So you’ve finally wrapped up the finishing touches on your new online course. Congrats! Now all you need to figure out is how much you should charge for your course. You obviously want your course to be as popular as you can, and getting the right price is a huge component of that.

In this post, we’re going to go over two strategies we recommend for pricing your new course: the value-based method, and the CAC-based method.

Before we get started on the math, we should address upfront a quick question about platform courses.

What about if you’re creating an “independent course” and hosting it yourself on your own website?

Well, in this case the sky is truly the limit. You can price it as low as $1 (or free, even) and as high as $20,000 (the most expensive course we’ve ever seen).

That level of freedom can be both exciting, and simultaneously frustrating. After all, the more options and possibilities you have, the less likely you are to feel like you’re in control.

So, what’s the best way of pricing your course? I’ll give you two methods we approve of.

The first method is what we call the value-based pricing method (we call it the “top down method”).

The logic behind this is simple: you should price the course off how much value is IN the course you’re selling. As in, what exactly they get for the price they pay.

If you base it off the value they get, then it becomes relatively easy to explain to anyone how you arrived at that price.

In order to do this, we suggest calculating your price by adding together two parts:

1. a base price
2. add-on increases

Here’s how we suggest calculating your base price:

In our experience, the best proxy for the value you are going to deliver is actually based off the hourly rate you would be able to charge if you were consulting someone on the same topic 1:1.

Online courses, after all, are really just an extension of consulting. If I were going to pay someone $200 an hour to tutor me in commercial real estate brokering, then surely I would also pay something for that same person to pre-record or host live group lessons on the same information.

Online courses are just a way of getting more for your time, and for students it’s a way to give them the information they need on their schedule (and for less cost).

So base your price heavily in what you would be getting for the same information, but in a 1:1 consulting relationship.

First, consider what hourly rate you have charged in the past, or you’re confident you could charge for tutoring someone 1:1 on your subject.

If you’ve consulted before, then it’s easy: just use the last rate you were able to charge (and the client was happy with).

If you haven’t consulted, then try your best to find a proxy for what you could charge. Go online and search for consultants that are charging for the same domain expertise, and see what they are charging. With a little Googling, you can usually find a good number to start with. If you don’t feel like the number suits you (or you couldn’t imagine charging it) then adjust accordingly.

For example, these are hourly rates charged by varying types of consultants:

• Financial Planning: $120 / hour
• Nutrition: $70 / hour
• Personal Training: $60 / hour
• Life Coaching: $100 / hour
• Health Coaching: $80 / hour
• Executive Coaching: $175 / hour
• Real Estate: $140 / hour
• College Level Tutoring: $40 / hour
• Language Tutoring: $30-50 / hour
• Startup Fundraising: $250 / hour

Basing your rate off category averages obviously isn’t the most accurate way of doing this, but it can work at the beginning if you simply have no other information to go off of.

So pick a rate that makes sense for what you would charge in person (if you’re still unsure try asking someone you’ve helped before on your chosen subject). Set this as your base rate.

Next, calculate the total number of instruction hours included in your course. Only count lectures that are instructional, and not things like interviews or previously recorded Q&A sessions. Write this down.

Next, if you’re planning to do live sessions as part of your course, add up the total hours you expect to do for each student. For example, if you’re doing an 8-week program and it includes 1 hour of live instruction per week, then you have 8 live hours. Don’t include weekly Q&A sessions. Only include TEACHING hours where you’re actively teaching your students.

Now take your base rate, multiply by it the # of pre-recorded lecture hours, and then multiply it by .2

If you’re doing live sessions, then multiply your base rate by the # of live session hours and then once again by .3

Let’s look at some examples of how this plays out.

Example #1: A course on interior decoration

Interior decorators charge on average $50-200 an hour, based on their experience. Let’s say you have more experience than most, so you choose $150 as your base rate.

You have 5 hours of pre-recorded videos in your course

Example #2: A course on startup growth

Growth marketing consultants can often charge a lot: $200-300 is common, so let’s say you settle on your last billable rate of $250.

You have a 6-week program with 90 minutes of instruction per week, for a total of 9 hours of live content.

