Hey kids, want some free candy?
Feel weird about that? Me too. That’s because the word “free” is complicated. People love getting things for free, but the word also has a handful of negative connotations and may hurt your business.
At Teachable, we’ve found ourselves in the middle of the free versus priced content debate. As a company helping people teach online, instructors can use our platform to create a free course, or they can decide to charge for it. We hear people debating the pros and cons of both on a daily basis.
While we’ve been rambling on about charging for your course from the beginning, we recently ran the data and we came to one very important conclusion:
Charging for your online course is linked to increased completion rates and we can prove it statistically.
In the spirit of transparency, we’re sharing our data and how we ran our significance test below. If you don’t care about math and want to skip to the wordy part where we talk about what we found and why it’s important, click here.
We wanted to test for engagement. Are students who enroll in a paid course more engaged than those who enroll in a free course?
The first step was to define engagement. We looked at the average percent of a course that our students complete in a paid course and a free course, and then we compared the percentages.*
*We eliminated bundled courses in which additional courses are given away as free with purchase to simplify the data
We found that in paid enrollment, students completed 36% of a course on average. In free courses, student completed just 9% of a course on average.
The next step was to determine if the difference in these percentages was statistically significant.
Hypothesis: Pricing your course leads to a significant difference in engagement (percentage of course completion).
Remember: significance is the likelihood that a result or relationship is caused by something other than mere random chance.
This is a stunning finding. While correlation is not causation (cue flashbacks to AP Stats), this is an accurate and important number to investigate.
We did an additional test studying the average completion of just 1 lecture in a free and paid course. Students are 3x more likely to complete just 1 lecture in a course if it’s a paid course rather than a free course.*
*again testing at .01 significance level.
We’re going to use this data to extrapolate a bit and, being more prescriptive than usual, say: PRICE YOUR COURSE.
Our CEO and Founder, Ankur Nagpal, who made millions by age 18 developing third-party quizzing apps on Facebook, reiterates this point as he walks beginning course creators through his 7 Step Process for Creating Your Own Online Course.
“We’ve found that the same course, when distributed free versus when a student pays, has a drastically different completion rate,” Nagpal explained to Forbes. “When you give a coupon for a free class, the completion rate can be in the low single digits. When you charge for the same course, the completion rate can be 30 or 40%. The more you charge for a course, the more people actually complete it.”
While it seems altruistic and philanthropic to give your course away for free, you’re ultimately signaling to your audience that your information isn’t valuable.
Now think, is it more ethical to price a course for free if it leads to less people reading your content? What if that content is essential to your audience’s well-being/happiness/business success? If you’re like me and care about the good of humanity (ok, a bit of a hyperbole), consider pricing your course.
Plus, you can donate the profits if you’re really worried about it. #karma
Now, I have to clarify a few things. Pricing your course doesn’t bar you from giving away content for free. Some of the best ways to grow your audience is by giving away pieces of content that:
- Shows your audience what to expect from you
- Conveys the value of your content
- Generates reciprocity between you and your audience
As the marketing adage goes, you’ve got to give, give, give and then take. Give away juicy content that makes people crave what’s coming next, but then charge for the rest of it.
This parallels what’s going on in an even larger debate about free content. Not to complicate things, but Stewart Brand declared in the 60s that “information wants to be free”. Brand argued that technology would help information spread and people share what’s important, valuable and crucial to their lives.
As a society, we’ve taken this to heart. Think YouTube, think WhatsApp, think Snapchat. All of the headline-smashing, viral-making, news-breaking platforms have given away their product for free.
And yet, these companies were eventually valued to be worth, quite literally, billions of dollars. Their founders made real money. Did Jan Koum and Brian Acton give away their company away for free? No silly, they sold it.
With this in mind, I explored a few reasons why priced courses might produce more engagement than free courses.
1. Price communicates value
Without going too far into more nerdy economic, we know that people tend to value something that has an assigned value over something that’s free.
Marc Slocum, of O’Reilly Media said, “Free product comes with low expectations (“Hey, it’s free) and neutral perceptions (“What’s the worst that can happen?”)” and I 100% agree. Conversely, a product priced at a higher cost is perceived to be more valuable.
Let me ask you a question, do you want the car for 10k dollars, 50K dollars or 100K? White-on-white Bentley baby!
2. Free can have spammy connotations
Personally, when I think “free”, I think infomercials with an additional set of knives that come for free. I think used-car salesman. I think of people trying to mine my data while asking if I want to win a free trip. Not great.
Free is well known in the marketing world as a converting word. There’s little risk and people seem open to try free things. However, the word has been abused and can come off as spammy if you’re not careful. Give things away, but do it with style.
MailChimp, a well-respected company in email marketing industry, has written extensively on the word free and its “spamminess”. They’ve detailed how using the word in your emails, and specifically the subject line, can send your email right to the spam box.
3. People feel obligation after they have paid for something
Once people have purchased your course, it becomes a sunk cost. Rational or irrational, this make us prone to loss aversion and framing effects. While we always think it’s worth your time to complete a course you purchased, knowing that you paid money for something pushes you to utilize that very thing.
4. Teachers creating paid courses might be putting out better content
Back to that thing my stats teacher used to yell at me, correlation is not causation. There could be a number of factors we haven’t discovered that caused a priced course to produce higher engagement. Thinking through these, I wondered if the instructors who priced their course also focused on engagement tactics? In the future, I plan to investigate.
What’s your association with free? Have any economic theories I should check out? I’d love to know. Talk to me in the discussion box and I’ll be sure to respond.