Build Your E-Learning Business Model

By: Jon Aleckson

Associations have learned the hard way that a "build it and they will come" attitude is not enough for a profitable e-learning program. But if you follow five strategic principles, you can build an e-learning business model that will provide a positive revenue flow sooner rather than later.

The Chief Marketing Officer Council is an impressive association that has carved out a unique niche despite formidable competition for members' time and attention. Its successful learning programs include live meetings, e-learning, and published material, all focused on topics surfaced by members as highly important.

The CMO Council is not trying to serve all marketers. Instead, it has a narrower target market—top marketing officers with 15 years of experience. The organization does not try to educate members in all areas of marketing, but rather focuses on emerging areas that are vitally important to the membership. By not trying to be all things, the CMO Council is uniquely excellent in specific high-value areas.

Success stories like the CMO Council tend to start with leaders making disciplined, strategic decisions. Such leaders know what their organization does best, and they commit to and execute well-designed plans to put their products in the hands of the audiences that will value them.

E-learning is one area where associations could use an extra dose of that discipline and strategy. Because e-learning seems like such an obvious extension to the live education associations have provided successfully for years, many a nonprofit has fallen into the trap of jumping into e-learning and assuming money would naturally follow.

What is missing, in many cases, is a clear business model for e-learning efforts. According to author and business-model expert Kay Plantes, a business model "captures how a new product or organization creates value for a group of association members while, at the same time, creating revenue for the association." (See sidebar below for more from Plantes on building new business models.)

In this article, we'll examine several e-learning initiatives from a business perspective. The bottom line for all associations is: Will your e-learning program provide for an attractive income statement?

We'll begin with a framework originally laid out by Jeff Cobb, managing director of Tagoras, in his white paper "Selling E-learning to Members: Basic Success Factors." Cobb outlines five strategic principles to guide e-learning programs:

  1. Know your market.
  2. Don't devalue learning.
  3. Go for critical mass.
  4. Choose a business model first, not a technology.
  5. Prepare to sell.

Let's consider what some associations' educational leaders have done in each of these five areas.

Know Your Market

Some associations conduct member research to make sure their decisions are not driven by the board or staff alone. Josh Goldman, senior director of Association of College and University Housing Officers–International (ACUHO-I), also used a traveling presentation to solicit input from members. "The key for us was to find the knowledge … our member-institution employees needed," he says. "We discovered an interest in learning [through training] skills like how to evaluate university housing services—like dining-room programs or housing-safety programs. Our research determined that demonstrating success through evaluation to college executives is very important for our members."

Goldman's team also considered whether the association should offer official accreditation, certification, or a certificate of completion for learners able to demonstrate achievement of a course's objectives. They settled on the last option, which fulfilled members' need for specific skills training and stakeholders' desire for evaluation of their learning.

In short, ACUHO-I did strategic research to determine which model would work best for its members. Only then did it take tactical steps.

The International City/County Management Association (ICMA), on the other hand, jumped prematurely into tactical implementation. "What we found after drafting our initial e-learning business plan was we were making too many assumptions, too quickly," says Wayne Sommer, a 20-year executive veteran and association education advocate. "Being an association formed in the early 1900s, we believed we had all sorts of content. We had our body of knowledge down to 18 areas that we thought could easily be translated to e-learning. After looking at it more closely, we determined we needed to do more market research to determine what our younger members desired. We are now in the middle of a restart to determine market needs."

ICMA was moving so quickly that it came close to locking into a learning management system that would not have met its longer-term needs—a mistake it fortunately avoided. Sommer reports that the group's experiences have made it wiser, and it is now approaching its e-learning business with more caution.

During the early stages of research, you should gather as many examples as possible of what other organizations are doing. This allows you to make informed judgments based on business benchmarking.

It's also useful to create an eight-year financial pro forma. Pro forma models, used by businesses for entrepreneurial endeavors, show the anticipated results of a product line, with particular emphasis on projected net revenues and expenses. (But make sure your projections are as realistic as possible; don't make the mistake of massaging the numbers to justify the project.) Actual pilots in a few markets can be used to prove or disprove the financial model.

