How much should you charge for your online course?
We looked at data from more than 133,000 course sales to answer, once and for all: how much should you charge for your online course? Don't launch your course without reading this!
Picture this: you’re getting ready to host a garage sale. You start putting your stickers on items, then freeze.
“How much is this worth?” you ask your nearest confidant. “Will they even pay it?”
Now take that same dilemma and push it to its maximum limits and you arrive at the challenge plaguing course creators everywhere:
Forget raising online course prices, how do I price my online course the first-time around?
After you’ve put your heart and soul into a product, you want to see some returns on it -- but you also want to make sales. If you price it too high, you may never meet your profit goals, while if you price is too low…
You encounter the same cliff of missing your profit goals, or worse, leaving money on the table.
That’s where this guide comes in.
We looked at 132,323 course sales to get down to the bottom of this dilemma. Here’s what we found.
How we sourced online course pricing data
If you’d rather jump straight into the pricing data, you’ll want to skip down to the next section where we talk about the averages we found. But if you’re like us and want to know more about the data, here’s how we handled it.
We looked at our records of course sales going back to 2016 all the way up to August 2018.
We then pulled out all the free courses and set our price range at $5.00 and up, which left us with 448 unique products out of 132,323 sales.
We excluded values below $5.00 because, at a minimum, they’re not courses that can recover any of the costs incurred in their creation.
This is how the price range broke down in those courses:
As you can see, the overwhelming majority of courses fell within the $5-$50.00 range, and course prices began to whittle down the higher we moved up the price range.
Here were the top five most prolific categories:
- $5.00-$50.00: 175 or 39.06% of courses
- $50.01-$100.00: 84 or 18.76% of courses
- $100.01-$150.00: 34 or 7.60% of courses
- $150.01-$200.00: 30 or 6.70% of courses
- $200.01-$250.00: 22 or 4.91% of courses
After we looked at that, we removed extreme outliers from the data set.
If you’ve never heard of an outlier, it’s basically a data point which lies far from the normal distribution of the data. The below image is a good visual representation of a (sad) outlier.
The presence of outliers can throw your averages for a loop and give you inaccurate measurements, although mild outliers usually won’t impact the data too much. The outliers we culled were those more than $99.00 from the nearest data point.
I.e., we removed one course which sold for $1500.00 because its nearest data neighbor was only $1395.00.
As such, the minimum value in the data that we evaluated to give you averages was $5.00 and the maximum value was $1395.00.
Now, with that out of the way, let’s get to the good stuff.
What’s the average price for an online course?
The average sales price for courses in our dataset was $182.59, which is consistent with our earlier studies where the average course was $199.99 across multiple course providers.
However, the average may not be the best -- or at least, the only -- function that we should look at when evaluating this data. Instead, we should also consider the median.
Because our data distribution is so all over the place -- and we’ll dig into that a little bit more in a minute -- there are still a ton of milder outliers in our calculations.
This is all a very boring, technical way of saying that our median will give us a better idea of what the middle ground value for course prices is.
As it turns out, our median is $76.50.
But… what does that tell us and how is it so far from the average? To understand that, we’ll need to take one more foray into statistics.
We need to examine the central tendency, or standard deviation, of our data. This information will give us an idea of how closely distributed our data points are -- in other words, how near course sale prices are to one another.
It’s phenomenally high: 239.86, to be exact.
To give you an idea, most bell curves measure within three standard deviations.
In this model, 99.7% of the data falls within three standard deviations of the mean (average), while 95% falls within two standard deviations.
(I promise, we’re almost done).
In other words, I tried to make a graph of this, and it isn’t even a bell. It’s almost a broken taco.
Trying to visually convey just how astronomically large the current standard deviation is would be like trying to explain the difference between a gas station Slurpee and a pint of Cherry Garcia.
Sure, they’re technically in the same category -- frozen sugary treats -- but the difference between them is solar systems wide.
Here’s what I mean:
So this is all a very, very fancy way to say that the data is wildly in different directions, and although the average may not be a bad idea as a place to start, it fails to convey just how widespread the data is.
How should you price your course, then?
How to price your online course
If the average price -- $182.59 -- doesn’t have much statistical value for us due to the distribution, where do we go from here?
