The Power of Free and Cheap in an Expensive Market

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Today’s post is a business lesson, and one that can be applied to almost any line of work.

More and more businesses today are finding themselves being priced out of the market by competitors using completely different business models, delivery methods, or concepts. For many, it eventually means the end of the road. For others, it will mean drastic changes to adapt to the marketplace.

Getting An Education

Many of you know that by day, I’m an architect. Among the other fun things I get to do and play with all day, the state (as most states have) determined that my 5 years in school and 3 years as an intern are not enough education to safely build buildings. They are undoubtedly right–things change way too fast to keep up with it all, and there are not enough years in my life to learn everything about this crazy profession.

As a result, I have to sit for 20 hours of continuing education every two years, including a special 2-hour class of my choice dealing with the building codes.

For years, the traditional delivery model for architectural continuing education has been a combination of paid courses at conventions or seminars, paid courses by mail, and paid courses in trade magazines. The cost for an hour of approved education could easily run $50-$100 and sometimes more. That’s $1,000 every year just to stay licensed!

Over time, and more rapidly in recent years, things have changed. Manufacturers of various products got smart and began offering free continuing education. A stone manufacturer would come into the office with sandwiches, do a generic presentation on the installation of granite, and then pitch his product for 15 minutes or so. It’s a win-win for everyone.

More and more CEUs are also available online, both through those same manufacturers and through the trade magazines, many of which no longer offer the print version of the class. More often than not, these are also sponsored by one entity or another.

This has been the status quo for the last 5 years or so with one notable exception–the advanced building code class, which always cost me $100-$200 to attend. About 2 months ago, I got a short email that offered me two of these classes on the same day for a refreshment fee of $15.

At first, I thought it was a scam. After reading through the materials and deciding that it was an authoritative source, I went for it, and completed the class earlier this month without a hiccup. Actually, the class was quite good.

As long as history repeats itself, I will never again need to sign up for a $200 class.

Same Model, Different Funding

What’s the moral of the story? Providers of free or cheap continuing education courses have figured out how to do two things well:

  1. Leverage lower-cost delivery methods for their CEUs. Instead of renting a hotel room for a class, many provide the education online or in architect’s offices.
  2. Leverage corporate sponsorships to shift the cost burden from architects to businesses. Today’s class on drywall really is brought to you by US Gypsum.
By doing these two things alone, they have effectively figured out how to price most of the other providers out of this market and garner the lion’s share of eyeballs, and ultimately sponsorship revenue.

Leveling the Field

Ignoring a change of this kind in your market can work for a while, as long as the spread of information is controlled in the marketplace. In other words, as long as people don’t find out that what you offer for $100 is offered by someone else for $15 or for free, you can make money.

A lot of existing industries that you and I use every day rely on this principle to stay in business, either by leveraging an uninformed group of buyers, or by obscuring their pricing so you never find out what they really charge until it’s too late.

The problem with this business model is that the Internet is destroying it by spreading information about pricing and the availability of other options. In industries with a lot of web-savvy buyers, companies that over-charge or under-deliver are dying.

Can $200 CEUs Survive?

The answer is yes, under certain circumstances:

  • The information and/or the speaker is really good and worth the money. It has to be something you’d pay for, even if you didn’t need the credit.
  • The architect doesn’t like the Internet and/or isn’t getting information about CEUs being offered for free. (A laggard, in technological adoption terms).
  • Extreme procrastination, in which case the only way to get the required hours might be an intensive (and expensive) all-weekend seminar.

For run-of-the-mill continuing education, most architects have figured out that there are plenty of opportunities to get the required classes for free.

Smart, up-to-date consumers are becoming the norm, not just the cutting-edge. Companies that want to survive should take stock of their strategy and their marketplace and see what they can do to evolve to the times.