Edtech marketplaces don’t need creative gimmicks — they need data: Here’s what to track

By Ksenia Novikova, head of operations at F1V

As a head of ops and growth, I’ve seen countless startups struggle, including edtech companies. Over time, I’ve developed a rescue plan for the companies in this industry.

The majority of edtech marketplaces make the same mistake: While teams focus on flashy features and creative gimmicks, they often neglect the fundamental financial, marketing, and teacher operations that are critical for this type of company.

In this article, I cover the main metrics to watch at edtech companies. I also mention some of the first steps you can take to fix any problems that can come up.

Examine trial-to-pay conversion rate

The trial-to-pay conversion rate indicates how effectively the platform converts trial users into paying customers. In the edtech industry, a conversion rate of around 25-30% is considered healthy.

To optimize this metric, map the user journey and analyze conversion rates at each stage. Where do users drop out? Identify the funnel stages with the most significant drop-offs and focus on improving them. If there's a drop between trial sign-up and first user engagement, enhance onboarding or content accessibility.

During the trial lessons, work on your sell point. The tutor’s goal is to show how the lessons help students achieve their goals and meet their needs. A good idea is to prepare a presentation that will show how students will benefit from your courses.

Gamification — like adding rewards and badges for completing onboarding — also works well to improve the conversion rate.

If students drop off between the end of the trial and the subscription decision, re-evaluate pricing or simplify the payment process.

Lower CAC rate

Customer Acquisition Cost (CAC) determines how much it costs for your marketplace to onboard one student.

To calculate it, edtech marketplaces need to consider two main components: the cost of marketing and the cost of sales. If an edtech marketplace spent $3,000 on digital ads and $1,000 on sales calls and managed to onboard 100 new students, the CAC is $40.

To understand if CAC is too high, calculate the LTV:CAC ratio. The 3:1 ratio is a golden standard. If the CAC is high, you are wasting too much money to bring in customers.

To lower CAC, an edtech startup should work on marketing and sales. Below are some ideas on how to approach them.

Marketing

• Run as many tests as possible to find the most effective marketing channels, creatives, and messages for the target audience.
• Offer more free content (webinars or free training) to lead potential clients to trial sign-ups.
• Encourage referrals by offering discounts or other bonuses for students who invite friends to try your services.

Sales

• Regularly review and update sales scripts to align with new market conditions and customer preferences.
• Provide a free product trial and collect feedback after users complete it to gather more information on how to improve your services.
• Prioritize sales efforts on leads that have shown high engagement or interest in the platform. Proactively call and email users near the trial expiry to walk through the value delivered.
• Offer different subscription packages: monthly or by the number of lessons. Determine what works better.
• Offer payment plans and installment options to ensure ease of payment.

Check if the take rate is adequate

Take rate is the commission that online learning platforms charge teachers or course creators for connecting them with students. Edtech marketplace Preply, for example, charges teachers 18–33% per lesson. The more hours the teacher works, the lower the commission.

Sorry for stating the obvious, but setting a low take rate to attract more teachers will result in financial losses. There must be a balance between offering a competitive take rate and ensuring your financial viability.

To ensure your take rate doesn’t lead to financial troubles:

• Calculate all expenses associated with running your edtech platform, including hosting fees, marketing, customer support, and administrative costs.
• Compare take rates with other edtech marketplaces.
• Estimate your transaction volume over a given period: course sales, lesson bookings, etc.
• Develop a simple financial model considering your costs, expected transaction volume, and potential take rates.
• Find the take rate that enables you to cover expenses, generate a reasonable profit, and remain competitive and appealing to teachers.

You might need to adjust your take rate as your platform grows and your costs change.

Make sure your platform is tutor-oriented

The goal of any edtech company is to cultivate a passion for lifelong learning in students. In edtech marketplaces, student engagement and your profits are directly tied to the performance of tutors. This is where a rockstar teacher operations manager comes in.

Hire a separate person to handle teacher operations. They will be responsible for onboarding, training, and managing teachers’ performance.

First up, onboarding. Create a short, easy-to-understand course on how to work on your platform and what teaching methods to use to teach students. Provide tutors with tools to create interactive teaching materials, including videos, quizzes, and other resources to improve the learning experience.

Always measure each teacher's effectiveness and keep them busy to 100% of their capacity. Implement KPIs that track the average number of lessons taught by each teacher. Offer bonuses for completing a certain number of lessons as a good motivation.

Make the process of getting money out of the platform as easy as possible. Try to provide teachers with the ability to withdraw their earnings when they want.

Invest in the professional development and growth of your teachers. By supporting your teachers' continuous learning, you increase the quality of teaching on the platform and also demonstrate your commitment to tutors’ long-term success.

This article originally appeared on Hackernoon, titled "Edtech Marketplaces Don’t Need Creative Gimmicks - They Need Data: Here’s What to Track."

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