Let’s assume, at a minimum, that you want to at least price each course at $50.01 to $100.00. 18.76% of our total courses fell into this range, so it’s not an outlandish place to start for a new course creator.
Then, start thinking about the factors that impact the bottom line.
Like where you want your course to fall in the product demand matrix.
If you start your course pricing off in the $50.01-$100.00 range, your product will fall into the “mass market category.”
If you want to aim higher and try to hit that golden goose, your baseline pricing should fall into the $100.01-$150.00 range, instead.
But you can’t do that if you haven’t already built up an audience and a credible reputation.
Which leads you to this conundrum: if you price your course too high, you may not get enough sales to meet your desired profit goals or build your business so you can start pricing higher. (It might also put your products at an increased risk for digital product piracy -- ouch.)
But if you price it low so more people can buy from you, you may end up losing money when providing their customer support needs.
Such as in the below scenario: 28 customers sound great, but how much of the profits will you lose if you have to provide after-purchase support for those same customers?
What’s a solid place to start, then?
Begin with the following questions:
How much did the course cost you to produce? How much money will you need to make to recover the cost for the tools for making online courses and the time you devoted to creating your course? What does your small business budget look like when it's breaking even?
Now, what do you want it to look like when it's doing more than breaking even? At a minimum, you should aim to exceed your investment costs. But what if you want to reach for more than just low-profit margins?
If you aren’t sure how a profit margin is calculated, by the way, this is the quick rundown:
Here’s an example. Take David Hickman’s “Plan & Write A Novel In 90 Days (Or Less...)“ course, currently selling for $67.00.
Let’s say he sells 12 courses for a total revenue of $804.00 (12 x 67).
The cost to produce the course -- including his time and materials -- was $120.00. Since he only had to make the course once, we subtract his one-time expenditures from his total revenue to get the gross profit.
$804.00-$120.00=$684.00 (gross profit).
Now let’s add in marketing budget -- more about this later, too -- and say he spent $75.00 on marketing to those customers.
Take out that $75.00 from his gross profit and that gives us $609.00 before taxes.
Adding taxes into the mix at a rate of 10% ($60.09) leaves us with a net income total of $584.10.
So his profit margin calculation would look like this:
Convert it to a percentage (multiply by 100), and you get a very nice profit margin of 73%.
Here’s a quick worksheet for you to plug in your numbers and calculate your profit margin.
How high of a profit margin you should aim for largely depends on how established you are as a course creator. The more you get to know your audience, the more enriching -- and expensive -- your courses can become. Second-time launches, even those that follow first-time 'failures', are often easier to sell at higher price points.
Jeanine Blackwell, an online course coach and business strategist, explains:
“The only people left standing when the dust settles from the great online course creation boom are going to be those that intentionally crafted learning experiences for their clients that deliver results.”
So if you’ve already done the groundwork to build your client base and identified a profitable course idea, you’re on your way to finding your unicorn and growing your feasible profit margin.
Which then enters your next factor to consider: your competition. The more mass appeal you’re looking for, the greater your competition.
It’s possible to launch online courses in competitive subject areas, but it takes outsmarting your competition by narrowing in on a market need that they haven’t addressed yet.
And, at times, out-pricing them. Competition and lack of market need are both in the top four reasons new businesses fail.
So, look at your expenditures and competition. What’s the minimum you need to charge to recover your costs while staying competitive for the same niche audience?
Is that minimum viable with your audience’s lifestyle and average income? If not, could you make it more feasible by offering a payment plan?
Remember, you can always adjust your prices as you gain a more significant foothold in the area. Nick Foy, an online course leader, elaborates:
“..once you’ve become a well-established expert in your industry you can raise prices and charge higher rates because you have the success and credibility that places your perceived value higher than a competitor who is charging lower prices.”
Outpacing your competitor doesn’t require sleeping on their digital doorstep, either. Here’s one free tool you can take for a spin to spy on your competitor called SimilarWeb.
Let’s try it out now.
First, head over to their homepage.
Click on the orange “free sign up” button to get started.
When this screen pops up, select the left-hand option.
This will take you to the sign-up page. Go ahead and fill out your information or connect with Google or LinkedIn.
