At the beginning of your course creation journey, making a profit serves one purpose before any other: validation. But this leads you to a dilemma, how much should you charge for your first course? If your price is too high, you may not get enough sales to meet your desired profit goals or build your business so you can start pricing higher. If your price is too low, more people are likely to buy from you, but you may end up losing money when providing any customer support needs.
A customer who is paying for your course is validating many things at the same time. They are saying:
- Your online course content is good enough to fill their knowledge gap
- Your online course provides more value than it costs
- Their knowledge gap is painful enough to warrant paying for a solution
Your online course price should reflect the value it provides to customers. It can be tricky because as time passes, the demand for specific knowledge is continually changing, and it could affect the value of your online course.
Customers calculate the immediate value which they could receive from your online course. They try to figure out if the benefit significantly outweighs the cost. There is a lot of nuanced thinking that goes into making a purchasing decision. As a result, you need to consider the implications of pricing your online course either too low or too high.
Giving your online course a low price point means that more people can buy it. But it may mean that you end up losing money when providing after-purchase support. There is a risk of this compounding when you attract the wrong type of people, namely “pathological customers”. These types of customers usually have irrational expectations of what your online course should offer them. They might give you their money, but they will also want to squeeze the most value out of your after-purchase support for the lowest price.
A low price signals to a customer that you think your online course is worth very little. As a result, this might scare away customers who are looking for high-quality products.
For this reason, it is crucial to frame your expectations as an instructor and understand your target audience. An ordinary person might struggle to see the value of paying $199 for an online course. To them, $199 might mean a pleasant weekend away with a special someone. However, to an employee, $199 of a company’s money likely means absolutely nothing. Especially when management compares it next to non-software items on a budget such as a single employee’s salary. An organisation is less likely to economise for $199 as it achieves no valuable business goal.
Overpricing your online course is not as bad. You’re communicating that you think your product is worth it. You’re showing that it will fill a knowledge gap for experts, for the people who know what they are doing. But unfortunately, it might also put your online courses at an increased risk for digital product piracy.
As mentioned above, don’t underestimate the signalling value of an online course’s price. If your online course’s price is substantially lower than others, customers who care about quality will think that you are worse. Fortunately, with high-priced online course content, you only need a fraction of the number of customers to become sustainable. For example, ten bargain-seeking customers might have unreasonable expectations for what $500 buys them. But if you sold your online course at $5000, then dealing with a single customer’s query instead of ten separate queries will not put so much pressure on your time.
However, it might not be possible to price your first online course highly. You might need time to become recognised as a well-established expert in your industry. After this, you can raise prices and charge higher rates because you have the success and credibility that places your perceived value more than a competitor who is charging lower prices.
Len Markidan of Podia recently looked at the data from over 133k course sales to see if he could find any insights to solve the online course pricing dilemma. He learnt the following things:
- The average online course price today is $182.59, which is a reasonable place to start as there is no industry standard for pricing
- Following on from the point above, if you’re still establishing yourself as an industry authority, set your baseline online price between $50.01-$100.00
- Always consider your competition as online courses usually fail because of two reasons: 1) a lack of market need and because 2) the competition drove them out
- If you can address the customer’s knowledge gap better than your competitor, then you won’t be so beholden to their prices
- Don’t neglect to add market spend into your number crunching, as you’ll need to set aside a sizeable portion (18.5% is the baseline) required to remain competitive
- Consider the minimum you need to charge to recover your costs while staying competitive for the same niche audience
- Following on from the marketing point above, capitalise on email marketing to make the returns on your investment
As mentioned at the outset of this article, the price is only secondary. It should not be higher than the online course value, but it should allow for content validation. It might not be the perfect price, and you might need to leave money on the table. To quote Markidan, “online course pricing may feel like trying to read an arcane book of magic, but it doesn’t have to curse you to indecision”.
But remember, this is your first course, and it only matters at this stage to show that there is a market for it. Early pricing services to validate your initial course offering. Later pricing optimises overall revenue. Remember that you can adjust your prices as you gain a more significant foothold in your market niche.
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Markidan, L., 2018. How Much Should You Charge for Your Online Course?. [online] Podia. Available at: https://www.podia.com/articles/how-much-should-you-charge-for-your-online-course [Accessed 21 January 2021].
Kahl, A., 2020. Your Initial Pricing Will Never Be Right, But Try Anyway - The Bootstrapped Founder. [online] The Bootstrapped Founder. Available at: https://thebootstrappedfounder.com/your-initial-pricing-will-never-be-right/ [Accessed 21 January 2021].
McKenzie, P., 2012. The Black Arts of SaaS Pricing. [online] Kalzumeus Software. Available at: https://training.kalzumeus.com/newsletters/archive/saas_pricing [Accessed 21 January 2021].
McKenzie, P., 2012. Ramit Sethi and Patrick McKenzie On Why Your Customers Would Be Happier If You Charged More. [online] Kalzumeus Software. Available at: https://www.kalzumeus.com/2012/09/21/ramit-sethi-and-patrick-mckenzie-on-why-your-customers-would-be-happier-if-you-charged-more/ [Accessed 21 January 2021].