Question: A few days ago a friend asked me for some pricing advise for his company. He has an online teaching platform so he produces videos for a specific test that we have in Brazil after high school and before starting college. The thing is that the subscriptions usually last for only one year (after you pass the test there is no reason to keep paying) and also some subjects of the test are the same over the years. So, he has unlimited capacity (as it is online), he has almost no cost (as videos are already prepared) and he would like to know how to price this without leaving money on the table… Do you have any bits of advice? Pedro
Answer: Hi Pedro, very interesting question. Here are a few takeaways.
How to Price an Online Course
First, I’d stop thinking of this as a subscription. In a subscription, you want to find ways to keep and grow your customers. In this business, they leave every year. Think of this as a product or a program that lasts one year.
Second, it always comes down to value. How much value does a customer receive? What are the alternatives to this course? How much do other courses charge? Does a buyer ever compare this course to other courses? How is his course better or worse than the competitors? The answers to these questions should drive the pricing decision.
In conlusion, he should consider price segmentation. After answering the questions in the previous paragraph, he will find some people who value his course a lot. And others who value it less. If he can identify those two different customers he can charge them different prices. Probably the easiest way is to charge a relatively high price for the course and offer coupons to those he found are the most price-sensitive.
The two most powerful things any company can do with regards to pricing are adopt value-based pricing and use price segmentation. The paragraph that begins “second” is all about adopting value-based pricing. The next paragraph was all about price segmentation. These two pieces of advice are great for every company.
**NOTE: Mark Stiving has an active LinkedIn community, where he participates in conversations and answers questions. Each week, he creates a blog post for the top question. If you have a question, head over to LinkedIn to communicate directly with Mark.
Tags: ask a pricing expert, pricing strategy