training because it’s free. To overcome this, you can include training with the price of the product you’re selling. For example, if you’re selling your software for $50,000 a year, you might include an $10,000 unlimited-training pass at no additional charge. This will give the training more perceived value and the customer will feel like they’re getting a deal.

Leveraging Customer Lifetime Value

It’s easy to nod your head with these considerations, but the question begs, why can’t we also add to this quarter’s profits? Training costs us money now.
This leads to a discussion of customer lifetime value (CLV). Embracing the importance of CLV shifts marketing from the transactional customer business view to the long-term relationship marketing approach.
Simply put, CLV is the amount of revenue (and profit) you can expect from each customer over their relationship with you. There are 3 variables that go into CLV:

  1. Revenue – how much your customers spend.
  2. Time – how long they stay an active customer.
  3. Churn – how much revenue is lost during a period due to customers canceling or downgrading.

Improving churn can have the greatest impact on the profitability and longevity of your business. Put simply, successful customers buy more and stay longer. They’re also the ones that generate referrals.
Revenue from long-term customers is more profitable, because the high cost of acquisition has been amortized. The training fuels the value they receive and drives demand. Research shows that training customers increases longevity. Trained customers renew at a 92% rate, compared to 80% renewal rates for non-trained customers.
The cost of developing and administering the training is like fertilizing a garden. Some effort is required for best results. How would you like your garden to grow?

Creating a Competitive Edge

Looking over the SaaS industry, it seems that established market giants like Oracle and Microsoft charge for training, largely because they can. They may feel that they are so embedded that customers will be theirs in perpetuity. They also tend to outsource training to third parties that have to generate a profit from training.
This is why an investment in training can be an important competitive edge for the next in line, which is where you come in. You view your customers as resources to be grown. They view customers as “share of wallet”.

From a Profit Center to a Customer Success Center

There is one other benefit for companies who take the long view and do not charge for training. That is innovation – the drive to keep your training sharp, in line with your latest advances, and geared to your customers’ success. As your organization adopts and practices this innovation, it has a spillover effect, pushing your organization to rethink how they add value to the customer relationship overall.

Don’t Be Penny Wise and Pound Foolish

There is a great British saying, “penny wise, pound foolish.” That is, making decisions with small amounts of money (pennies) can end up hurting larger amounts of money (pounds, as in British Pounds) down the road. That’s the difference between charging for training now versus investing in your customers’, and your long-term success.
Investing in training enables your customer to use your product more deeply, to more closely align their methods and processes to your technology, and ultimately attribute some portion of their success to you.
Unfortunately, even in a world where it costs more to acquire a new customer than it does to keep current customers, many companies perpetuate short-term, transactional thinking. These companies continue to invest nearly 80% of their budgets on customer acquisition.  Just 42% of businesses are currently even able to measure customer lifetime value, let alone measure it accurately.
Customer training is a real business opportunity, a commitment that will benefit your company now and in the future. Remember, making customers better makes better customers.

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