The Ladder Method of Pricing Online Courses
Monetizing training content is a natural step in the development of an eLearning program. Some people start monetization early in the life cycle of their training program while others will switch to selling training once they become established. Often, a new executive leader will establish a new direction which includes having some content for sale. Refer to this article for a step-by-step guide for pricing your first courses.
This article will describe what I call my “Ladder Method” for pricing online learning products.
Once you create your pricing model,
input your course prices into the Budget Calculator to determine the ROI of your program
How do I decide how much to charge for a course?
The price you charge for online courses is as important as the structure of your pricing strategy. Before setting your prices, you should have a structure in mind that drives people to increase the value of their cart at checkout. The method I use for this is called “The Ladder Method” and I will detail that here.
The Ladder Method is a way to increase the perceived value of your courses and increase purchase intent from your buyers. It is a derivation of the “Good, Better, Best” pricing structure that is common for SaaS products (HBR, 2018).
What is the Ladder Method of Pricing?
Think of a person being asked to climb a tall ladder. A ladder consists of several steps (or rungs) and what you want the person to do is climb all the way to the top. The first objective is to get the person to climb onto the first step. The next objective is to get them to continue to climb. And the final objective is to get them to go all the way to the top.
The Ladder Method follows this same three-stage logic. The first objective is to entice someone to decide to purchase your first level product. This first step should be a small one. You want to make it easy for them to see the value of taking this step, since all others come after it.
The second objective is to provide a logical incentive to purchase your second and third offerings. This is by pricing your subsequent offerings to be relatively higher, but with clear value so making those steps seems to make the most sense.
And the final objective is to provide an incentive that makes purchasing all your products in one bundle. Effectively, to make it logical from a value perspective, climbing to the top, after taking the first step, makes the most sense. This is accomplished through a discount or pricing incentive that makes purchasing your entire course bundle better than just buying two or three products in the bundle.
The objective of the Ladder Method is to entice your customer to purchase all your related offerings in a bundle, not only one.
What is the relationship between price and value?
In the Ladder Method of pricing, there is a simple structure to price and value that provides the incentives outlined above. Your “first step” product should be high value and low price. By making this value relationship very clear for the buyer, it will hard for them to not want to transact. Many people get this relationship wrong. They will want to put a high price on all their high value solutions. To incentive your buyer to take the first step on your ladder, pick one of the most high value solutions, narrow the content down to the bare essentials, and place a very low price on it.
For your second and third step offerings, identify courses related to the first step but that are slightly more advanced. An example might be: You have a set of courses that teach a person how to build websites. The first step course might be about how to plan for your webinate build or the technologies needed to create a web presence. Think of the first step offering as a “foundations” course.
Your second and third step offerings go deeper on how to set up the website. These are related to the first, and the first step logically comes before the others.
For these second and third step offerings, increase the price meaningfully from the first step, but not an exorbitant amount. What you want to signal to the buyer is that these solutions are more valuable than the first. The objective, remember, is to sell all the courses in one bundle.
Your top level steps are your highest value offerings. These contain the information that is hard for a person to find elsewhere. You can identify these from your customers because they are always asking for them. These courses tend to be highly reliant on specialized knowledge that is difficult to find in the market. They might also represent ore investment in your time to research and develop.
Make the price jump for your highest value courses the largest. Compared to the first step, these are significantly higher. And compared to your mid-level courses in the bundle, these are materially higher. The price you give these reflects the perceived value in the market.
Example: Thought Industries Course Collections
How do you increase the price of the checkout cart?
This is the real magic of the Ladder Method. To go back to a ladder analogy, think of the ladder you’ve built as one of those extension ladders. These are ladders where you can extend or shorten the length of the ladder. Recall that our final objective is to get a person to climb all the way to the top. To do this, you need to first get them on the ladder … and then make the distance they need to climb shorter. Make it easy for them to get to the top.
How do you do this? Use a discount for the whole bundle.
Your Learning Management Solution (LMS) should have a way to bundle all your courses together. Use this bundling feature to create an offering that allows your customer to purchase all the courses for a discounted price. You want this discount to be material.
When I say material, I mean it should be an undeniable deal. Small deals are things like 5% - 10%. These are minor incentives. A major incentive is any price discount above 20-30%.
So once you have defined the value & price relationships amongst your courses, then bundle them together and offer a 20-30% discount when they are all purchased together. Ideally, this will make the total price appear to give 1-2 of the courses to your buyer “for free.”
This solution will “shorten the ladder” of value that you want your buyer to climb.
After you create your pricing solution, be sure to plug your numbers into the Training Program Budget Calculator to determine your program's ROI