To Price Your Online Course High For Big Revenues, Understand Your Psychology And That Of Buyers. Any Price Can Be Justified If You’re Ready To Be Audacious
It is sad to see so many course-creators box themselves into a low-priced strategy hoping to catch more students that way. In fact, they are all doing the exact opposite of what buyer psychology demands.
When people buy courses, they are not buying products or services. They are not even buying courses. They are buying new improved versions of themselves after completion of the course.
Online courses are opportunities people grab at to make themselves better at many things, and they see the price tag of courses as self-investments. Or if they don’t, you have to make them see it that way.
At Solohacks Academy, we believe that many a course-creator downgrades the purchasing power and willpower of his customers to buy high-priced courses, because he evaluates them via his own low self-esteem. Learn to be audacious to sell online courses with aplomb.
1. Put the wrong ideas out of your head: courses must be margin-based price models, not volume-based price models
Do you know the difference between margin-based pricing models and volume-based pricing models? If you’re not entirely sure, here’s a brief introduction.
A margin-based pricing model is when when you plan to sell a few products to a few people but at high profitability, so that your profit-margins are high and thus your revenues increase. For example, sellers of consulting services may bargain that their prices will be high and they will plan to attract a few well-paying clients, so that their monthly targets of $10000 will be met. You plan to make money from the sheer profit level packed into your product or service.
The same goes for say, sellers of any high priced items … like homes, or cars, or jewellery or big-ticket appliances. They build in high profits into the pricing so by selling to fewer clients they can make big bucks.
A volume-based pricing model is one where you bargain that the profitability in your price will be low, so your real earnings will come from getting lots of customers. A classic case in point would be toothpaste. Sellers make small profits with each toothpaste tube sold, but they get their big bucks from the sheer crowds they can attract to buy their toothpaste.
Their earnings are based on the volumes of products they sell rather than by the magnitude of the profit-margin gained with every product sold.
Now into which of these two categories should online courses fall?
In other words, do you think you will make big bucks by pricing your course high and getting just a few high-paying students per month (the margin-based model)? Or do you think you should make the course price low, and get more customers per month to buy, to make your target earnings (the volume-based model)?
It’s a wrong kind of math that most course creators do. They plan for the second model – the volume based model. They are always tentative and timid about the pricing of their course, so they figure they should lower the price so they can get more customers.
They think that because online courses are “passive income models” (that can make money without your intervention, even as you sleep), they will get hordes of customers signing up every day, all through the day and night, and thereby they’ll make the target profits they want.
So life becomes all about the chase for more and more customers, because the profit gained per customer is low.
If your thinking is volume-based, you have a huge mindset change coming.
Online courses should be sold on the margin-based revenue model, where your prices are high and you need fewer customers, (even if your course is a passive-earner). Courses that sell on the volume-based model are already aplenty on sites like Udemy, where they come for $10-15 per course.
No one values them, finishes them, or gains from them really. Because people who don’t pay high for a course, don’t see it as an investment in their own growth. they don’t finish courses that cost less. They have scant regard for courses that don’t cost a lot. It’s human psychology to highly value that which highly values itself.
I hope I have turned your mind around with this bit of advice. The moral of the story: your course shouldn’t undervalue itself if you don’t want customers to undervalue it … and you’ll get big earnings with just a few customers if you begin to think this way.
2. Nine times out of ten you may be selling your online course too low: not because it may have less to offer, but because you have Impostor Syndrome
If you are at first tempted to under-price your course, you may tell yourself that it’s because you want to test the waters and don’t want to score a duck with your very first course. But dig deeper inside yourself, and you’ll see that you built that course in the first place to position yourself as a person with expertise, authority, and trustworthiness. You built that course because you are better at that topic than the average Joe, right?
Then how come you think that people may not buy a high-priced course from you – or they may do so only if your first course wins somehow through low pricing? On the other hand, what if your first course’s low-pricing erodes your brand value, and you may thereafter never be able to price higher, because you have yourself signalled your low brand pricing with your first course?
See if you are suffering from the Impostor Syndrome
What is this term “Impostor Syndrome”? It’s actually a psychological term. Wikipedia describes it very well:
“Impostor syndrome (also known as impostor phenomenon, impostorism, fraud syndrome or the impostor experience) is a psychological pattern in which an individual doubts their skills, talents or accomplishments and has a persistent internalized fear of being exposed as a “fraud”.