Don't Devalue Learning

Many associations assume that e-learning is worth less than classroom instruction; some charge as little as $25 per online hour. But cutting costs doesn't necessarily mean charging next to nothing, because internet-delivered learning cuts such costs as travel and accommodation. In the words of ACUHO-I's Goldman, "If a member attends a conference as a way of acquiring professional development, it is costing much more than the conference fee."

Once an association has acknowledged that its e-learning program is worth paying for, it has to decide exactly how much to charge. There are many models to choose from: subscription-based pricing, for example, or setting prices according to the size of the user's organization. "Keep in mind," says Cobb, "the learning associations offer is typically the most valuable asset they have."

ACUHO-I uses a value-added system. Value-added pricing is based on a simple question: What is the professional development worth to the member? This works in ACUHO-I's favor, because its e-learning program offers unique content that is custom made by member experts and difficult to acquire elsewhere. If your content is unique, that should be reflected in value-added pricing. If it's not unique, consider licensing off-the-shelf content from outside providers.

At the Credit Union National Association, subscription pricing has allowed for more annual revenue than a single-course pricing model. CUNA has more than 300 one-hour, self-paced courses, and members pay a subscription price for access to all the features of the CUNA learning management system.

Go for Critical Mass

It's important for executives developing an e-learning business model to look beyond today's hot-button issues, which can come and go. Instead, they should focus on perennial industry issues to help support a sustainable business plan.

Former American Society for Clinical Pathology Educational Director Chitra Subramanian (currently at Duke University) has been a driving force behind an e-learning effort that aligns business objectives with the association's mission while also aligning infrastructure support for user experience with course quality, a must in continuing medical education. "This has involved a major investment for ASCP," she says. "[It] will eventually pay dividends due to the business model and business plan we designed and executed."

Subramanian's team created a business-plan blueprint and implementation plan that called for the creation of a knowledge library with some 600 one-hour online activities. This blueprint, according to Subramanian, "helped my seven staff members keep on the same page while also garnering support from our association leadership." Of course, mass participation is easier to anticipate in a field with extensive professional-development requirements.

Choose a Business Model Before Technology

A business plan or blueprint is vital when you are selecting a technology partner. Jeff Cobb cautions executives to make sure the technologies they implement serve the plan, rather than giving nonessential functionalities more weight than they deserve: "[Don't] get obsessed with software features unless they serve a strategic purpose."

As an aggregator of software technologies, Rich Finstein, president of CommPartners, understands the Cobb principle that the business model must take precedence over coveted software or a favored vendor. According to Finstein, wise associations stay relevant by continuously evaluating member needs and rapidly developing content for internet delivery.

More of CommPartners' clients are moving to a sponsorship model for their e-learning programs, with emphasis on creating blended learning experiences. "Webinar pricing has declined significantly," says Finstein, "and associations are thinking outside the box to creative concepts, like providing members points [credits] and other benefits for participation in all types of learning events, from conference proceedings to serious online certificate programs." Innovations also include courses that are tied to social-media platforms.

Prepare to Sell

Of course you should have a marketing plan for your association's e-learning initiatives. But on an everyday, tactical level, it's most important to encourage a sales culture among the association's staff.

Of the 500 associations Cobb surveyed for his white paper, less than a third claim to have a serious business plan for e-learning. Those that do, Cobb says, insist on a culture that supports sales.

By "focused sales effort," Cobb says, "I do not mean that you have to hire a sales force or start calling members in an attempt to sign them up for the latest course. Rather, actively train everyone on your staff to speak knowledgeably about your e-learning offerings and to convey your value proposition clearly."

Get Ready to Plan

Do not underestimate the time it takes to plan, develop, and launch an e-learning business initiative; it can be as much as three years. Upon reflection, Josh Goldman of ACUHO-I regrets not setting aside more project time to educate himself on platform technology, specific course designs, and development nuances. "This is an in-depth program with practical, on-the-job assignments," he says. "Our three courses each require about 30 hours of learning. That's a lot of content to develop."

