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Pricing strategy: How do IWT courses compete against “free”?

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I LOVE reading strategy books. A lot of people think business strategy is about boring business frameworks and pedantic cost-benefit analyses.

FALSE! You’ll find some of the most eye-popping drama and insane stories when you study why companies do what they do. For example, strategy gives you a front-row seat to war stories about Amazon’s Jeff Bezos, why Prada doesn’t discount, and what happens when a company like Nokia doesn’t change with the market.

So when I recently saw this question on pricing strategy on Quora, a question-and-answer site, I thought I’d share a small piece of the strategy behind IWT.

Q: How will expensive privately-offered online course offerings set themselves apart to warrant the cost, when a similar free course could come out on one of the many free or low-cost MOOCs (Ramit: “massive open online courses”) that are gaining popularity?

A: This is a great question.

I create high-end courses that range from $200 to $12,000. I have courses on psychology, careers, negotiation, and business. My students are people who are interested in personal development.

My courses don’t compete with free offerings. In fact, if you don’t want to pay a cent, 98% of my material on I Will Teach You To Be Rich is free. I encourage you to start there and get results like these from my free material alone!

But my premium courses are quite different than MOOCs. Here are a few examples why:

  • We focus on very narrow subjects (“Earn1K: How to Start a Side Business”) vs. general, broad-based courses like “Introduction to Finance.”
  • Each of our courses costs over $500,000 to develop, often including years of research testing with 100,000+ data points. Free MOOCs are not comparable in depth. For example…
  • We custom-build the software and monitor retention and completion rates, tweaking until we get it perfect. We’re not simply giving people a reading list and a discussion forum, but actually curating an entire educational experience — including the analytics and research to validate that students are getting measurable results.
  • We can provide more personalized support, including triggered emails when we notice inactivity, text messages, even phone check-ins from trained support staff. All this technology is a result of reinvesting course revenues back into creating a better student experience.
  • We make big promises and build the lesson plans, software, and community to deliver. For example, in my Find Your Dream Job course, we include over 25GB of video, including interviews and hours of on-camera salary negotiations. You simply will not find these things in free courses, since it’s too expensive to produce this material without ROI. (It costs roughly $10,000/day to shoot the video included in my coursework.) That is why we see IWT students get results like this: Dream Job Success Stories.

Overall, MOOCs have a role in online education, and they can be an excellent way to get started on a subject. (Personally, I’m skeptical of the idea they’ll replace university courses, but if they expose people to a new area of study, I’m all for them.)

But premium, high-end courses do not sell “information” — they provide an outcome. It’s tough for MOOCs to compete with an artisanal, carefully constructed course that includes years of research and detailed videos, scripts, case studies, and strategies/tactics that I can only create because I know there’s a financial ROI.

*     *     *

Pop quiz on strategy:

I’ve talked before about how I give away 98% of my material for free, and how I intend for my free material to be better than others’ paid content. I’ve also shared how I prohibit people with credit card debt from joining my flagship courses, a decision that costs me over $2mm/year.

If you were analyzing the business and pricing strategy behind IWT, how would you answer these 3 questions?

  1. Who do I target and NOT target?
  2. Which decisions do I make that others in my space do not?
  3. Pick one area of the IWT business — pricing strategy, marketing, positioning, productization, process, etc — and compare it to a totally different industry. For example, how does IWT’s product strategy compare to the deodorant or luxury-shoe industry?

Share your responses in the comments below.

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16 Comments on "Pricing strategy: How do IWT courses compete against “free”?"

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YOHAMI
2 years 4 months ago

“when a similar free course” – The “similar” is the lie.

Stephen
Stephen
2 years 4 months ago
TARGET:: Responsible people who want to also become more successful in “x,y,z” aspect of their life ACCEPTANCE:: Is limited to prequalified individuals who are almost guaranteed to succeed. OTHERS DO NOT:: create a culture of success, establish prequalified candidates that are highly engaged, mentally/emotionally/financially prepared for your course, give them tools to be successful in any way other than in a single business model. IWT=COFFEE:: Starbucks is great and they educate and engage their customers more than any other… In general. But does that mean one Starbucks location earns more than say, a single privately owned coffee shop? Of course… Read more »
Marek
Marek
2 years 4 months ago
Who do I target and NOT target? From what I had noticed, you target people who have the same or similar mindset (who would pay for your course if they didn’t have that mindset?) and especially are willing to take action, otherwise it’s just a waste of time. Which decisions do I make that others in my space do not? You are kinda (or all) perfectionist so you aim for the best courses (as you always say) for the best results and you are not going below that, never. Pick one area of the IWT business — pricing strategy, marketing,… Read more »
Patrick Huizinga
Patrick Huizinga
2 years 4 months ago

I’m don’t know about the other 2 questions, but

2. Which decisions do I make that others in my space do not?
A: As you also mentioned in your post, you refuse people who have credit card debt. The kind of people who ‘clearly’ would benefit the most of advice on money and wealth.

(Not really of course. Most likely the people who have credit card debt right now would probably have twice that debt after their income is doubled.)