Despite external evidence of their competence, those experiencing this phenomenon remain convinced that they are frauds, and do not deserve all they have achieved. Individuals with impostorism incorrectly attribute their success to luck, or interpret it as a result of deceiving others into thinking they are more intelligent than they perceive themselves to be.”
What this means is that you may in fact be a really terrific expert, but inside yourself, you think you are masquerading as one. You fear you may be “found out” when people pay high for your courses and then say to themselves: “Look at this fraud. I thought he knew it all, and look how pathetic his course is.”
All this expected derision from customers may be totally imaginary
It’s not the customers who are really mouthing these words at you, it’s your own low self-esteem.
I have seen it so often with my own clients that I know Impostor Syndrome when I see it. When it comes to pricing a fantastic course they have created, they balk at putting big numbers on the price tags. They close their eyes and imagine the disdainful comments others may make – and they see hordes of negative testimonials coming at them. They fear becoming the centerpieces of mockery and ridicule on social media. And so the prices of their courses, that may be worth $997 just subside into $97 – or worse, into $27 if there are no immediate buyers.
If you’re suffering from Impostor Syndrome, no one can help you make money from your course but you.
Somewhere inside you is a voice that’s been silenced. It always says, “Get you true worth”. Find that part of you and then proceed with pricing your course. You’ll get out of your own self-imposed cage, and self-imposed financial constraints, for life.
3. Where you situate your courses has a lot to do with your pricing attitude: if you’re among low-priced competition, you’ll worry about being the odd one out
Have you noticed that if you plan to put up your course on a site and platform that sell courses in bulk (like Udemy), you get conditioned by having to price your course like the other courses around you? On Udemy, for example, they sell by a volume-based pricing model. The platform invites several course-creators to host their courses there, even competitors with exact same content.
Would you choose for your course to sell from a bazaar or the high-street?
People who take their courses to sites and platforms that sell courses in bulk, are probably attracted by the idea that there is always a footfall there. They expect there will be plenty of buyers there, who will choose one course over another based on the curriculum they like best … and anyway, all courses are more or less priced at similar price ranges (i.e. low).
If you also join this bandwagon and host your course on a platform like Udemy, can you succeed by pricing at $997, when other courses around you are at the $10-$25 range? The very situation you are in constrains both the perception of your value and your pricing. The competition can easily copy your curriculum and show that you have nothing they don’t have.
Contrast this with those who host their courses on their own sites. Their courses can sell, without any nearby competition, at $997 with ease. The flip side is that you won’t get a course-shopping crowd. You have to promote your course to get that steady traffic to your site. But if you spend on the promotion to proliferate the popularity of your site and your course, you can eventually sell other products via your site too.
Your decision on where to situate your online course has its pros and cons
In principle, it’s always wiser to want to be on your own real-estate and with your own value-pricing of your courses, than to be on a platform that forces low and competitive pricing on you. Further, if the platform changes its rules tomorrow, what happens to your course? They may change their course rating system, and your course which was among the top three on your topic may descend several notches to stand 25th on the new ranking factors. Anything can happen when you are not in complete control.
Moral of the story? Always ensure that your course is on your own site. But, your site will need lots of promotion to attract enough targeted traffic and conversion of traffic to subscribers. Once your own site begins to get substantial traffic, and builds a healthy emailing subscriber base, it will make course selling at high prices easy.
Aim to be on your own site with a built-up “Minimum Viable Audience”
The way to approach things is this. Make sure you don’t launch a course till you have blogged a lot to display your expertise, and have built a substantial subscriber base on your email list. Brian Clark of Copyblogger says you should have a “Minimum Viable Audience” (MVA) on your mailing list.
A Minimum Viable Audience is the smallest possible market you can serve that can sustain your business as it grows. It’s also about targeting specific people who will particularly benefit from what you are offering.
Seth Godin, the ultimate guru of Internet Marketing says:
Stake out the smallest market you can imagine. The smallest market that can sustain you, the smallest market you can adequately serve. This goes against everything you learned in capitalism school, but in fact, it’s the simplest way to matter.