Once you’re done, it will take you to the main dashboard.
Hover over the “research” tab to see the drop-down menu and select “website analysis.”
Since this is just an example, let’s pick an ecommerce retailer like Old Navy.
There’s a ton of useful information immediately available in the report, including audience information, referral traffic, and social traffic -- all of which can tell you where your competitor is getting their sales and what platforms you should be using to compete with them.
Or, even better, what platforms you can use where they aren’t even a competition factor. Someone else’s missed opportunity can easily become your unicorn.
The real gold of SimilarWeb is the competitive landscape feature of their reports. Click the second option under “overview” to peep on your competition.
In free mode, you’ll only be able to see the first five results, but note the right-hand side and the “affinity” score.
The affinity score is the measure of how often the same users visit the competitor’s website. Unsurprisingly, users who frequent Old Navy also visit the Gap (who owns them).
Pretty neat, right?
OK, we’ve covered calculating your price based on every factor but one, and it’s a big one: your market spend.
According to a 2017 survey, you’ll need to budget at least 18.5% of your revenue to marketing to stay competitive in education.
Unless you equip yourself with our awesome next step, anyway.
Making more sales: Promoting your product
No matter how great your course is, you’re not going to see the sales you want if you’re not putting in the work to market your online course.
If you want to see this in action, consider the case of the Video Fruit course. After building a list, Video Fruit founder Bryan Harris launched his course to a staggering $25,000 in profits.
Which was a far cry from his initial launch without an email list where he lost money.
That’s just how powerful email marketing is for online course sales.
How do you make email marketing even sweeter? Add automation into the mix.
CareerStaff, an employment agency in the healthcare industry, saw massive leaps and gains -- a 140% higher click-through rate -- on their email campaigns once they combined it with an email automation platform.
Here’s another tip:
After you’ve figured out how to price your course (based on the above factors), use Gmail ads to promote your course. If you aren’t sure what a Gmail ad is, they’ll typically show up in your promotions tab.
What makes Gmail ads such a strong choice for email marketing? This staggering statistic: there are 1.2 billion Gmail users worldwide. How many of them could become your students with a well-placed ad?
Finally, regularly iterate and test out your email campaigns. Professional marketers routinely tweak and change their email campaigns, with 70% reporting that subject lines and messaging are the most commonly tested elements.
If you’re still looking for more email marketing tips, swing by our ultra-detailed guide's email marketing for online courses chapter for everything you ever wanted to know about email marketing but were afraid to ask.
This is the gist:
You’ll have to factor in marketing spend when you’re looking at your profits for your course, but if you use email marketing as your primary channel, you can get back oodles of returns on your investment.
The pricing conundrum, solved
Trying to set a price on your online course is a lot like trying to set a price at a garage sale if the garage sale was selling your precious time and passion. We looked at the data from over 133,000 course sales to see if we could find any insights, this is what we discovered:
- The average course price today is $182.59.
- However, the data set is varied -- so much so that an average only gives you a small fraction of the picture.
- So instead, we looked at the median price, or middle ground, of course sales. The result was $76.50.
- Basically, after all that data digging and math, we concluded that while the average is a good place to start, there’s no industry standard for pricing.
- Instead of looking at the averages or median to set your price, consider the funds you spent to create the course, your current audience size, desired profits, and whether you want your course to serve the masses or the select few.
- Your desired profit margin will determine the best price for your course. If you’re still establishing yourself as an industry authority, you may want to start on the lower end. We recommend setting your baseline price between $50.01-$100.00 for a new creator.
- Don’t forget to consider your competition -- most startups fail because of a lack of market need and because they were driven out by the competition. If you can address the market need better than your competitor, you won’t be so beholden to their prices.
- And, don’t neglect to add market spend into your number crunching. You’ll need to set aside a sizeable portion -- 18.5% is the industry go-to -- of your revenue to stay competitive.
- Speaking of marketing, capitalize on email marketing to make the most returns on your investment. Automation, Gmail ads, and iteration are the name of the game.
Online course pricing may feel like trying to read an arcane book of magic, but it doesn’t have to curse you to indecision. Follow the tips and tricks in this guide to set your course price and work your way toward your product -- and sales -- unicorn.