Evolution of Pricing and Coupons

It’s been over a year since we rolled out our initial pilot of differentiated pricing, and over two months since we launched the new instructor marketing tools. How did we get here, how is it going, and where are we headed?

Why are we working on pricing and coupons?

We’re always looking for opportunities to improve in ways that help students, instructors, and businesses, including ours. A one-size-fits-all, low-price model only rewards a narrow range of courses, limiting what content instructors can realistically create and what students can learn. On the other hand, a differentiated pricing model — one that uses student-response data to create custom sale prices for each course, in each market, for each promotion — creates a healthier range of opportunities for everyone.

In September 2018, we launched our first pilot of a differentiated pricing system in Australia, and it outperformed our flat pricing model. So over the course of 2019, we slowly rolled out the new approach around the world, making incremental changes and testing rigorously. By November, flat-price sales were less frequent and more special, enabling critical centerpiece sales like Black Friday and Cyber Monday to deliver more aggregate revenue to more instructors than ever before.

How and why did we update the instructor promotional system?

Udemy is an ecosystem, and over the last year our testing confirmed that a differentiated pricing model can’t work at scale without everyone, including instructors, on the same page. So, we rolled out changes to the instructor promotional system to help Udemy and instructors stay in sync when it comes to pricing and promotions.

Here’s a reminder of how the new system works, and why we designed it that way:

1. For instructors who use Udemy Deals, coupon price options are now generated from your course’s pricing data, rather than one-size-fits-all. This ensures that marketing from Udemy and instructors stays in alignment, even as course prices adjust over time.
2. Discount coupons expire and are limited in quantity. This reinforces discounting as an active marketing choice, rather than a passive default, so promotions stay special.
3. Steeper discounts expire sooner. This reinforces the specialness of deep discounts and free coupons, and makes it harder for bad actors to use free coupons in ways that undermine the health of the Udemy marketplace.
4. Referral links, a new tool introduced with the changes, enable instructors to follow Udemy’s pricing for their more passive channels, such as their website. Referral links also ensure that expired coupons still give attribution and revenue share for sales driven by instructors.

What’s been the impact of these changes?

It’s still early days for the new promotional system, and some of the effects we’ve been monitoring in our testing take a long time to measure (for example, lifetime student learning and purchasing behavior). There are some things we can measure right away, though.

Here’s what excites us in the early data from the new marketing tools:

• Revenue from instructor promotions has continued to grow overall, and has held steady as a percentage of all revenue generated.
• More courses than ever are getting instructor-driven, paid enrollments.
• The number of paid courses with a consistently high proportion of free enrollments has dropped.
• Conversion rates from instructor-driven traffic remain healthy.

And here’s what we know we need to work on:

• Though prices are differentiated in most markets today, coupon price options remain relatively uniform between instructors. We need to continue to improve differentiated pricing so coupon prices are more differentiated, too.
• Discounts should be deliberate, but creating them shouldn’t be a pain. We need to reduce the complexity of creating and maintaining coupons, especially for instructors with multiple courses or many active marketing channels.
• Reducing the number of distinct coupons makes it harder to gauge which marketing channels are working well. We need to enhance coupon tracking so instructors can make data-driven improvements to their marketing.

What’s next?

Beyond instructor coupons, we know we still have a lot of work to do to keep building long-term value with our pricing and promotions. Here’s what you can expect to see over the next few months:

• We’ll test the effects of “charm pricing” (i.e. rounding sale prices in a standardized way) within differentiated pricing. This will let us see how students respond and decide if charming should be standard for Udemy sales, including instructor coupons.
• We’ll run targeted experiments to better understand the relationship between list and sale prices, including testing different list prices to help find the optimum for each course, market, and promotion. This will help us understand if we can use our data to optimize list prices and increase earnings for instructors who use Udemy Deals.
  
• We’ll make the free course experience more distinct, giving free coupons a clear place within the world of differentiated pricing.
  
• We’ll simplify Udemy’s promotional agreements to make it easier to indicate if you want to use Udemy’s pricing data and promotional strategies, or rely on your own.

We’ve come a long way, and we know there’s still lots to improve. But we’re encouraged by the results we’ve seen so far and excited to keep improving pricing for everyone.

Teach on,
The Udemy Instructor Team