E-learning platforms are grown exponentially in the last year. The Massive Open Online Course (MOOC) market size is projected to reach USD 67.18 Bn by 2027, from USD 7.34 Bn in 2020, growing at a CAGR of 37.2% during 2021-2027.
And learning management systems are playing a central role in enabling said growth.
With over 87% of users using some form of web-based LMS solutions, they have been indispensable during the pandemic. Nearly 3 in 4 users (74%) say their LMS has had a positive impact in areas such as student satisfaction, teacher/admin productivity, and teaching in the era of COVID-19.
To not only survive but thrive in the competitive e-learning market and changing times, a robust LMS is a necessity for any e-learning provider. Whether you’re a potential buyer or a current user, the decision to adopt or switch to a new LMS is a difficult one since it must be considered on various factors, with the second most important factor of consideration(after functionality) being the price.
So, in this article, we’ll delve into the costs of an LMS, focusing on the different LMS pricing models so that you can choose the right fit for your e-learning platform. Before we do so, we’ll also cover some basic concepts regarding an LMS.
General Overview of Learning Management Systems
What is an LMS?
An LMS is a software application that allows an e-learning platform to plan, execute, and monitor learning processes, from content creation and delivery to assessing student participation and performance. An LMS usually has two components – the admin interface to execute basic functionality like creating and delivering courses, adding learners, analyzing reports, and the like, and a user interface that is operated by teachers, admins, and students.
How can an LMS benefit you?
Choosing the right LMS plays a critical role in driving business growth. Apart from enabling you to design and deliver an enormous amount of information in various formats of learning efficiently, an LMS brings with it a slew of benefits:
Monitor performance and track results: This is one of the biggest advantages of using an LMS. A robust LMS can generate metrics from the time users sign up until they complete the course, leaving you lots of ways to analyze learner patterns and measure the success of your learning program. For instance, metrics like course progress/completion rates and learner proficiencies allow you to analyze every aspect of the online tests, allowing you to identify any issues with your e-learning course so you can course-correct accordingly.
Time-saving: Similarly, an LMS also helps you cut down on functions like in-person training programs and onboarding.
Learning Automation: A fully automated learning process ensures flexibility in processes and learning paths, allowing you to experiment extensively with various program components.
Content Centralization: All users of a cloud-based (SaaS) LMS can access any information, at any point of time from anywhere in the world, from one central repository, allowing faster content updates and enhancing user collaboration by allowing students and teachers to work together on different tasks at the same time.
Increased User Retention: For learners, apart from unlimited access to content anytime, anywhere, an LMS helps them stay on top of their learning, boosts their knowledge retention, and increases their learning engagement through interactive processes and gamification elements like internal competitions, quizzes, and more. Especially in the case of a corporate learning program, LMSs offer a win-win situation by helping employees build and hone their skills without having to leave your company.
Security and Compliance: A huge repository of user information makes your learning platform a security concern governed by many laws that keep updating and changing over time. With an LMS, you needn’t worry about compliance and security. Most modern LMS have inbuilt security protocols (like advanced password authentication, domain-based registrations, data encryption, and the like) to meet the required standards, leaving you plenty of time to focus on more essential objectives like product development and customer retention.
How does an LMS function?
The functionality of an LMS can be split into the following two components:
1. The Course Catalog
The content engine comprises of the LMS’ ability to let you:
Create e-learning content: Create content from scratch within the LMS or add existing material.
Organize your courses: Depending on the needs of your organization and learners, it could be a single course or multiple courses across different student groups, categories, skills, and branches.
Deliver your courses: Delivery depends on whether your courses are for a restricted audience (for instance, employee training courses) or for a wider audience (for example, paid courses for a school).
Manage your users: Managing users involves adding them to the LMS, assigning them to specific courses, interacting with them, and handling their payment (we’ll cover the revenue aspect in the section below).
Assess learning: Automated access to learner statistics like sign-ups, attendance, grades, and more.
For more information on the content engine, specifically on tips to build a perfect course catalog, read our blog – ‘Catalog’ Your Way to E-Learning Success.
2. Seamless Payment Processes
Once you’ve established your content, the next step is monetizing it. With an efficient billing solution, you can ensure a ‘complete package’ for the user from course selection to checkout with seamless payment processes like:
Quick pricing iterations: Experiment with various pricing options to maximize value to your learners and revenue for your business.
Flexible payment options: Make payment convenient for your users by offering various payment methods and by tailoring your prices to local currencies and tax regulations.
Manage one-time as well recurring transactions: Whether you offer courses on subscription or as a one-time transaction, the billing solution you choose should scale and handle the complexities of both seamlessly.
Plan management: Finally, everything you do with pricing and payments boils down to how efficiently you manage your plans. Hence, having a lean product catalog allows you to seamlessly manage multiple products and plans and lets you make changes without much code.
For more information on the different levers of the revenue engine and what your tech stack should enable you to do, read our guide on Scaling E-Learning Businesses through Experimentation.
Costs of an LMS
The decision to adopt an LMS or switch to a better LMS software is an easy one. The difficulty arises when deciding which LMS to buy, given that LMS costs will account for a considerable amount of your learning technology budget. Without further ado, let’s break down the costs of an LMS so you can make an informed decision:
Hard Costs
These are the visible costs, usually forming the bulk of your expense, which is basically the pricing model. We’ll go through the various LMS pricing models in detail after covering the soft costs.
Soft Costs
These costs usually seem like hidden expenses but are an important part of your cost equation. Be aware of the following soft costs and other similar costs to ensure you’re within your budget:
Installation or setup fee – Some vendors charge extra for setup; others don’t; it depends on the complexity of the installation process.
Additional hardware or software requirement – Do you need to purchase additional hardware or software, like database technology and workflow management solutions?
Customization and upgrades – Can the LMS scale with your business, and how much will that cost you? Generally, anything custom for your business will involve extra costs, and if you need to upgrade or downgrade, is there a fee for that?
Training costs – Usually, vendors offer training for free, but if you require in-person training on-premise, that might come at an extra fee.
Maintenance and customer support – Will regular activities like keeping your content fresh, installing add-ons, and pushing new releases require charged maintenance? Also, how complicated is the product? Is support completely free or chargeable beyond a point?
Cancellation and refund – Don’t forget the matter of cancellation and refund policies. If, for any reason, the LMS doesn’t suit your needs in the future, how much will leaving it cost you?
Time spent – Above everything, ensure that the LMS seamlessly integrates into your organization’s processes and tech stack. If the LMS is not well-integrated with your existing systems, it might end up taking up a large chunk of your time and will prove to be quite expensive overall.
Pro tip: How to choose the right LMS?
We have covered a major chunk – the pricing aspect – of choosing an LMS. Apart from pricing, you will have to consider other aspects like functionality, reliability, and support. But for a quick screen test, here are key pointers to ensure you pick the right LMS for your business:
The LMS should:
– seamlessly integrate with other systems
– scale with your business (allow you to experiment and go to market quickly)
– provide thorough reporting
– be easy to use
– be secure
In Conclusion
The most important component of your e-learning platform is the creation and distribution of quality content. As we’ve seen, an LMS helps with exactly that and so much more, bringing clarity and efficiency into your processes. However, to deliver unique value propositions to your users, you need a holistic approach: a well-structured content catalog along with seamless payment processes.
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