If you’re creating your first online course, you’ve probably wondered how to pick the right price at LEAST twenty times. Some of you have reached out to me with this exact question. And my answer was to look at what others were doing in your niche and just start somewhere.
Now I realize that answer sucked.
It didn’t suck because it was wrong. It sucked because it wasn't right enough.
It turns out pricing is a pretty complex science and you're right to have questions. I mean, there are ENTIRE companies devoted to helping businesses price products! It's a crazy maze. But you don't have to navigate it alone.
Because of the way my brain works AND because I told you I’d be your crash test dummy for online courses, I decided to find you a better answer. And lo and behold: it turns out there’s three strategies for how to price your course. It’s like a pricing buffet!
Strategy 1 - Start Somewhere (The "Pick One Price" Model)
I know what you’re thinking, "Isn’t this the same advice you gave me before?” Well…kinda but this time, I come bearing bonus information.
You know what one common theme is among online course creators when it comes to pricing? That they had no clue how to price when they started selling courses. In other words, you’re not alone.
So what did they do? They checked in with friends for advice. They checked out similar courses sold by other people in their niche. Then they guesstimated the best price for their course. Sound familiar? It should because it’s exactly what I told you to do before.
But there’s more.
All of the above tactics are fuzzy. They feel fuzzy, don’t they?
I mean, how does this help you get better at pricing? What does looking at how someone else prices their courses have to do with your course? All courses are not created equal. So how can you get specific about pricing your course? And what's value-based pricing? There's so many questions!
The answer? You gotta get some data.
How to Find Your Starting Price
Let’s not sell the start somewhere strategy short, it gives you your initial data by telling you if people will pay what you charge. (Spoiler: Chances are you’ll charge too low.) So before we move on, here’s a quick tip for figuring out your “start somewhere” price and not undercharging:
Survey your audience to see if they want your course
In that survey, ask them if they’d pay X dollars for it
If at least 30% of your survey respondents say yes to that price, you can go higher.
Statistically, only 1 - 3% of your audience will buy your course. So if you’ve got 30% of them saying, “Yes, I’ll buy at this price,” then you can price higher.
Data is Golden
Does all this still feel fuzzy to you? Me too. I mean, how do you figure out the threshold, or how high you can go? Well, that’s the thing about picking one price. You’ve got to guess.
Sure, you can research other courses in your niche and get a sense of low, mid and high options (definitely do this!), but that’s as informed as you get.
The one price model only gives you two pieces of data: whether people will pay what you ask and how many paid. But that doesn't help if you've asked the wrong price to begin with.
Which brings us to strategy numero dos.
Strategy 2 - Create Two Pricing Tiers
If you’ve bought anything online in, well, forever, you’ve seen people offer multiple price points for products. And if you’ve been paying attention to all of the “I made a tribillion dollars selling my course!” marketing, you’ve probably deduced that multiple price points equals more revenue.
But what you may not have realized is that pricing tiers also help you figure out value-based pricing, or how much your audience values your products. That way you never have to worry about what other people are charging again.
How? Data points, my dear Watson.
Why You Should Use Two-Tier Pricing Model
This is a step above the “Start Anywhere” strategy. You won’t see a ton of people doing this if they’ve been selling courses for a long time (I’ll explain why in a minute). BUT, it’s a great way to split test two price points and identify your entry-level pricing. Here’s how it works.
Say you have "My Amazing Online Course" for sale. This is your first or second time selling it to your audience and you want to make the most of your launch, so you offer two options instead of one.
You offer an Standard option for, let’s say, $197. Then you offer a Plus option for $347 and hit publish on your landing page.
Assuming you’ve got customers lined up for your launch, sales start coming in. According to Bryan Harris from Videofruit, if more than 25% of sales are for your most expensive option, that’s means you priced too low.
But that's okay because you're gathering data and you can always change the price of your course. There's no failure here, only learning.
Plus, now you know your low and mid price. And we’re about to discover your high. But first...
Why You Should Not Use Two-Tiered Pricing
Now that I’ve told you why you should use two-tier pricing models, here’s why you shouldn’t use them.
HUMANS LIKE HAVING THREE OPTIONS
Having three options isn’t just about maximizing profits. (You know I wouldn’t write about it if that's all there was.) It’s also about psychology.
See, we tend to have three types of customers: budget types, middle-of-the-road types and I want it all types (or, as I like to call them, Veruca Salt customers). Budgets want to pay the lowest price possible. MOTR types want to pay the standard price. Verucas want everything.
Most of us go for the middle option. So having just two options means you’re not offering the thing that most of your customers want. Just either, or. And we're all crazy, lazy and indecisive (or, wait, is that just me?).
YOU'RE LEAVING MONEY ON THE TABLE
Pretty sure this goes without saying, but I can’t resist. If most people naturally want to buy the middle options, but you only offer two options, you’re leaving money on the table. Especially if you have more than 25% of your sales from your most expensive package.
So what should you do? Use three tiers. More on that in Part 2.
Pricing is an art and science. Do your research, but don’t let research derail you from starting.
Every successful course you see online started at a different price. Remember, you gotta start somewhere.
Use the one-price model to get an initial pulse on whether and what your audience will pay.
Then add more value and offer tiers.
Remember, the goal is to get data so you can figure out your price points and stop pricing based on what other people are doing.
Should you offer two or three tiers? What's Strategy 3? Read part two for them answers!