Jacob Karasch
2 years 4 months ago

1: You target people who are serious about creating a better life for themselves. Charging fees filters out the people who aren’t ready to commit to changing themselves.

2: You decide to forego profit ($2mm/yr) in order to focus on ideal clients with higher potential and a higher success rate.

3: IWT pricing strategy can be compared to that of an exclusive night club. Your high prices mean only a certain type of person gets in and the experience can be laser targeted to their wants and needs. It keeps the quantity down and the quality up.

Grace Miles
2 years 4 months ago
You target people who care about succeeding in some part of life, people who will actually follow through. (You sift them out with long emails, no-nonsense attitude, and premium pricing.) You don’t target people who are passive or who just don’t have the drive, people who are negative and whine. Decision-making: You research unmet needs like crazy. You get into people’s heads and find out what they really need, even if they can’t articulate it themselves. (This is classic design thinking!) You give away much of your material for free as a way of sifting through people who are serious,… Read more »
E.S.
E.S.
2 years 4 months ago
1. Well I think it’s easy to say “you target awesome people who are good at life”, but my theories on the targeting you talk less about, which involve actual choices: – Young adults (20s-early 30s) – you’ve said things like “we millennials are willing to work hard”, plus this age group is likely to be a bit short on money, so a good target for Earn1K. PLUS, likely to have cognitive dissonance between the perception of a career (passionate, fulfilling) and the reality of a day job, making an ideal target for Dream Job, ZTL, etc. – “Left-brain” thinkers… Read more »
Mark
Mark
2 years 4 months ago
Who do I target and NOT target? – You target people who can pay. Ethically, credit card debt is a huge issue, especially for premium products, so excluding these individuals establishes your ethics and lays the foundation for future clients. It also tells us something about you. – You target people who are willing to pay a premium. These people aren’t going to nickle and dime – they are committed to your materials and are more likely to put in the effort. These are “good clients” that aren’t going to refund as soon as you ask them to take some… Read more »
Raffy
2 years 4 months ago
Ramit & team, congrats on a wonderful business! I joined RBT a few months ago and have found the sign up process and further contact eye opening in terms of building a customer base than nothing else! 1. Target- The language and tone seem to select people who already have a skill who are unsure of themselves in the greater marketplace. The content is geared toward shifting the ‘unsure about my skills’ mindset to ‘of course I can meet and exceed you expectations’ which is really a key difference. Most top performers after a certain point are no different in… Read more »
Brendan
Brendan
2 years 4 months ago
Skipping the first two because they’re less interesting to answer. For the third one… Progressive. Yes, the car insurance company. Progressive’s price comparison tool is a clinic in customer selection. Progressive’s business model isn’t about insuring everyone – it’s about insuring the highest lifetime value customers. When they show their price alongside their competitors’, they’re counting on you picking the cheapest option, even if it isn’t them. If you’re a high-risk driver, their price will be higher than their competitors. If you don’t buy from them, that’s fine – they didn’t want you. If you’re a low-risk driver, their price… Read more »
Raf
Raf
2 years 4 months ago
1. You target people who want to lead a rich life. Through money, through time, through everything. Not those people who want to live frugal lives and save a few dollars on toothpaste a year. Which decisions do I make that others in my space do not? 2. You make decisions in regards to who you are writing for and who you are not. People in personal development have the fishing net out as wide as possible. They hope for as many fish to come up by the boat so they can snatch all of them up. Not realizing that… Read more »
Olga
Olga
2 years 4 months ago
I think the mindful comments above lead us naturally to the 4th question, which I’d rather ask than simply reply to the 1-3 set. And the question is: 4. What is it what IWT is actually selling? Is it the prestige as Raf’s comment may suggests? Or is it the feeling that, because we are with IWT, we are not the whining unwashed masses? Is it the network of people at similar age with similar mindset (completely invaluable when one needs support in reaching goals)? Or is it – as the DJ description says – ‘a little help and a… Read more »
Average Investor
2 years 4 months ago

Always be investing in yourself 🙂

stace
stace
2 years 4 months ago
Who do I target and NOT target? – Tertiary educated, intellectually minded, nerdy but hipsterish types too (not the full wanker ones who are into looking dark and too aloof to work) and Indians/non white ethnics, (and whites who are “global citizens). There seems to be a lot of I want to run the world types but also generally people who are marketing/photographers/designers/programmers/bloggers and want to make their own living/get some sort of meaning and progress at work/people who like learning for it’s own sake and behavioural psychology, people who might not want a conventional job. You do NOT target… Read more »
AARON
AARON
2 years 4 months ago
Ramit, here are my answers to your questions: 1) You target young (i.e., under the age of 40), urban (city dwelling) career professionals with a disposable income greater than $40,000 looking to take themselves to the next level in focused areas such as small business development (i.e., Earn 1k) and job hunting (i.e., Find Your Dream Job). You do not target the poor (i.e., make less than $35,000 per year) or the un-confident (i.e., subscribe to your email subscription list but NEVER purchase one of your courses out of fear that they may or will fail). 2) You make marketing… Read more »
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