Can ‘Equity-Based Pricing’ Make Edtech Products More Accessible?
In Finland, a speeding ticket can cost six figures. That’s because the country, like several of its European neighbors, fines offenders a percentage of their income, instead of a flat rate. The idea is that the financial punishment ought to fit one’s privilege in society.
In a similar spirit, an Oakland, Calif.-based company is planning to apply that principle to make its software license pricing more equitable for schools and districts.
BookNook, which develops software for reading and literacy instruction, announced last week that it will adopt an “equity-based pricing model,” whereby the company will provide discounts to schools that serve a high percentage of children who are eligible for the National School Lunch Program (or more commonly known as free or reduced lunch).
“This is the time for companies that are working with underserved communities to look back and see how their work reflects their missions,” says Michael Lombardo, CEO of BookNook. He added that the disruption caused by the pandemic, “which disproportionately affects low-income learners and communities of color, combined with the increased demand for our product,” spurred his team to explore ways to make its product more affordable and accessible.
The new pricing model, which will go into effect on August 1, works like this: The company will look at data from the National Center for Education Statistics, part of the U.S. Department of Education, GreatSchools and other sources to see what percentage of a district’s student population is eligible for free or reduced lunch. For every 1 percent above 50 percent, BookNook will apply a proportionate discount to the licensing fee.
For example, if 51 percent of a district’s student population qualifies for free or reduced lunch, the district will get a 1 percent discount. If the free or reduced lunch rate is 75 percent, the discount will be 25 percent.
BookNook serves nearly 400 schools and nonprofit after-school programs across 32 states. On average, its school customers currently pay about $4,000 per year, though the price ranges from $3,000 to $12,000, according to Lombardo.
“From an equity and inclusivity perspective, providing discounts to a district that may need more is a unique approach,” says Barry Bachenheimer, assistant superintendent at Pascack Valley Regional High School District in New Jersey.
He noted that BookNooks’ approach assumes “there is a correlation between students’ socioeconomic status and a district’s financial resources,” which may not always be the case. Certain districts that largely serve poorer communities have been able to provide technology and other resources.
Still, the equity-based pricing model marks a departure from how most software vendors apply discounts, which are often based on bulk purchases or long-term commitments. Usually, the more you buy or the longer you agree to pay, the better rate you get.
Sometimes, discounts are negotiated on an ad hoc basis, determined largely by a district’s relationship with company salespeople. That has been a bone of contention for researchers at the Technology for Education Consortium, a nonprofit that has published reports on the discrepancies in what districts pay for technology.
Celina Morgan-Standard, founder of TEC, said that BookNook’s equity-based pricing model “sounds great in principle” but could leave room for confusion if companies that adopt it are not upfront about the methodology used to adjust the pricing. “Transparency is key here.”
“There could also be grumbling from districts that don’t meet the criteria” for the equity-based discounts, she adds.
Lombardo says he plans to publish the formula for his equity-based pricing model on the website. He is also prepared to respond to unhappy customers who may soon find themselves paying a higher rate than others. “If you are in a more affluent community, you will be paying more, and we think that’s fair and just,” he says.
While the company expects to take a short-term revenue, “it’s not going to put us out of business,” says Lombardo. He’s confident that the recent surge of interest will offset the financial impact of the new pricing model. Since the pandemic, Lombardo claims his team has seen a 1,500 percent increase in inbound leads on its website, and has done eight times the number of demos for interested parties, as compared to last year.