When you have your eyes firmly focused on the minimum viable audience, you will double down on all the changes you seek to make. Your quality, your story, and your impact will all get better.
And then, ironically enough, the word will spread.
Once you have that “Minimum Viable Audience” gained from building your own site, nothing can stop you from building on your financial base. You can sell other products before you sell courses. There will thus be more money to hand for course promotion, and this will all become an upward spiral without any competition around you to curb your cruising speed.
4. Pricing your online course low is really bad for your Knowledge Commerce business: it’s also bad for your product’s and brand’s value perception
A lot of experts agree that low pricing of a course actually lowers its “brand-value-perception” in customers’ eyes. What do they mean exactly by the term “brand-value-perception”?
Value and perception are both not about your course, it’s about your customer
Value perception has actually nothing to do with either the pricing of your course or its genuine value that you have intended for the customers. It is the value that the customers seem to perceive the course may have for them, not the value you think it will give them.
For example, ask customers what you think the price of your course should be and they will state some number they think fit – like, say $97, or $199, or whatever. Now, ask them, “What will this course do to increase your earning power as a person intelligent in this topic?” The moment the course is measured as something that adds to the customers’ self-value, they will probably give you a price number higher than before. This is because the value of the course is being measured against the perceived value of what it can do to improve the customers’ value in the market.
To customers, a branded course is as valuable as it adds to their own value. How they perceive their incremented value is what you should notice, when you try to price your course.
A good way to assess the value-perception of a course to a potential buyer
Given the above understanding of how customers may fix their value-perception of your course, there’s a simple way to find out. Here are the steps of the process, which you can research using a focus group audiences of your course:
- When researching your potential customers before pricing your course, ask them to name their biggest reason for taking the course? What gains are they looking for, or what losses are they wanting to eliminate, by taking the course?
- Ask them if it’s possible to put a dollar number to the extra earnings or savings they expect after taking the course (like say, they want to be able to earn $20K more per month, or maybe save $10K more than they do now).
- Take the average of what the researched audiences of your course tell you. This would give you a sense of what typical customers would perceive as the probable gain from taking your course.
- Now, review the price you had in mind for the course, which you haven’t told the researched customers about yet. See if you have totally mistaken about what you see as the customer gain from the course. Try out the average dollar value they told you they expect to gain, and see if you can price the course as a fraction of that number. See how they react.
- If people say, for instance, that they expect to gain $10K within the next three months after the course, see if you can price your course at around 10% of that gain … maybe, at around $997. Then you could justify your pricing by saying, “What is $997 when you can earn that in under three months after the course.”
- If people think they can earn or save that $10K in a longer time frame (like, in the next 6 months), then you may want to lower the course price a bit because they have to wait longer to see gain. So you may price the course at $699 or so and say, “What is $699 when you can earn that in under six months after the course.”
This is the game of value-based pricing, in short
If there are bigger expected short-term gains, try pricing higher at a higher fraction of the gains. If gains are expected to be slower, price a little more modestly at a lower fraction of those expected gains. Either way, it’s all based on “customer perception” of likely gains from your branded course … not your perception of what the course may be worth to customers.
5. Some experts understand and exploit the psychology of the pricing tiers: know this for yourself, so you can tweak price without affecting demand
I recently read a superb article by Jessica Glendinning titled “How to Price Your Online Course: Essential Lessons From 9 Years of Course Building”. One of the points she makes about course-pricing is based, apparently, on a consumer behavior theory grown out of Marshallian Economics. It was an eye-opener for me – as it may be for you too.
Here’s what Jessica Glendinning says abut “pricing tiers”
We all know that that the more a product costs, the fewer people will buy it. But that’s not the whole story — the key is, the decline in sales isn’t linear and instead happens in tiers.
Basically, there are pricing thresholds that psychologically impact your potential customers. While you’ll make roughly the same number of sales within each tier, once you raise your price past the threshold into a new tier, your sales will tend to drop significantly.”
What does this mean? Let me simplify this idea … there are, it seems, five tiers of pricing that act as thresholds that customers are used to. They are:
Now, if you were adjusting your course price within a tier (say, within the $97 to $197 threshold) there would not be much impact on the number of customers you get. You would probably get just as many customers at a price of $107 as you got at $97. But if your price crosses the threshold of $197, there would be a significant drop in customers.
