COVID19 and Learning Systems Trends

Normally, opening up a post with a witty line or two comes quite easy, but nothing about this virus is easy, nor should be written with any form of wit. 

In the learning system space, despite what you may have heard or read, or in some cases, read pre-pandemic for projections, for many of the vendors, it is equally rough in comparison to many other industries, regardless if they are brick and mortar or online only.

Impact – Sales: What the Trends Show

Overall, for Q1 (Jan-March in a fiscal calendar year, and Q3 in a calendar year that starts in June), sales were better than expected. But with that comes an asterisk.

Vendors found that if the customer was already in project mode (i.e. the system was being built or contract was signed), then they were moving forward.

But, on the other side, there were customers in the pipeline, either about to sign, or close enough that the assumption was there, that backed out or requested a delay. 

One would anticipate that to be the case, yet, what folks I believe were surprised to learn is that an OR was occurring.

Companies (inc. non-profit, association, SME, large, B2B, etc.) were either pulling back OR wanting to buy a system now.  As in right now.  Immediately.  These customers didn’t want to wait any longer, with a remote workforce, purchasing a system was necessary for them.

If they wanted an LXP as the must now, then they bought it.  If it was an LMS, then an LMS.  This is a plus to the industry, because it is unexpected, but it comes with caveats:

• When people said now, they were thinking they could have the system up and running within a few weeks, which is normally not the case in terms of how long it takes to implement a system and go-live.  Flipping a switch is doable in the buy now, go live now mode, think self-service.  But, even if you have 250 employees, and purchase a learning system, it may take a month for design and so on.   In the industry as a whole, (pre-pandemic), the vast majority of systems can implement and go-live in under three months. 
• Too many clients are not doing any form of due diligence.  They are just rushing to find anything that they can purchase and go-live – a good reason to read “How to Pick the Wrong System” so that you avoid doing it.
• Vendors are reporting an increase in phone calls from folks and the questions they are asking seem to be back to the fast turnaround aspect, rather than asking for a demo straight up and thus push the questions as part of that demo (An approach I would recommend and take).
• The infamous “we have to qualify you” – is out the window. Showing that this approach that many vendors love to spout to truly see if you and them are a match, is just poppycock to begin with (I never understood a vendor saying this, when they are in the business of selling, not matchmaking).

Sales in Q2 – Trends

The “we need it now” is continuing as a whole, but not every vendor is seeing this, and even those that are, not everyone is closing the deal.  The trend line is pointing towards, not a strong Q2 for vendors (overall), due to the following:\

• We want it now will continue – but I do not believe at the fast clip that started to occur in March (end of Q1) and into April (start of Q2). What I am projecting is a slow down in “we want it now” beginning in mid-May and going into June.  If more countries re-open for business by the end of May, as it appears to be the case, then this will change the “we want it now” and slow it down.  For countries like the U.S., where it will come down to the states on when to open (if they have been in a lockdown), a Q3, should see a flatline of “Now” verus “what it used to be”.

Realize that the days pre-pandemic in terms of close times, sales, etc. will not be like it was, when everything opens up.  We are in a recession, and could easily drop into a depression, globally speaking. 

In the financial crisis recession, and post financial for the first two years thereafter, these trends in the learning system space appeared

• Price per seat dropped.  The days of charging $48 a seat or $40 a seat, were gone.  Many vendors went to the $20-25 a seat for under 2,500, and at 5,000 it was not uncommon to see $15-20 a seat (this is per year mind you).
• SSO and similar were included at no additional charge. 
• Setup fees were either dropped (although in actuality, hidden elsewhere) or reduced.
• API fees reduced, some vendors waived
• Support though didn’t change, vendors really didn’t add more support, provide more hours to you (if they charged for that).