Done right, strategic planning and tactical implementation pay off. CUNA, for instance, invested in a business model for credit-union-specific learning; now, e-learning is a positive line item on the association's income statement. Associations like it that develop business-based, sustainable e-learning programs will lead the way in reaching wider audiences and benefiting members.

Jon Aleckson, Ph.D., runs Web Courseworks, a 23-person e-learning software company. Email: [email protected]

Learn More

Jon Aleckson and Jeff Cobb will conduct a session on e-learning business planning at the 2011 Great Ideas Conference in Colorado Springs, Colorado.

Sidebar: 5 Questions to Define Your Business-Model Strategy

By Kay Plantes

Behind consistently successful companies, associations, and products you'll find a business model that

  • Offers a unique, relevant, hard-to-copy value promise;
  • Is aligned with market trends;
  • Is capable of generating attractive profits either because it creates the lowest cost or offers unique benefits that competitors cannot easily copy;
  • Opens up new growth platforms.

But all too often, nonprofits add new services without the upfront market research and strategic thinking required to build a winning offering in our copycat economy. Today's new products quickly encounter "me too" competition, with resulting pressures on pricing. If your organization lacks the lowest cost structure for a "me too" new product, you run the risk of a new product adding little, if any, financial boost to the bottom line. And if your new product can be easily copied, you'll end up in the same unattractive position, absent having the lowest price.

In other words, if you can't be the Walmart of educational offerings, you must approach education in a way that better benefits your members and that lowest-cost providers cannot easily copy.

The only way to protect margins on a new product is through business-model differentiation. A business model captures how a new product or organization creates value for a group of customers while creating profits at the same time.

Before developing an e-learning offering, make sure you create a deep understanding of the educational alternatives available to your members, how each alternative addresses or fails to address member needs, and the frustrations and compromises members experience in using these alternatives. As you listen, make note of different groups with different needs, where the groups might be defined by demographics of members (e.g., large versus small) or situations (e.g., new to your industry or not).

Then, define a business-model strategy for your e-learning offering by answering the five core strategy questions below. You may want to broaden your focus to all your educational offerings as you define your business-model strategy, as the uniqueness and benefits of your e-learning offerings may rest in their relationship to and interaction with in-person learning opportunities, something that web-only competitors cannot match.

  1. Who are our target markets, how do we reach them, and what is the nature of our relationship with customers?
    • Are you trying to serve all members or just a subset?
    • In what situations do you want your members to turn to your offerings versus other alternatives?
    • Is there anything about your selling strategy (e.g., including a needs assessment for members) that will help you gain more trial of your offerings?
    • Is the connection with members around educational offerings tactical (there it is, buy it and download) or will there be a beneficial level of interaction with members?
  2. What is the scope of the offering?
    • What is the focus of the learning offering?
    • What is outside our scope?
    • Who is in our competitive set?
    • What frame of reference do we want our members to use when thinking about our offerings?
  3. What value promise will lead customers to choose our offering? In other words, what benefits or cost savings will lead members to chose us over alternatives, including other uses of their money?
    • How will our offering advantage our members in ways that the alternatives cannot?
    • What aren't we promising?
    • What compromises or frustrations with the alternatives are we addressing?
    • What emotional response do we want users to have?
  4. What advantages of our organization, our educational offerings, and partnerships will make it hard for competitors to copy our value promise?
    • What is it about how we source, create, and deliver our offering that creates our value promise?
    • Why can't the alternatives do what we do?
    • Why will they fail trying to copy us?
  5. What factors ensure our profitability as we deliver on our value promise?
    • What is the most effective and efficient way to develop our offerings? To sell the offerings? To keep our offerings current? To market the offerings? To learn about customer needs?

Kay Plantes, Ph.D., is principal of Plantes Company, LLC, and author of Beyond Price: Differentiate Your Company in Ways That Really Matter. She blogs on business model innovation at Email: [email protected]