[Pricing Nugget #052] 3 Pricing Tips for B2B & B2C Online Courses

What are the questions that I received?

“We have two separate pricing mechanisms for the corporate subscription. One is a set fee per month. The other is based on the number of people enrolled in the program during the previous month. Should we have just one corporate pricing structure? If so, which model should it be?”

My first recommendation here is:

Don't sell a transaction, like a course. Sell a capability.

Customers understand that having access to this educational content and getting the value when they need it comes with a price that refers to the duration of the value. Here it is the duration of having access.

The assumption is that the educational content is relevant on an ongoing basis. It is not a one-time educational experience that delivers the learning outcomes once and is not relevant anymore afterwards.

For example, if you buy a washing machine today and you take out a loan, you still feel comfortable paying for the washing machine. Why? You are enjoying the benefits and consuming the washing machine while paying. However, if you take out the same loan for a vacation, it is very painful to pay for the vacation after it is over, and you cannot benefit from the value anymore.

Second,

draw on the flat-rate bias and avoid the taximeter effect.

People enjoy paying a flat-rate price that is fixed and is not dependent on any kind of consumption. However, if a taximeter is ticking in the background when you consume something, consumers feel very uncomfortable with this. The taximeter effect is also relevant for corporate customers. It serves as cost control. If you have a flat-rate tariff, corporate buyers know the exact amount they have to pay. So, the answer to this part of the question is: Set a fixed fee for time periods of access. Don't sell individual courses.

I also have a bonus tip here. You have to decide about the level of the fixed fee for your corporate customers. And your corporate customers might be quite different in terms of size.

What should be the metric that you use to determine your fixed fee?

Your pricing metric should refer to the concept or idea that you want to emphasize implicitly.

For example, if your courses, and your educational content in general, create more revenue, you might link it to your client’s revenue class so that the concept of revenue is also linked to your courses.

If you want to stress that this course should be relevant for all employees in your customer’s company, you might link it to the total number of employees of this company.

That is the bonus tip: Set the fixed fee for time periods of access that is a function of the concept you want to stress.

We also have a question in the B2C context.

“We are exploring an individual subscription model for consumers. Should we price based on monthly usage? Or should we charge a set annual fee that is discounted or a monthly fee that is equal to the full annual fee divided by twelve?”

The answer to the first question is already given: Don't pay for consumption. Set a fixed flat-rate tariff.

On this fixed fee, how should it be set? Should it be an annual fee or a monthly fee?

Research shows that consumers book expenses to a mental account, and this mental account balance depreciates over time.

More or less, after four or five months, people usually have forgotten that they paid for something and enjoy the benefits as if the product or service was for fee.

For example, in an insurance context, when you pay for your insurance, let's say at the beginning of the year, and you feel that your account is in the red: You paid for insurance, but you haven't got anything back. The only way to "consume" insurance is to commit insurance fraud. Hence, annually paying customers commit more insurance fraud right after the payment than many months later when the mental account is sufficiently depreciated.

To justify taking the annual option, you need a monthly option at a higher price.

You take the annual fee and discount it relatively to the monthly option. The only reason why you keep the monthly option at a higher price per month is to justify buying the annual option, and nobody should take the monthly option. In this sense, the monthly option becomes a decoy.

That is the third tip: Set an annual fee that is discounted relatively to the monthly option and keep the monthly option as a decoy and justification to take the annual option.

What did we learn today?

Today, we learned that when we want to sell educational content, such as online courses,

• first, you should set a fixed fee that relates to time periods of excess because course, we don't want to sell a transaction, but the ability and the capability of drawing on the knowledge when needed,
• second, you should relate this fixed fee to a concept that we want to emphasize implicitly,
• and lastly, when you have to decide when this fixed fee has to be paid, you should err on the side of setting an annual fee that is discounted relative to the monthly fee to make it more attractive and to make the monthly option a decoy.