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Evolution of Pricing

Evolution of Pricing

We’ve begun price tests to help you maximize your revenue potential, and information about these tests can be found here. Throughout 2018, our Pricing Research team will update this blog post with details about these tests, let you know what’s coming up, and share learnings.

Have thoughts about pricing? Please fill out this form. Our Pricing Research team wants to hear from you!


June 27 Update

 

Udemy is continuing to run price tests for its Deals Program with the end goal of creating a dynamic marketplace where courses that create different experiences sell for different prices. We’ve learned a lot from our initial tests, and we’re planning a pilot of a differentiated pricing system later this year. To support this pilot, we’re also making a minor change to our Pricing and Promotions Policy. Both the tests and the pilot will only affect instructors who opt into our Deals Program; instructors who do not opt in will not be affected.

 

Read on for more, and remember to fill out this form if you have thoughts about pricing on Udemy!

As you heard in February’s State of Udemy and our April pricing update, we’ve been hard at work evolving our pricing strategy. Since this is your business, too, we’re committed to keeping you in the loop as we test, learn, and build toward a more dynamic marketplace.

 

“Before we dive in — why are we focused on pricing, again?”

As many instructors know, most Udemy courses sell today within a pretty narrow price range, regardless of attributes like topic, length, rating, and instructor responsiveness. This one-size-fits-all pricing model isn’t ideal for instructors because it limits the types of courses you can create and the ways you can market them, and this in turn limits what you can earn on Udemy. Uniform pricing also confuses students, who expect different courses to deliver different value.

Our long-term goal with pricing strategy is to maximize revenue by creating a dynamic marketplace where you can viably create different kinds of content short or long, general or niche, introductory or advanced, etc. and students can choose and pay accordingly.  To build toward that system, we need a whole lot of information we don’t yet have, so we’ve been running tests to fill in the blanks.

 

“What has Udemy been testing?”

Today, we want to share a bit about the two major types of tests we’ve been running in 2018 for courses in our Deals Program and give you a look at what else is coming up. We know this can get pretty dry, but it’s also important, so bear with us.

 

Elasticity Tests

To create a marketplace with a true range of viable sale prices, we need to know where, in students’ minds, the edges of pricing lie. Elasticity tests display the “sitewide” promotional price at different levels to different groups of students, so we can measure where small changes in price could produce big changes in revenue. These tests help us understand the realm of possibility for our pricing models in the near future so that we can avoid shocking the system when we roll out changes more widely. In economics terms, this helps us define the demand curve.  We’re still collecting the data on these, but we’ve already learned a great deal about how students in different geographies respond to different prices. Down the road, this will help us develop a healthy spread of prices in each market that maximizes instructors’ earning potential, and better aligns with student expectations.

Price Differentiation Tests

With over 65,000 unique courses on the Udemy platform, determining the best price range for each one is a complex task. This is why we’ve been running price differentiation tests, which attach different price points to different courses based on a variety of course attributes and measure their comparative success. Assessing the value a student is likely to find in a course is extremely delicate, and we’re making no assumptions. Instead, we are thoroughly investigating actual student behavior to figure out where students perceive value.  

The awesome news is that we’ve seen that some courses do command higher prices from students — and generate more revenue for instructors! Others actually generate more revenue when their price is a little lower. In other words, these tests suggest that improvements in price differentiation could increase revenue potential for multiple types of courses.

 

Today, sale prices through our Deals Programs are concentrated around “sitewide” prices, like in the first image above. To maximize each course’s revenue potential, we’re trying to create a more dynamic marketplace where sale prices vary by course, like in the second image.

 

“So, what’s next?”

The data we’ve gathered from these tests has brought us to an exciting inflection point. Though we’ll still need a lot more information before we’re ready to roll out differentiated deals to the whole Udemy marketplace, we believe we know enough to develop and test a contained “pilot” of a dynamic marketplace. So with the goal of 1) putting to work everything we’ve learned from our initial tests and 2) accelerating our rate of learning, we’re excited to announce plans for an Australia Pricing Pilot.

In this pilot, which will launch by September 2018 to courses in our Deals Program, we’ll isolate Australia’s pricing structure from that of other Udemy markets and gradually roll out a differentiated pricing system to new and existing Australian students. You can think of this as a longer, more holistic pricing test. Rather than gathering a bit of data on a specific variable here and there, we’ll be able to measure the deeper, longer-term benefits (and risks!) of various options for improving our Deals pricing system. We will consider this a success if we see fewer confused students, more satisfied instructors, and a healthy marketplace. And if it’s successful, we’ll use this to begin slowly improving our pricing across other markets.

 

“Why Australia?”

We know you depend on the income you generate with your Udemy courses, and any sudden changes to our business are also sudden changes to yours. We picked Australia for a few reasons. First, the majority of Udemy instructors receive only a small portion of their revenue (less than 5%) from students in Australia. Second, Australia is similar to other markets like Canada, letting us measure if we’re making the right changes. Our tests to date suggest we can differentiate prices without much risk to short-term revenue. And in the long run, this should actually increase your potential to earn on Udemy as it lets you create a greater variety of courses for more diverse audiences.

 

“Okay, but how will this affect me?”