Then add both of them together to get your base rate. If you had 4 pre-recorded hours, and 5 live hours you’d just run the calculation twice and add them together to get your base rate.

Write down your base rate.

Next, we need to add to our base rate based on what other offerings we are including in our course.

Generally speaking, online course buyers expect to see bonuses and extras when they buy and they take these into consideration at the time of purchase.

All you have to do is add to your price for every extra you offer. Use this list here of the most common additions, and tally up the total at the bottom.

Which of these are you offering?

• PDF summary guide of the course material ($25)
• Course Workbook or follow-along guide ($25)
• Software or service discounts over $100 in value ($25)
• Access to an additional directly relevant course ($25 per)
• Expert Interviews ($25)
• Direct email address for support ($50)
• Weekly Q&As ($50)
• Private community group ($50)
• Direct access to instructor phone for support ($75)
• 1:1 onboarding call with a team member: ($75)
• Professional production quality ($100)
• Customized action plan ($100)
• Work review ($100 per)
• Regular coaching calls ($75 per)
• 1:1 onboarding call with you ($150)

For each of these you include, add the listed price to your base price to get your final course price.

There you go, you now have a value based course price. If anyone asks how you came up with that course price, you can easily explain to them how you arrived at this point.

So let’s say you have a 6-hour pre-recorded course on getting into a competitive university. You typically charge $150/hour for consulting 1:1.

The alternative method we recommend for pricing your course is what we call “acquisition based pricing”. With this pricing method, instead of relying on a pre-determined value for your content, you effectively let the market decide the value of your course.

Sure, it’s conceivable that you could price your course at $3,000+ but will your target students consistently pay that amount?

With acquisition based pricing, what we’re going to do is run some tests to see how much it costs to acquire each student at different price points and then adjust accordingly.

Scenario 1: If your primary concern is maximizing total revenue for your course, this pricing method might be better for you. However, if you’re including a lot of 1:1 time in your course and you think there’s a cap for total students you can handle, then it’s better to rely on the value based pricing we covered before.

Scenario 2: Your plan to promote your course includes paid ads and paid promotion. If you plan to do mostly soft promotion on the other hand, like appearing on podcasts, writing blogs, and community group posting then you should use the value based system.

To get a good “acquisition based price” we first need to establish the cost it would take for us to acquire a student (Customer Acquisition Cost or CAC).

This becomes a little tricky though, as the cost to acquire a new student changes based on the price you set. For example, a $500 course could potentially acquire new students for $50-350, whereas a $10,000 course could cost much closer to $1,000-2,000 per student.

Keeping this in mind, what you have to do is run a quick series of tests at multiple price points.

Take your best guess at what you think people will pay for your course (use the value based method if you want), then create two alternate prices. Alternate price #1 should be 1/2 the price you just established, and alternate price #2 should be 2x the price you established. This should cover the range of possibilities you have without being too over or under-valued.

Let’s say your value based pricing told you your price should be $600. In this scenario, we would then want to test price points of $300, $600, and $1,200.

With these 3 prices in hand, let’s run our acquisition tests.

For a pre-existing audience:

If you’re planning on promoting to a pre-existing audience (preferably email addresses from a list you control), then we’re going to run what’s called a “bandit test”.

Let’s say you have an email list of 2,000 people. To run a test, you’d design your launch email sequence as normal as if you were getting ready to launch your course.

For the launch sequence, keep everything the same except the price they are offered. This might mean making multiple variations of your landing pages and enrollment pages, so be aware. Most online softwares allow you to run variation tests on your pages. The simplest way in my opinion is to just copy your page 3 times and change the price.

For example, in WordPress (what we use) we can just copy our enroll page and set 3 different prices:

Then we just send out the correct URL for the price we want to show.

For a 2,000 person email list, and 3 price points of $300, $600, $1,200, we’d break it down like this:

• • • 200 email subscribers get shown $300
    • 200 email subscribers get shown $600
    • 200 email subscribers get shown $1,200
    • 1,400 email subscribers do not get shown anything

You can lower the amount you put into each test group, but just be aware there is a high likelihood that you will have to run the price test again in the future when you have a larger audience. The results from your tests will be more unreliable when you go below 100 per test group.

