If you’ve spent any amount of time reading blog content in the “make money online” space over the last several years, you’ve likely come across scores of articles proclaiming that membership sites are the #1 way to generate sustainable, recurring, and passive online income.
The popularity of membership sites exploded around 7 years ago, as entrepreneurs seeking a stable stream of internet-driven income created sites in every niche you can imagine. And membership sites certainly can be very profitable and a great way to charge for your online course.
You create your site, add course content, sell a recurring monthly subscription, and update content regularly to retain customers. It’s a simple pricing methodology and it opens the door for people who are interested in your content but who may not be able to shell out several hundred (or even thousand) dollars in one lump sum to gain access to your site.
However, as we noted last year in one of our annual WP Courseware customer surveys, selling online courses through lifetime-access, one-time pricing is an approach that has quietly surpassed the monthly subscription model over the last two years. In that particular user survey we were shocked to discover that over 60% of the courses created using WP Courseware were being sold for a one-time, lifetime fee. Courses being sold with lifetime access typically ranged from $100 to around $2,000, with a couple of respondents indicating that they sold lifetime access to their courses for $4,500 and $7,500.
And when it comes to accurately pricing your course to gain the best return on your investment for time spent creating content, building your site, hosting fees, and all other costs, there are many variables involved. One of the biggest considerations for maximizing revenue from your online course is also your pricing model…does it make more sense to charge a recurring monthly subscription fee or offer lifetime access at a much higher price?
This is an incredibly important question and one that we’re continually asked by our WP Courseware users. So in this post we wanted to provide a comprehensive resource for you to use when determining the best possible pricing model for your course. We’re hoping that this will help you make an informed decision and maximize the earnings potential of all of the time and hard work you’ve put into your course offering.
But before we dive head first into weighing the pros and cons of your pricing model, let’s walk through a little exercise to help you assign some context to the discussion that will follow!
Course Creation Cost Analysis
Ok, ok...I know some of the eyes reading this post will glaze over at this point and some of you will be tempted to quickly close this browser window in fear.
You can do this and it's an important first step in deciding on the right pricing model for your course. In the window below, I want you to simply fill out the worksheet with your course creation and ongoing maintenance costs to the best of your ability. If you haven't even started creating your course yet, that's fine. Just use estimates that seem realistic given how you plan to produce your course, how you plan to market it, and costs associated with your hosting, software subscriptions, etc.
In the viewer below, you'll see the original document that we created with some sample values included for reference.
See, that wasn't so painful was it?
No, But Why Does This Matter?
Fair question. If you completed the exercise, I'm proud of you! But you very well may be wondering why this cost analysis matters. I get it.
This exercise of tallying all expenses associated with creating your course is important because it forces you to take a hard look at just how much you've put into your course.
When most online course creators launch, they launch with a very low price because they want to make sales and start recouping some of their investment as quickly as possible. Ben and I have been there. Although we could have easily charged well over $1,000 for lifetime access to our first course because of the niche and quality of the content, we sold it for $20 per month.
To be honest, we were scared. We were scared that after months spent developing great content, sacrificing nights and weekends with our families, that the course just wouldn't sell if we overshot the price tolerance.
But if we'd taken a good hard look at all of the time and financial resources we'd put into the course, we would have been more likely to put our foot down and say "Hey, this is what the content is worth and we're not selling it for a penny less."
What You Learned From the Exercise Above
If you take a look at the default values I've included in the spreadsheet, you'll see:
1. How many lifetime course purchases I would need to cover my initial course creation investment
2. How many customer subscription months I would need to sell to cover my initial course creation investment
3. How many lifetime course purchases I would need per year to cover my annualized ongoing costs
4. How many customer subscription months I would need per year to cover my annualized ongoing costs
Note: The term "customer subscription months" refers to one monthly payment from one customer for one month. This can be divided by 5 months from 1 customer or 1 month from 5 customers...it doesn't matter. It's one monthly payment from one customer...simple.
Three Massively Important Letters…C…L…V!
At the end of the day, there’s only one reason you’re doing your best to make the right choice here and there’s only one reason I’m writing this blog post…
Customer. Lifetime. Value.
It’s that simple.
