Choosing the right pricing model for the external learner use case with a new learning management system (LMS) is as crucial, if not more, than certain features on the market.
Here’s the thing: many LMSs today started life as internal learner (i.e. employees) LMSs, and this entrenched legacy thinking has carried over to the external learning realms. With less than perfect outcomes for buyers like you to boot.
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’s different from 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
- Scalability: Pay-per-learner pricing allows you to easily scale training initiatives. This model can accommodate any number of learners without you needing to invest in additional infrastructure or licenses.
- Cost efficiency: This model ensures that you only pay for the actual usage of the LMS, making it suitable for those with fluctuating training needs or irregular user patterns.
- Flexibility: Pay-per-learner pricing also helps organisations tailor their investment based on number of users, really optimising training budget.
Cons
- Limited predictability: With pay-per-learner pricing, the total cost may vary significantly depending on the number of learners enrolled. You’ll need to carefully forecast training needs to estimate costs accurately.
- 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 charges organisations based on the number of users who actively engage with the LMS within a given period.
Pros
- Cost efficiency: Pay-per-active user pricing ensures you pay only for users who actively utilise the LMS, making it suitable for organisations with a varying number of active learners.
- 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.
- Granular tracking: By tracking active users, you can gain valuable insights into learner engagement and adjust training strategies accordingly.
Cons
- Difficulty in predicting costs: Like the pay-per-learner model, pay-per-active user can make cost estimation challenging due to fluctuations in user engagement. You’d need to closely monitor user activity and be prepared for potential cost variations.
- Potential underutilisation: If you 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 maximising 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
- Cost control: Pay-as-you-go pricing offers the flexibility to pay for the LMS only when it is actively utilised. It’s ideal for organisations with sporadic training needs or those looking to experiment with different training approaches.
- 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.
- Easy adoption: The pay-as-you-go model enables you to quickly implement an LMS without long-term commitments, so you can adapt and explore different platforms before making a more substantial investment.
Cons
- 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. Carefully analyse training needs and usage patterns upfront to determine whether pay-as-you-go is the most cost-effective option.
- Limited customisation: Some pay-as-you-go LMS providers may offer limited customisation options compared to other models. If you’ve got specific branding or integration requirements, you should assess whether the available customisation options meet your needs.
4. License fee/subscription
Definition: The license fee/subscription model involves paying a fixed fee or recurring subscription cost to access and use the LMS for a specified period, typically annually or monthly.
Pros
- Predictable costs: With a license fee or subscription model, you’d have a clear understanding of annual or monthly expenses, making it easier to budget for training initiatives.
- Comprehensive feature set: LMS providers often offer robust features and ongoing support as part of their license fee or subscription, providing a complete package to meet training needs.
- 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
- Upfront investment: Depending on the pricing structure, license fees or subscription costs may require a significant upfront investment, which can pose a challenge for those with limited budgets or short-term training needs.
- Potential overcommitment: Committing to a long-term license or subscription may lock you into a contract that doesn’t suit changing training needs or business requirements. 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 to use and modify as per requirements. The costs associated with open source LMS are primarily related to implementation, customization, hosting, and support.
Pros
- Cost savings: Open-source LMS platforms eliminate license fees, making them an attractive option for those with limited budgets. The cost savings can be significant, especially for small or non-profit organisations.
- Flexibility and customisation: Open-source LMS platforms offer the freedom to customise and adapt the system to their specific needs. You can modify the code, integrate with other systems, and add custom features.
- 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
- Implementation and support: While the open-source LMS itself may be free, you need to consider the costs associated with implementation, customisation, hosting, and ongoing support. These expenses can vary depending on your technical capabilities and requirements.
- Technical expertise: Utilising an open-source LMS requires technical knowledge or the availability of dedicated resources for implementation, customisation, and maintenance. Decide if you have the necessary skills in-house or if you’ll need to rely on external support before buying here.
- 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. Be prepared for potential complexities in implementation and ongoing management.
So what’s the best path forward? Monthly passes
Have you ever joined a gym? Remember that initial feeling: all the motivation and gusto, wind in your sails, ready to change your life. Then two months in, you’ve stopped. Life gets busy. You can miss a session or two… and so forth. Suddenly, that annual contract you signed up for isn’t looking so worthwhile.
External learners such as client, partners, and members don’t need regular or, sometimes, even long-term 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 apply it to external LMS pricing, and that’s exactly how we treat your external learners. This isn’t a one-time login situation, not is it forcing you to pay for six months that go largely unused. It’s that sweet spot in between.
Pros
- Cost savings: If you go to our pricing page, we have a rundown of outlaid costs and the features you can get for it.
- Surprise-free: As you buy a fixed 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. Plus if you creep over the usage, no problem. We don’t want to give you any headaches on unexpected pricing.
- (And speaking of) headache-free: What’s worse than the surprise invoices that throw your budget out? Not to mention the monthly, soul-destroying administration that come with it. We take care of all of this for you with consensus on the agreement in advance, and then work together for the 12 months plus ahead without painful reconciling.
Cons
- It’s something new: We have all worked with that stalwart procurement professional or manager approver. New things can be hard to sell to them, even when we save you money. (You can likely hear them now: “If it’s too good to be true…”) We can help you build a business case here.
- 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.