Choosing the right pricing model for the external learners use case with a new Learning Management System (LMS) is as crucial, if not more, than certain features on the market. Because here’s the thing, many LMS’ today started life as an internal learner (employees) LMS, and this entrenched legacy thinking has carried over to the external learning realms. With less than perfect outcomes for buyers like you.
In this article we give you objective and direct guidance on what your options are, our journey to get to what we believe is the optimal solution, and why that is different to the rest of the market. Let’s get into it.
1. Pay per Learner
Definition: Pay per learner is a pricing model where the LMS provider charges based on the number of individual learners who will be using the platform.
Pros:
a) Scalability: Pay per learner pricing allows organisations to scale their training initiatives easily. They can accommodate any number of learners without the need to invest in additional infrastructure or licenses.
b) Cost-Efficiency: This model ensures that organisations pay only for the actual usage of the LMS, making it suitable for organisations with fluctuating training needs or irregular user patterns.
c) Flexibility: Pay per learner pricing allows organisations to tailor their investment based on the number of users, enabling them to optimise their training budget.
Cons:
a) Limited Predictability: With pay per learner pricing, the total cost may vary significantly depending on the number of learners enrolled. Organisations should carefully forecast their training needs to estimate costs accurately.
b) Higher Costs for Large-Scale Deployments: For organisations with a large user base, the pay per learner model may result in higher costs compared to other pricing models. A thorough cost analysis is essential before committing to this model.
2. Pay per Active User
Definition: Pay per active user is a pricing model where organisations are charged based on the number of users who actively engage with the LMS within a given period.
Pros:
a) Cost Efficiency: Pay per active user pricing ensures that organisations pay only for users who are actively utilising the LMS, making it suitable for organisations with a varying number of active learners.
b) Encourages Engagement: This model motivates organisations to actively engage and involve their learners in the training process to optimise costs, leading to higher learner participation rates.
c) Granular Tracking: By tracking active users, organisations gain valuable insights into learner engagement and can adjust their training strategies accordingly.
Cons:
a) Difficulty in Predicting Costs: Like the pay per learner model, the pay per active user model can make cost estimation challenging due to fluctuations in user engagement. Organisations should closely monitor user activity and be prepared for potential cost variations.
b) Potential Underutilisation: If organisations pay for active users and a significant number of learners remain inactive, it may result in wasted resources. Ensuring high engagement levels is essential to maximise the value of this pricing model.
3. Pay as You Go
Definition: Pay as you go is a pricing model where organisations pay for the LMS based on the actual usage, typically calculated per month or per hour.
Pros:
a) Cost Control: Pay as you go pricing provides organisations with the flexibility to pay for the LMS only when it is being actively utilised. This model is ideal for organizations with sporadic training needs or those looking to experiment with different training approaches.
b) Low Initial Investment: Pay as you go models often require minimal upfront costs, making it easier for organisations with limited budgets to access LMS functionality.
c) Easy Adoption: The pay as you go model allows organisations to quickly implement an LMS without long-term commitments, enabling them to adapt and explore different platforms before making a more substantial investment.
Cons:
a) Potentially Higher Costs: While pay as you go pricing offers flexibility, it can result in higher costs over time compared to other models, particularly if the LMS is used extensively. Organisations should carefully analyse their training needs and usage patterns to determine whether pay as you go is the most cost-effective option.
b) Limited Customisation: Some pay as you go LMS providers may offer limited customisation options compared to other models. Organisations with specific branding or integration requirements should assess whether the available customisation options meet their needs.
4. License Fee/Subscription
Definition: The license fee/subscription model involves organisations paying a fixed fee or recurring subscription cost to access and use the LMS for a specified period, typically annually or monthly.
Pros:
a) Predictable Costs: With a license fee or subscription model, organisations have a clear understanding of their annual or monthly expenses, making it easier to budget for their training initiatives.
b) Comprehensive Feature Set: LMS providers often offer robust features and ongoing support as part of their license fee or subscription, providing organisations with a complete package to meet their training needs.
c) Customisation Options: License fee or subscription-based LMS platforms typically offer greater flexibility for customisation, allowing organisations to align the system with their branding, workflows, and integration requirements.
Cons:
a) Upfront Investment: Depending on the pricing structure, license fees or subscription costs may require a significant upfront investment, which can pose a challenge for organisations with limited budgets or short-term training needs.
b) Potential Overcommitment: Organisations committing to a long-term license or subscription may face challenges if their training needs or business requirements change. It’s important to carefully evaluate the scalability and flexibility of the chosen LMS platform before committing to a license fee or subscription model.
5. Free (Open Source)
Definition: Open source LMS platforms are freely available for organisations to use and modify as per their requirements. The costs associated with open source LMS are primarily related to implementation, customization, hosting, and support.
Pros:
a) Cost Savings: Open source LMS platforms eliminate license fees, making them an attractive option for organizations with limited budgets. The cost savings can be significant, especially for small or non-profit organisations.
b) Flexibility and Customisation: Open source LMS platforms provide organisations with the freedom to customise and adapt the system to their specific needs. They can modify the code, integrate with other systems, and add custom features.
c) Active Community Support: Open source LMS platforms often have a vibrant community of developers and users who provide support, share best practices, and contribute to the ongoing improvement of the platform.
Cons:
a) Implementation and Support: While the open source LMS itself may be free, organisations should consider the costs associated with implementation, customization, hosting, and ongoing support. These expenses can vary depending on the organisation’s technical capabilities and requirements.
b) Technical Expertise: Utilising an open source LMS requires technical expertise or the availability of dedicated resources for implementation, customisation, and maintenance. Organisations should assess whether they have the necessary skills in-house or if they need to rely on external support.
c) Potential Complexity: Open source LMS platforms may have a steeper learning curve and require more effort to set up and configure compared to commercial options. Organisations should be prepared for potential complexities in implementation and ongoing management.
So what’s the best path forward? Monthly passes
Definition: Have you ever joined a gym? Or know someone who has? With all the motivation and gusto, wind in your sails. Then two months in, nothing. Whilst not exactly the same same, external learners such as client, partners and members don’t need regular access. This is why gyms create a monthly pass, and we thought why not evolve for the LMS world.
The monthly pass to a gym by definition refers to a membership that allows individuals to access a gym for a duration of one month. Recurring of course. It gives you the right to use all the gym’s amenities. Now, take that and it is exactly how we treat your external learners. If they are onboarding, or learning a new product, this isn’t a one login thing, but it also isn’t 6-months straight of logins.
Pros:
a) Cost savings: If you go to our pricing page we have a calculator that will show in cold hard cash how much your save.
b) Surprise free: as you buy a number of monthly passes for the year ahead, you know what your annual outlay is. We work with you on a best ‘guestimate’ of the amount you need. And if you creep over the usage, no problem. We don’t want to give you any headaches on unexpected pricing.
c) Talking of headache free: what’s worse than the surprise invoices that throw your budget out? The monthly, soul destroying, administration. We take care of all of this for you when we have consensus on the agreement in advance, and then work together for the 12 months+ ahead without painful reconciling.
Cons:
a) It’s something new: we have all worked with that stalwart procurement professional or manager approver. They mean well. And have seen a lot. But you know what, these new things can be hard sell. Even when we save you money. I can hear them now, ‘if it is too good to be true…”. We have help at hand of how to manage this.
b) Your relationships with other vendors: those who don’t move to consumption-based pricing for utilisation levels like external learners will be under pressure from you in no time, potentially creating hard decisions and more work for you to change vendors.