We don’t expect you’ll see any significant changes to your business during this pilot. To give us the flexibility to execute the pilot, we’re amending our Pricing and Promotions Policy to include Australia on the list of countries that don’t have a minimum sales price after discount. This does not mean that you’ll see lower prices overnight on every course in Australia. As we wrote in April, we’re seeking the right price for each course, one that resonates with students and maximizes your chances of a good return on your time and effort, and that will continue to be our goal.

While it’s running, you’ll still be able to promote to your students in Australia. We’ll provide more details on how your coupons will function in the context of this pilot as we get closer to September. As with all our pricing tests, our goal is to maximize what we learn while minimizing what we disrupt, so we’ll be making all these changes very gradually and thoughtfully, making adjustments as we go.

 

 

To recap: we’ve been gathering the information we need to build a dynamic marketplace, we’ve learned a lot, and we’re ready to test a “miniature” of that marketplace in Australia starting later this year. This will help us learn much more than we can in the one-off tests we’ve done to date, and we don’t expect it to have a noticeable impact on your business in the short-term.

We’re excited to venture into this promising new territory with you!  We’ll keep you posted as we learn more, plan more, and keep working at our mission to improve lives through learning.

 

If you have thoughts about pricing, please fill out this form. Our Pricing Research team wants to hear from you!


April 10th Update

 

Udemy is beginning a series of price tests designed to help you maximize your revenue potential by finding the price where your particular course sells best.

Background

Today, the vast majority of you opt into our “Fixed-Price Promotions” program. As a result, students are regularly able to find many discounted courses, usually for the equivalent of between $10 and $20 USD. This strategy has been instrumental in making Udemy courses accessible to over 20 million students around the world. It’s also why thousands of you have been able to monetize your knowledge, and in some cases even make a successful living as a Udemy instructor. However, this one-size-fits-all pricing strategy doesn’t do justice to the nearly 65,000 diverse courses on our platform today.

We’re very excited to announce that we’re running price tests through the remainder of 2018 to help us evolve our pricing strategy. Ultimately, this means finding the price where your particular course sells best to help you maximize your revenue potential.

 

Revenue Maximization Point

Finding the price point that maximizes your course’s revenue is not an easy thing to do. If you price too high, you won’t reach as many students. If you price too low, you’ll reach lots of students, but they’ll pay too little for your course. The goal of these tests is to find that point in-between that drives the largest number of students willing to pay the highest amount for your course: the revenue maximization point. In other words, you want the product of (Price x Number of Students) to be as big as possible (and so do we).

Our existing pricing strategy hasn’t allowed us to test and find that revenue maximization point for each individual course. It’s possible there are some courses on the platform where selling for $15 USD is the perfect price for revenue maximization. For others it might be $10 USD, and for others it might actually be closer to $30 USD. We don’t know yet, but this is what we’ll be testing.

Something else we’re going to test is finding the revenue maximization point for each course by country. For example, a course’s revenue maximization point might be $20 USD when it’s sold in the United States, but $10 USD when sold in Brazil. Let’s dive into the details for a moment:

  • Imagine that at $20 USD, a course sells to 100 students in the U.S. but only 10 students in Brazil. Using our formula, that’s $20 per course x 110 total students = $2200.
  • Now imagine that we maintain the $20 USD price in the U.S. but drop the price to $10 USD in Brazil. We see the number of U.S. students stay the same (at 100), but the number of Brazilian students jumps up 5x (to 50): $20 per course x 100 U.S. students + $10 per course x 50 students = $2500, an increase of $300!

In August 2017, we announced that we were going to do “localized price testing” in 5 countries: Brazil, Mexico, India, South Africa, and Turkey. These tests provided some good initial learnings that in certain countries, the revenue maximization point for some courses is likely below $10 USD. We’ll continue sub-$10 USD tests in these countries this year.

 

“What do all these tests mean for my business on Udemy? I rely on a steady flow of new students and revenue. Will they be disrupted?”

Our #1 priority during these price tests is to learn as much as possible while doing as little as possible to disrupt your business on Udemy. We know how important it is to continue to reliably enroll new students, and with them, deliver you revenue. With that said, we also know that you expect us to evolve and take calculated risks to help further grow your business.

At first, you likely won’t notice these price tests since we’re focusing them on new students who aren’t yet familiar with our existing approach to pricing. Over the coming months, as tests show positive signals, they’ll expand to existing students and you’ll probably start to notice them more frequently. Today, none of these tests require any action on your part. If they ever do, we’ll notify you with ample lead time and provide details in updates to this blog post. These price tests also should be compatible with most instructor coupon strategies; however, this is something we will pay close attention to as we test.

 

What’s next?

In the short term, you might notice tests where different courses are discounted to different amounts. This is intentional as we strive to find the revenue maximization point for each individual course.

Please trust that we are going to take a very thoughtful, iterative approach to evolving pricing. When you are successful, we are successful. We cannot accomplish our mission of “improving lives through learning” without you, and we hope you are excited about our commitment to helping you maximize your revenue potential as an instructor on Udemy.

If you have thoughts about pricing, please fill out this form. Our Pricing Research team wants to hear from you!