Choosing The Right Revenue Model For Your Edtech Business

The pandemic gave the edtech industry a boost and gave rise to a lot of new ideas. In 2020, global lockdowns stopped people from learning face-to-face in schools and universities. At the same time, many adults had more time to learn new things at home. At that time different Edtech business models come to teach everyone. Edtech Business Model For Education App gave the world the flexibility and remote access to education that it needed.

What does this fast growth mean for edtech now, and what can you do to make sure your Edtech business model does well?

For one, it means trying to stand out in a market that is getting more and more crowded. And if you do beat the competition, you’ll need systems that can grow with you as your business does.

All of this is based on how you bring money into your business. And because there are so many to choose from, it’s more important than ever to find the right one for your business.

In this guide, we talk about the pros and cons of some of the most popular SaaS revenue models for edtech businesses.

Selecting the Best Revenue Model

The best business model for you will be determined by a variety of factors, including: • 

The clients you serve. Varied types of customers have different purchasing tendencies. So, consider who you’re aiming for. Is it the general public, educational institutions, or someone else? Are institutions privately funded or run by a local government?

• Customer location: Different income models are more popular in different locations. Some nations also have distinct legislation surrounding software sales tax and security on recurring payments. And you should think about these things before making a choice.
• The product or service you’re promoting: Is this something you anticipate people using on a regular basis? Is it better suited to a one-time purchase?
• Your business stage and growth plans: If your primary goal is to acquire more users, your revenue model should support that and assist you in getting people. Whereas a company focusing on maintaining its present customers may invest in optimizing a subscription model.

5 Edtech business Models for Revenue

Here are five prominent income models used by successful Edtechs:

1. The freemium business model

A freemium approach involves providing a free version of your product or service. It contains enough functionality to demonstrate the worth of your product while remaining limited enough to attract users to upgrade later.

Pros

It’s a good approach to encourage more people to use your product and differentiate yourself from competitors that don’t offer a free version of their own.

By providing clients with free access to your product, they can see for themselves how important it will be to them.

A freemium approach can help you keep consumers for a longer period of time. Users should be less likely to churn because they already know what they’re going to pay for.

Cons

Using a freemium model requires you to walk a tight line between providing a valuable free service and convincing people that your full product is worth paying for.

If you don’t leave your free users wanting more, they’ll stick with what they’ve got. However, if your free version isn’t up to par, you risk losing them entirely.

Before choosing the freemium model, edtech companies should think about how they will convert their free users into paying customers. 

2. Ad-supported model

With an ad-based model, you make money from your product or platform by selling ad space on it instead of charging your users. It is often used together with a freemium model.

This model has been used successfully for a long time by Spotify. It plays ads between songs that its free users are listening to.

In the world of edtech, the language-learning app Duolingo has brought this model to a large number of people. It has 40 million active users who use both its free and paid features.

Pros

Even if your product is free, you can still earn money from it. This means that you are likely to successfully keep that version free for a long time and it won’t stop your growth.

Users might switch to a paid subscription because of ads. Especially for platforms for media or learning platforms where ads come in the way.

Cons

You must ensure that the advertising does not discourage consumers from using your product. We’ve all used apps that had too many ads and then quickly deleted them.

You’ll need a strategy for filling ad space, either directly or via a third-party tool. Even if you do have them, you won’t see any revenue immediately soon. To make advertising worthwhile, make sure there are a lot of eyes on them and, in many cases, clicks and interactions as well.

3. Subscription-based model

If your product is meant for long-term use, you’ve most likely considered a subscription model. This means that you keep charging your customers, usually once a month or once a year.

It started with media and entertainment services, but now you can buy everything from your weekly meals to beauty products through a subscription service. And your edtech, of course.

Duolingo has a service called Duolingo Plus. For the first 14 days, you can use it for free, and then you have to pay a monthly fee. Others, like Kahoot!, have a variety of paid packages for individuals and teams, and then offer custom pricing for large businesses

Pros

Subscriptions are adaptable. It allow you to bundle your product in the most effective way for your company and customers.

Recurring payments provide you with a more reliable stream of revenue as well as a loyal customer base for future upsells or add-ons.

Cons

To manage recurring payments and subscription logic, you’ll require technology. That means either finding a payment gateway and a subscription management tool or using an all-in-one solution. Regardless of how you manage that infrastructure, the subscription process should be easy for the consumer, or you risk losing them.

4. The marketplace model

If you want to host learning materials from many vendors, a marketplace model might be the way to go.

It’s a strategy employed by businesses such as Amazon and Etsy. But Apple’s App Store is likely the most well-known as a marketplace. These businesses host various merchants and receive a percentage of their sales via their platform. Some marketplaces charge merchants to be listed, which is analogous to charging for a pitch or stall at a traditional market.

This strategy has not gone unnoticed by edtech companies. Udemy’s online courses is the first to do so. 

Pros

It creates many revenue streams because each seller will have their own items and services.

If you charge a listing fee, you can make money even if not all of the products or courses you list sell well.

You won’t have to worry about sales fulfilment because that will be handled by the seller.

Cons

To make your marketplace successful, you’ll need a lot of sellers. And a large consumer base can bring you a percentage of each sale.

You must manage both seller and buyer relationships because they are both your consumers.

You don’t have full control over everything. If customers aren’t happy with what they buy from a seller, it could also hurt the brand of your marketplace.

5. Channel sales model

When you sell through a channel, you use a third party to help you reach your customers. This could mean selling through a marketplace or through affiliates or a referral partner or programme.

Many businesses select to do this in addition to selling directly from their website to bring in more money.

Pros

When you sell your product through different channels, you can reach new people. More reach means you could reach more customers and make more money.

It’s feasible because it handles a lot of the heavy lifting in terms of operations and sales

Cons

As your business grows, you might want to know more about how people buy and sell.

You have to split the profit with someone else. It could be a fee for sending someone to a marketplace or a share of the money it makes. In particular, marketplaces are known for charging sellers high fees.

Conclusion

As your business grows, you will need to change and improve your business right revenue model. When you first start up, you might offer a freemium service to get people interested. Then, as you grow, come back to the model. As we saw with Duolingo, you may then deploy new models that unlock new revenue streams and give yourself the best possible chance of success.