Onsite Pricing (Pt. 1): How To Charge For Instructor Travel And Living Expenses.
"Onsites" are instructor-led courses
delivered at a customer's site.
Onsites let customers
avoid the travel-related expenses of sending course participants
to your training location. However, you have the additional
expense of sending your instructor to their location. So you
must somehow reflect this incremental expense in your price.
The question is, how?
Below are 3 alternative
approaches, together with their pros and cons -- followed
by my overall recommendation.
A: BUNDLE IN THE COST. That's right, simply raise your standard
Onsite list price a consistent amount, say $1500, to offset
average instructor travel-related expenses and protect your
PROS: Why complicate an already
complicated selling process by tacking on an additional
"extra" for your customers and your salespeople to worry
about. By bundling in instructor travel related expenses
you are able to say "we don't nickel and dime you for
that." This can help tip the scales if your competitors
do. Also, it's easier for a customer to cut a PO when
they know what the total price is going to be in advance.
Finally, you avoid any contention associated with your
customer having an interest in where your instructors
stay or how they travel.
CONS: The major downside when you
bundle in instructor travel related expenses is that a
naive or careless customer could shop your price without
fully understanding what your price includes. So if your
Onsite price includes the works and your competitor's
doesn't, they could walk off with the business before
the customer catches on. This is especially a problem
when customers are purchasing based on catalog or Website
information and your salespeople never get a chance to
make their case. Another issue associated with bundling
is that there is no incentive for the customer to help
you save travel related expenses.
ALTERNATIVE B: PASS ALONG THE COST.
Yes, bill your customer after the event for your instructor's
actual travel associated expenses, be they $50 or $3550.
PROS: Passing along instructor
travel related costs as incurred lets you advertise a
low list price. So price sensitive customers won't fly
the coop before you can speak to any unique qualities
or services you may provide. Also, you're not obliged
to "eat" travel surcharges and premiums when a customer
decides they need you to run a class at their Aleutian
Island sardine cannery beginning tomorrow at 8:00 AM.
CONS: Since travel related expenses
can't be known until after the course, your customer may
have problems figuring out what amount to put in the PO.
And you may have to delay your final Onsite billing notice
until well after all services have been provided. Passing
along as-incurred travel expenses is also an issue when
you're competing for business in a far off metropolitan
area or geography with another firm that is local to that
geography. Or when you must fly in an instructor from
2000 miles away to teach an Onsite that's fifteen minutes
from your office. Try convincing your customer to pay
for that! Finally, if customers have visibility to your
instructor's expense reports, you risk hearing "I'll be
damned if I'm paying for the Marriott or for any $17 breakfasts!
-- and I don't see why your people can't travel by Trailways
like our people do."
ALTERNATIVE C: TACK ON A STANDARD
SURCHARGE. Figure out a reasonable average for instructor
travel related expenses, say $1000, and apply it as an uptick
to all Onsite deliveries.
PROS: This approach lets you advertise
a bare bones price, to compete with other firms that treat
instructor travel expenses as an "extra." It also makes
where you source your instructor -- or where they stay
and eat -- your business, not your customer's. Furthermore,
since the fee is fixed, it's easy for your customer to
build into their PO -- and easy for you to bill in advance,
or upon course delivery. Another plus comes should you
need to make a price concession in a competitive auction.
By waiving the surcharge, you are able to reduce your
proposal without having to compromise your standard Onsite
CONS: Occasionally, a customer
will object to paying a standard travel related surcharge
if they learn you sourced your instructor locally. If
you can't appease them by explaining that they will save
the next time when you have to import an instructor from
Timbuktu, then you may need to waive the surcharge. There
also can be an issue if a customer takes advantage of
your good graces to make last minute changes in venue
that drive up airfare expenses.
D. MY RECOMMENDATION: As you may
already have guessed, I'm partial to alternative C. But
since Onsite pricing is frequently carried out in a wheeling
and dealing way, you may also decide to vary your approach
corresponding to customer preferences and competitor tactics.
Whatever you do, remember it's always better to concede
on travel expenses as compared to course fees, especially
if you can come up with a face saving excuse. Once you've
caved in on your course price, you've pretty much set a
MORE ON ONSITE PRICING: Should you
publish Onsite prices -- or keep them confidential? Should
you bundle the cost of course materials in your Onsite course
price? What should you do when a customer feels they should
pay for your instructor at a low-ball, per diem consulting
rate? Should you price Onsites as a multiple of your public
course tuition? What multiple? What should you charge when
a customer wants to send additional trainees or auditors?
When should you begin charging extra for requests to customize
an Onsite to a customer's specific business situation? What's
the best volume discount approach to use for Onsites?
address these tricky issues, and more, in future E-Visorys.
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