What every Vendor Must do for the remainder of 2020, and into 2021 to acquire new clients, keep current clients and retain them when contracts are up

• Be flexible.  This means offering to restructure the deal. Even if the client isn’t asking, if they are close to a renewal in Q3/Q4 2020 or Q1 2021, offer them a better deal, and lock it in (i.e. some vendors pull the 10% increase angle in their contracts, due to cost of doing business).   If you have a prospect says we are going to hold off, offer them some alternatives:

a. Special deal that doesn’t require them paying any money up-front for the first three months, or a very small amount (say 10%).  If you are a vendor who does a “pay annual up-front”, change that.  The client only pays 25% up-front. 

b.  If you do a three-year discount, offer to spread the discount over the three years, rather than just the first year.  Let’s say you include a 20% discount.  If the customer wants it to be 10% in year 1, 5% in year 2, and 5% in year three, agree to it. 

c.  Throw in some things for the client.  Include at no charge SSO, API, custom domain, and other items you normally charge.  Add in some content too.  Especially today, people are seeking certain content more than others, remote teams, remote workforce, and so forth.  A couple of Microsoft 365 courses like Excel and Word is a smart move. 

d. Offer a higher level of support, and do not charge them.  Vendors will find a way to hide the fees, but some should just eat the cost.  People never forget when vendors go beyond what they expect.  Since support is the number one issue in good times, trust me, this isn’t the time, to keep it as it is. 

e. If it is a very large client, offer one of your employees to be an admin for them for the rest of the year.  So, if the client has 50,000 or more employees or is doing 50,000 end users a month or more (B2B/customer training) – provide an additional level of service with an employee at your company for the time being (if you can).  A client can always turn it down, but making the gesture is a nice touch.

Trend – Projections

Any article or research you saw in Q1 as it related to financial projections of the industry or e-learning for that matter, should be tossed in the trash.  There isn’t any way, those numbers are going to be even close to accurate – due to the virus and its impact. 

Thus as a vendor, you should be going back and looking at your projections pre-pandemic and updating them for the rest of the year.  Even if you are seeing increases or better than expected numbers for early Q2, do not assume it will stay like this for Q3 or Q4.  I for one, do not expect it to stay as it is.

Trend -Wait and See

As mentioned earlier, not every vendor is experiencing the wave of “I want it now”, and there are customers/prospects asking if the vendor can do this or that for them.  The answer every vendor should say is YES.

There are customers who are waiting it out, and I expect this trend to continue, especially if (I’ll refer here to the U.S.), the states they are located in, do not follow what the President wants to do (whenever he decides on opening up), because he does not have final or total authority (just in case you were wondering – it is in the 10th Amendment).

And there are already indicators in countries that did open up, of a virus uptick with workers, another factor on why I see this trend continuing.

Trend – Layoffs

It started with a couple of vendors, in February, but it had nothing to do with the virus, however, in just the last 1.5 months, there have been layoffs directly due to the virus impact.  This includes one vendor who received a large amount of PE funding. 

If you are a vendor whose sales are dropping lower than your projections, and you have a large staff, something has to give.  Not to be a harbinger of doom here, but I expect more layoffs in the industry especially Any vendor who has a large number of clients in the retail, restaurant/hospitality and FS verticals (if the JP Morgan data just released is an indicator).  

Vendors who have a large number of banks for example, are seeing drops in sales.

Vendor Impacts

Expect to see drop off from the vendor standpoint in the following areas:

• Marketing – getting the message out, this includes a downturn in traffic to vendor websites.  I would not be surprised to see vendors doing cuts in staff in Q2 or early Q3)
• Sales – Another area that is seeing some staff cuts, less sales, less need for salespeople. If you are looking at cutting staff in April, consider the wait and see – as it relates to May, if you can, especially if your primary markets are outside of the U.S.

Bottom Line

If you are in the corporate sector, government or education, and you want to buy a system now, there are a lot more options for you to do so.  If you wish to hold, but plan to buy in the summer or fall, you can still look now, then agree to buy with a vendor – in your contract structure it, so you start paying in the fall, even if it requires 5% or 10% up-front.  Vendors are willing to do more deals then in the past, which is a benefit to anyone looking.

On the vendor side, you have to more flexible.  Now is not the time, to stay the course, and follow your sales approach in 2019 or early 2020.  Maybe you offer three months free, if you purchase by X, or multiple training webinars plus free setup, for example.

Ignore telling prospects your NPS (they don’t care), ignore telling them how you are better than someone else, rather show them. 

Because here’s the thing.  For every vendor who is willing to go beyond, there are just as many who won’t.

And for those vendors who think that they do not need to flex, then you as the customer, must walk away.

After all, if this isn’t the time to be flexible,

When is?

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