Similarly, if you adjusted the pricing anywhere between $197 and $497 you wouldn’t see much difference in customer acquisition. But once your course is priced at $497 or above, there would be fewer customers gained than at the $197 price.
This is a good point to remember when you set pricing
Don’t be afraid to raise the prices slightly, as long as you haven’t crossed the threshold of the next tier. So long as you’re within a tier, you’ll find it okay to experiment on price, without fear of losing customers.
6. You can charge any price if you can justify it: see what add-ons you can offer with your online course to make its price seem more than worth it
With all of the arguments I’ve given you above, I hope you’ve got the idea that charging high prices for your online course is not only good for business, but it’s also good for raising the value of your brand and your authority status. Remember this little axiom: the world may sound attracted to modesty in pricing, but it respects and pays for audacity.
The question then arises: how do you justify your high-priced course? Surely, if any price could be charged, as long as it can be justified, there must be some add-ons to your course to help you make a strong price-justification?
There are some terrific ways you too can justify your high-priced online course as experts do
Try some or all of these tactics, to see what works best on your target audiences:
- Explain the differential that your course has over competition. Show people why others don’t offer the kind of innovative ideas or content as you do. You can be different by teaching something very specific. In fact, the more specific your course is, the more you can charge for it. Do you have some exceptional demos or rare case-studies to show>? Can you include some “secret sauce” into the course that is all yours? Think of what you can do to make the course just that tad extra-special to be able to price it higher than similar courses of others.
- Make your bustling and energetic student community forum an irresistible attraction. Most online students are lone learners who may yearn to hang out with like-minded company. Tell students they can not only get access to you through this forum, but also brainstorm with all your other students, to everybody’s benefit. Give potential students a sneak preview of your vibrant forum. A lively forum is a price-justifier like no other.
- Throw in some private coaching sessions as a bonus. A lot of students appreciate any one-on-one training or coaching they can get within the price of the course. Don’t overpromise on this and overextend yourself. But do see if you can give every student at least one private session with you on a 20-minute Skype call, for instance, just to make the course feel more like a quasi-mentoring session. It immediately raises the value-perception of the course.
- See if you can have an “office hours” session about once a fortnight – these can be Group Q&A Sessions, where questions can be sent to you in advance, and you can answer them as you’d do in a webinar. This idea can be converted into a massive hit if you can rope in other A-lister experts to help answer your students’ questions. These kinds of “group sessions” are a way to greatly enhance the value of the course by allowing space for top-grade interaction.
- Offer a certificate or badge at the end of the course that can add to your students’ credentials. See that they can share their achievements on social media, or wear the badge proudly on resumes, websites, or social profiles. Certificates and badges can, of course, increase course value. But additionally, the idea of getting something tangible that recognizes completion of the course will be an incentive for students to actually stay with the course to the end. This builds more loyalty, and creates the opportunity for purchases of other products from you.
7. People like 3 types of learning: the question is, why price for one consolidated course when you can unbundle the content and charge for 3 separate courses
If you examine any topic, you’ll notice that people need to know three things about it:
- What is this topic all about? CONCEPTUAL UNDERSTANDING is the first key to obtaining full knowledge of a topic.
- How do I best use this topic as part of my success plan? STRATEGIC UNDERSTANDING is the second key to gaining more knowledge of a topic.
- How do I implement this topic for the best results? IMPLEMENTATION UNDERSTANDING is the third key to rounding up knowledge of a topic.
Most often, course-creators tend to offer all three of the above types of learning in a single course. For example, if the course topic is about the value of “Branded Content”, then most course creators may believe they need a course which incorporated all three aspects – what is “branded content” as a concept, how is it to be used as strategy for business success, and finally, how does one implement and use branded content to best effect.
See the extra earning potential in unbundling a large topic
If you truly dive deep into the topic, you’ll soon realize it may be a fairly mammoth subject. The concept may have many aspects to it that students would do well to get a grip on. The strategy might be another massive topic altogether, if you explode all the possibilities. And the implementation may involve several steps to the process, if shown in detail.