The cost of acquiring a customer is fixed. I have no idea how you’ll be marketing your course so I can’t give you any hard data on what it will cost you to acquire a customer for your online course. There are simply too many variables.
But suffice it to say this…
The more revenue you can squeeze out of each customer, the more profitable your course will be. That’s why we’re having this discussion. We want you to earn as much money as possible when a person signs up for your online course.
This analysis doesn’t get into the details of the value of upsells and/or cross-sells that you may be presenting to your customers after they sign up for your course. Again, there are a number of variables there so you’ll need to decide how that extra revenue might skew your pricing strategy one way or the other.
But when we’re evaluating whether we want to offer lifetime access to our course for $1,000 or monthly access for $100, we have to consider factors such as:
*The number of months we can retain monthly customers
*The incentives offered for lifetime access
*Whether or not our customers can afford upsells after paying for a lifetime membership
*Whether or not our customers will “grab and run” with our content
Lifetime Access vs. Monthly Membership
Now that we have some idea of how many units we’d need to sell depending on which pricing model we choose, we can start taking a look at the pros and cons of offering lifetime access for a flat fee or a monthly subscription to your content.
Monthly Membership Subscription
Again, this has long been the “gold standard” for offering digitally delivered information. The model is simple…a customer signs up for your site, they pay a monthly fee, and as long as they continue to pay that fee they can access both legacy content and content updates.
*Recurring monthly income stream
*Lower price entry for customers
*Very high churn rate (average 3-month subscription span per customer)
*Slow to recoup initial costs and cover ongoing costs
*Much higher marketing budget required to acquire customers to cover churn
*Higher volume of customers means increased support burden
*You constantly need to create new content to prevent churn
PRO tips for monthly memberships:
The biggest challenge for monthly membership sites really boils down to customer churn. If you choose to go this route, the longer you can keep customers, the better. Here are a few tips for improving retention:
1. Offer discounted pricing for multiple months paid for up front
2. Engage your community and let them engage themselves through forums or private Facebook groups
3. Use testimonials frequently in your email and marketing communications to prove long-term value
4. Hire a virtual assistant to respond to student inquiries frequently and quickly
5. Offer incentives after a certain number of months of continuous membership
6. Set a tight drip feed schedule for important content to increase the “fear of missing out” on what might be right around the corner and always be emailing customers about what’s next
7. Offer a highly-discounted, one-time lifetime access “buy out” when a customer begins to cancel
8. Place a sincere “please don’t go” video on your cancellation page
9. Immediately place cancelled customers in a follow-up email series
Lifetime Course Access
As I mentioned, this pricing model is beginning to take off. And for good reason. It’s simple to understand, you recoup your investment quicker, and you’re not continually stressing about membership churn and the cost of acquiring new customers.
*You can recoup your initial costs and annualized ongoing costs with fewer customers.
*Generally, the support burden is lighter than it is with monthly memberships as you’re not continually educating a high volume of new customers.
*The pricing model is simple. There are no surprises to your customers, no refunds when customers just “forgot they wanted to cancel”, and you can easily match your customer acquisition cost to a fixed amount of revenue.
*A high price can present an image of dominant authority in your niche and cause customers to see a very high degree of perceived value in your content.
*Higher pricing leads to fewer customers and, thus, fewer opportunities for list-building, cross-selling, and upselling.
*A very hard line must be taken on refund to prevent cash flow fluctuations and customers stealing your content.
PRO tips for lifetime pricing:
1. One of the strategies I’ve seen implemented successfully for lifetime access courses is a refund strategy which requires a consultation with the course owner. During the consultation, the student must prove to the course creator that they’ve executed the steps suggested and that it just isn’t working for them.
2. As far as the price hurdle, there’s nothing to prevent you from breaking that initial lump payment up into 2 or 3 installments if you don’t mind the extra infrastructure management to handle it.
Now It's Up To You
I hope the analysis above will help you begin to think through which pricing model you should choose for your course. It's difficult to provide a concrete recommendation either way, since your course is unique and your audience is unique.
But this will provide some framework to help you make that decision. And don't be afraid to change your pricing model either. We see this all the time with our WP Courseware users. If you start with one model and it doesn't work, try the other.
As always, if you have questions or comments please let us know!