According to a 2020 report by HolonIQ, the total global EdTech expenditure is expected to reach $404B by 2025 representing a 16.3% CAGR, or 2.5x growth, between 2019-2025. Part of this market acceleration is a reflection of a significant ‘infrastructure catch-up’, as well as a huge increase in student populations within developing countries.
With that in mind, EdTech startups have several new challenges and opportunities ahead over the coming years, especially when it comes to recalibrating their approach to securing significant public tenders and projects. In this article, Classter’s CEO, Nikos Nikou, shares six procurement and retention lessons stemming from the company’s biggest successes and failures.
Successful Procurement: Big doesn’t always mean good
As the demand for EdTech solutions continues to rise, startups may be able to see initial traction through the option of freemium subscriptions. However, monetizing this initial user base can be incredibly time consuming with little return. Moreover, there are substantial challenges when dealing with public tenders, since education is such a highly regulated market, with buying decisions owned by political authorities or government entities. These market dynamics, therefore, become a prominent hurdle for those EdTech solutions looking to be adopted at scale globally. Having said that, there are several lessons that you can learn from, while trying to secure revenue:
1. Large projects can become a big challenge
Your startup should not rely only on big projects and public bids, as they have extended sales cycles that may fail to leverage your company’s local partners and network. It is therefore key not to focus on multi-million tenders alone, but also on smaller tenders that are usually easier to win and do not require long sales cycles. It’s also important to remember that these smaller projects can be a better fit for your strategic goals. Online channels and inbound marketing should also not be underestimated as a means of revenue. Building a demand generation funnel can work to attract prospective customers as well as potential local partners and resellers.
2. Seeking regional partnerships can have as many pitfalls as rewards
Part of Classter’s public procurement effort has included us participating in public tenders across more than 10 countries through local representatives. With that said, we only managed to secure one-fifth of these. Unfortunately, many times we have been surprised to find out we were selected from officials for dubious reasons, including fulfilling compliance regulations that require a minimum number of bidders. However, that is not to say that local resellers cannot play a key role in ventures’ growth. In our case for example, partnerships with local resellers helped us win three public tenders in Malta, UAE, and Georgia. In all these cases, we managed to partner with local resellers who enabled us to have access to public tenders by providing specific market and domain knowledge and bidding capabilities which we could not have otherwise.
3. Different geographies and project sizes require holistic strategy building
Focusing on specific geographies and types of institutions could significantly increase the success rates of your marketing and sales efforts. For instance, in North America, Classter seems to be an ideal solution for seminary education academies and small colleges due to its SaaS, cloud-based, modular nature, but it is generally difficult to penetrate the K12 segment of this market since a deeper integration with state systems is probably required and the market is much more saturated by established legacy players. In contrast, K12 institutions within Europe and MENA seem to have greater capacity and budget for solutions such as ours, while we also face a lower level of competition. However, as we engage more with each local market, we also proceed with adaptations in our platform and marketing strategy to accelerate market penetration.
Retention Rates: Implement, Lock, Owe
The assumption is that the success of a venture comes down to customer acquisition, but is it really the case? Research in EdTech has shown that improving acquisition by 1% can boost your revenue by 3%, while at the same time, a 1% increase in retention will improve your bottom line by almost 7%. Let’s find out what can ruin your retention rates and how to overcome such obstacles to avoid affecting your revenue outlook.
1. EdTech solutions are often perceived as a negative change by management and educators
Hesitation from academic institutions is understandable as they require data-backed proofs that your solution can improve the learning process, employee’s productivity or reduce operational costs. One of the best ways to overcome this resistance to change is to support your sales offering with data-backed success stories from current customers in a specific region. Prove to decision-makers that your solution improves specific KPIs important to educational organizations, relevant to teachers, students, or back-office employees, such as minimizing labor cost, improving academic progress, and increasing application and graduation rates.
2. Absence of management support or internal politics may play a significant role in customer retention
In many cases, low-level management can feel lost in front of a new software solution. The result is that your project is at-risk as you lack the critical internal ambassadors that will drive the adoption of your product within the organization. In such cases, it becomes crucial to offer support through consulting services or detailed product documentation, as well as access to project and account managers who can help to create timely implementation plans and empower customers to be part of that pathway to success.
3. Change of project managers or key stakeholders may cause issues
Professionals in any sector, including education, usually carry a tech stack with software solutions that are familiar and feel comfortable working with. Meaning that with the change of management, a change in such systems is very possible, if time and financial costs allow it. Try to engage and lock your client as soon as possible before a sudden change in key stakeholders cause to lose a customer.
Implementing successful procurement strategies and maintaining high retention rates is definitely not an easy equation to solve. Whilst each case can be different, always remember to bid for large projects carefully, don’t lose focus on smaller projects and have a retention strategy in place for increasing the lifetime value of your won customers.
Nikolaos Nikou is is a contributor for the WISE Edtech Accelerator.