The question to ask yourself is this: if you gave it all as one course, how much could you charge for all that knowledge? And if instead, you chose to unbundle the whole content into three dovetailed courses, could you charge more for the set of three courses than you could for the one consolidated course?
There are more benefits to unbundling than just a price-gain
Chances are that if you do unbundle the knowledge you gather into three separate courses, you can charge more. Each of the courses could take a deep dive into their area of the topic to offer enough justification for their pricing. Not only is there this advantage of higher earnings from unbundling, but people will also discover that none of these courses individually will be fully valuable without the other two courses also being completed.
What would a student do with only understanding a concept, if he couldn’t strategize with it, or implement it with care? What could he do with just the strategy, if he hasn’t understood the conceptual basics of a topic, to begin with? And how does he implement any topic without knowing its fundamentals, and also learning how to action it?
Unbundled knowledge is a win-win for the customer and the course-creator
One further advantage is that when you unbundle knowledge and offer multiple courses as sets or a series, the customer feels as if he has an easier payment plan – he can pay for one course after another, even if he ends up paying more than he would have if it was all just one large course.
The time to check if your course topic has enough meat to warrant unbundling should be when you are researching your topic content. If you sense there is enough in the topic to create many courses as a series out of it, by all means do unbundle the package and sell each part for a good price.
Don’t fall into the trap of thinking people will buy your course only if it has everything in one course. People actually prefer phased course-sets. To the customer, it feels easier to learn and easier on the wallet … while for you, the course-creator, it’s also a win, because you gain more earnings in the end, and you can aim to retain the customer throughout the course-series.
8. Two things every course-marketer should always have: one, a clear financial goal to earn from courses – and two, a great mailing list to work on
There are two things you may forget when you’re frettng about course-pricing – and these two points have a direct bearing on the pricing you set. Here they are:
Check if your pricing is in alignment with your own income-earning goals from the course
It often isn’t enough to just see what prices customers may buy courses at, or how competitors are pricing their courses. You need also to focus on what your money goal is from selling your course. Try to get a fix on what you’d like to earn from the course. Then work backwards to see how to set a price, so you have to market your course only to as many students as you can realistically get.
What do I mean? Here’s an example. Let’s say you have a wonderful money goal. You want to earn $20K per month from your course.
Now, let’s say you tentatively price the course at $200 or thereabouts. That means you have to find 20000/200 = 100 new students every month to sign up for your course. Let’s say your success rate with sign ups is about 2%. In that case, you have to promote your course to a targeted audience of about 5000 people per month. Is this feasible for you, month after month?
What do you do if the math is simply impossible? You can do two things, First, try a price increase on the course. Say you double the course price. You still have to find 2500 people per month to market to get 50 students who’ll pay you $400 or thereabouts for the course.
If even this sounds too much to achieve, you’ll just have to lower your earning goals. If you do that, and increase the course price a bit, you could end up with a happier equation – one where you need to find fewer students who will pay more, and your earnings can still be healthy, if not over the top.
Remember that 2% conversion from an emailing list is the industry standard
You may ask why I used a 2% conversion rate in the above example. Well, that is the industry’s benchmark for course-conversion rates, if you have a mailing list that’s healthy. One factor you must notice is that it’s always easier to sell courses to email subscribers than it is to broadcast ads or social updates to all and sundry online. Targeted email lists, where people have been primed with blog posts and email marketing enough to trust you, are the best prospects to buy your courses. Once you’ve built a good emailing list, you can expect to convert about 2% of those subscribers to buy your course. Any other assumption may be a tad unrealistic.
So let’s check out the math again. If you’ve got, say, 1000 people on your email list, maybe 20 of them will convert to buy your course. So if you want to earn $10,000 from course-selling, you’d need to sell your course for at least $499. If your current course hasn’t enough quality and quantity of content to warrant that kind of a price tag, you’ll have to think of ways to make it more attractive at that price – with lots of value-adds, like downloadable worksheets, Q&A sessions, consulting or mentoring add-ons, an enticing forum, occasional A-lister guest speakers and webinars, and so on.