After you run your sequence, it’s just a matter of tallying the results and determining the winner.

As a rule of thumb, an engaged email list should convert for a <$2k online course at between 1-6%. As in, if you email 100 people you should expect purchases from 1 – 6 of them. If you’re seeing purchase rates below 1%, then you most likely need to work on keeping your audience more engaged prior to launch, and also better matching the course content to what your audience wants.

The calculation here is easy. Which of the test groups made the most revenue? That’s your optimal price to charge. Roll out the exact same campaign (with any tweaks or improvements you’ve identified in the bandit test) to the remainder of your list.

If you have a large enough list, you can add an additional round of testing if you want. If you noticed that the response rate was much higher for your lowest price and the revenue in that group far exceeded the others, then you might want to run another 3 price test centered around that lower price. Perhaps going even lower would bring in MORE revenue.

In this case, it gets a little trickier but you can still make it work. If you’re using a Facebook group or for example a YouTube audience, then you just have to do the testing through whatever software you’re using to sell the course. So run your sequence like normal leading up to the course sale, but purposely don’t mention the price.

When you finally give them the chance to pay, use a tool like ClickFunnels, SamCart, Unbounce, or Instapage to run an A/B test on their end with the different price. With most softwares, you should have an easy option to crown a winner in your A/B test and switch all further traffic to the best price you have. The rules from before still apply: make sure each price version gets shown at least 100 times before deciding on your price going forward. If you don’t want to use a landing page tool, then you can alternatively use the free Google Optimize tool by adding a quick code snippet at the top of your page. Remember though: Google Optimize can only change the text and not the actual price that gets charged, so you might need another workaround to do this.

If you’re NOT planning on selling your course to a pre-existing audience, then you’ll have to run your test a different way.

In this case, you’ll have to run your tests through some paid advertising system. If you were planning on promoting your course through Facebook, then use Facebook Ads. If you were planning on using YouTube advertising, then use YouTube Ads.

Setup your promotional funnel the same way you were originally planning to, but instead use 3 different campaigns to test 3 different prices. Same as before, pick a base price and then create a 1/2x and and a 2x price.

Then set up your campaigns to have a campaign spend limit for each test, and set them all the same:

<image of FB ads>

The cost you pay for each student will vary wildly based on how you plan to promote your course and, of course, your price. For example, if you run ads to cold traffic directly in the United States to a 45 minute webinar you might expect to see stats like this:

(this is just an example)

Whether these stats are realistic depends on a number of factors, such as your audience targeting, your ad quality, your advertising platform, the effectiveness of your webinar page, how good your webinar content is, your ability to effectively pitch your course, and your price point.

For example, a 1% CTR on ad is generally considered mediocre. Not bad, but not good. A $25 CPM for ads run in the United States is considered expensive, but it largely depends on WHO you are targeting and what system you are using. Facebook CPMs are almost always higher than YouTube CPMs. Alternative ad networks like Quora could be dramatically cheaper. The signup rate on your webinar page could be as high as 40% and as low as… well, it can be 0% if your page is terrible.

The point is, you just need to RUN the funnel you plan to work with and do it for 3 different price points to come up with two numbers: your profit per student, and your return on ad spend (ROAS).

In online courses, the upper limit we’ve seen for ROAS is 5-7x, but more commonly in the 1.5-3x range.

To calculate your ROAS, you can just add the total number of sales for each price point and divide it by the total you spent on that price test campaign.

When you have these 2 numbers, you just have to decide what suits you best.

Do you want to run a lean operation that limits your total students and maximizing how much you make for each one? If so, pick the price test that got you the best per student profit. Remember, it doesn’t make a lot of sense to take any student so long as they were acquired profitably if you have time intensive bonuses like 1:1 onboarding calls.

Do you want to maximize the amount of money you make in total? Pick the price test campaign that had the best ROAS. As you scale up your marketing, you’ll want extra cushion in your ROAS as this metric tends to deteriorate as you start widening your audience targeting.