9. When in doubt, settle on $197: it’s the sweet spot of course-pricing, and there are strong reasons why $197 almost always works
Sometimes you may worry so much about the pricing of your online course that you forget other things like content finessing, promotion, ecommerce and student-care. In cases where you think you’re wasting too much time on the pricing there’s a simple strategy: if this is your first video course online, charge $197 for a video course … and don’t worry beyond that.
Bradley Stevens emphasizes this approach in his article titled “The Backwards Pricing Principle for Online Course Creators”.
Once you decided on this price, he says, work in reverse order to see what you can put into your course to justify this price of $197. The question to ponder about would then be, “What can I pack into my course that seems truly worth $197 to a potential student?”
In other words, forget worrying about the price, and worry instead about the quantity and quality of content in the course.
In case you’re dying to ask why $197 works so well for most courses, here are Bradley’s reasons
$197 is a just-big-enough price for these reasons:
- You course sounds valuable when it has a three figure price tag
- It has enough profitability in it to sustain your course promotion, if not more than that
- You have some leeway to tinker down the price, if needed
- Most online students have learned to expect this price, so there’s less justification required
Also, $197 is a just-small-enough price for these reasons:
- Your course creation becomes easier without overstretching yourself to make a meatier course
- You limit your financial risks, if god forbid, your course doesn’t take off
- The price is viable as a competitive tactic, since many competitors may also be in the $197 mindset
- Students will be less demanding of the course than if they had to pay $449 instead
The simple axiom when you get all caught up in pricing dilemmas is this: when in doubt, settle for $197 and get that course out.
10. If you think your online course is going to be your wealth creator, think again: it’s what you earn after people take your course that is the money-spinner
It’s often the case that course-creators see their courses as the top end of their spectrum of products and services. You’re selling courses for $997 apiece? You’re made! That is your earning power.
But read what Sarah Cordiner says in her article “How To Price Your Online Course”:
Although online courses can certainly be profitable in their own right and have the potential to earn you a limitless income stream, it’s what your course leads to AFTER the sale that really creates wealth.”
Posting a successful course on your site will lead to more and bigger money earning power
Your course will build a lot of trust in you as an expert, and authority, and a thought-leader. It should ideally lead to more business – such as speaking gigs, invites to be the guest on podcasts, requests for one-on-one coaching at top-consultant rates, or requests from 9-figure businesses to train their staff on a regular basis (depending on your topic).
For sure, courses are about 90% passive income, so it’s nice to dream of a life where money just pours in without your involvement. But if you are ready to put yourself out into the world in a personally available mode, the traction built up by running courses may be all the promotion you need to land big-money assignments that pay for your time. The question is how you want your business to go forward? Where do you want to draw the line between trading your personal time for money, and having non-work time to enjoy that money.
More money or more life: how will you choose to balance things
If your course is successful, you’ll have all the opportunities to make a bigger brand of yourself. If your goal is to earn as much money as you ever can, let the course be a rung in the ladder of your growth. If your goal, on the other hand, is to find better work/life balance, say no to those extra lucrative personal intervention opportunities, and be happy with the passive incomes that courses can give you. Create more courses, if you will, and live happily ever.
Either way, it’s important that you make a conscious choice – and find your sweet spot. After the course is a huge success, there is a lot of money to be made by earning from personal involvement. But it won’t anymore be passive income.
So What Are Your Thoughts? Do Share!
This post is incomplete without your input. The community of Knowledge Commerce solopreneurs would feel galvanized to hear from you … so do share your thoughts on this topic with us, in the comments field below this post.
Related Articles From Our “Creating And Promoting Courses For Knowledge Commerce: Guide”
- How To Pick The Best Online Course Topics … 10 Unbeatable Strategies
- How To Create Engaging Online Course Content … 10 Pro Techniques
- How To Produce Course Videos With Classiness … 10 Crucial Tactics
- How To Structure An Online Course With Ease … 10 Uncomplicated Hacks
- How To Market Online Courses To Galvanize Sales … 10 Quick Tricks
- How To Teach Online Courses With Great Skill … 10 Captivating Ways
- How To Create A Sales Funnel For Your Online Course … 10 Step Cycle
- How To Protect Your Online Course From Thieves … 10 Master Strokes
- How To Evaluate Your Online Course With Student Eyes … 10 Key Factors