So, you’re finally doing it – you’re picking a new learning management system (LMS) for your organization.
You probably have high hopes for what this LMS software is going to do for your e-learning strategy. From onboarding to corporate training, upskilling, reskilling, and so on, LMSs are powerful tools that transform learning and development.
Before any of that can happen, however, there’s the small matter of cost.
But just how much, and how will you pay for it? LMS pricing models can be confusing, for sure.
This guide goes into all the detail you’ll ever need on how LMS pricing works and what you can expect as you prepare to pay for your new LMS.
6 Common LMS pricing models
When you’re choosing an LMS for the first time, or you’re switching to an LMS that can better support your learning experiences, there are many things to consider.
You have to think about what LMS requirements to focus on, but also about how much all of that will cost.
You can refer to our handy table for a breakdown of different pricing models and their pros and cons.
To get more information, just scroll down where we’ll explain each model in depth.
1. Pay per user
Also called pay per seat or pay per learner, LMS vendors who use this pricing model expect you to pay upfront for a set number of users. Most often, the pricing model is tiered, so the rate goes down the more users you want to add.
If you choose an LMS with this pricing model, you’ll pay the total cost for the selected number of users either per month or per year.
- Easy to budget because the costs are predictable.
- Good for companies where the number of learners is relatively constant.
- There is a risk of overpayment because you’re paying in advance regardless of how many people end up using the LMS platform.
2. Pay per registered user
Unlike the previous pricing plan where you have to guess how many people will use the LMS, here you only pay for those learners who create an account.
In this pricing model, a registered user means every employee who has a username and a password on the LMS platform.
- A good option for organizations that run a lot of voluntary and optional training programs.
- You don’t have to pay for people who don’t end up registering.
- You may need to frequently add and remove users to “clear the seat” for new learners.
3. Pay per active users
This model addresses the common cons of the previous two pricing plans. With both pay-per-user and registered user models, you’re committing to pay in advance, irrespective of how many users end up using those fancy LMS features.
To prevent this, you can choose an LMS where you only pay for the number of active users. What’s an active user? It’s a learner who has accessed the LMS platform within a given billing cycle.
It’s important to understand that there are two main ways that this pricing plan works.
The first model charges for each user who accesses the LMS during the billing cycle. After their first log-in, they can use the whole online course catalog at no extra cost.
The second model LMS vendors use is to charge per active user per month.
To illustrate the difference, under the first model, if someone logs into the LMS in January, they’d show up on the bill for January but not the following months.
In the second model, you’d pay for that user each month they accessed the LMS.
- You only pay for users who actually use the LMS.
- No need to do “seat clearing” all the time.
- Can be complicated because different vendors define activity differently.
4. Pay per course
So far, we’ve talked about models that charge per user. Those models are a fit for companies that hold continuous employee training.
But what if you know you only need online training a few times or even just once a year? That’s often the case with companies in industries that require compliance training and (re)certification.
In these cases, it might pay off to look into the pay-per-course pricing model. Most often, you’ll be paying per user per course, and some LMS vendors will let you prepay and give you credits you can use when needed.
- You only pay for what you use.
- Price goes up only when the number of users increases.
- Possible bill shock if the number of users increases suddenly.
5. License fee
If you find calculating the costs by the number of users confusing, you might choose the license fee or subscription model. Here, you pay one set fee, usually per year.
After you do so, you can add a more or less unlimited number of users and courses.
Most LMS vendors that charge like this do have tiered pricing, however. How much you pay depends on what features you want to include in the package.
License fee pros:
- You’ll always know the total cost upfront.
- Unlimited or nearly unlimited number of users.
License fee cons:
- You have to pay the full subscription cost, irrespective of usage.
- Features you end up needing can be locked behind higher subscription tiers.
In software, open-source means that the source code of an app, program, or platform is publicly available and can be modified by anyone.
Compared to closed-source applications (which most SaaS LMSs are), open-source’s main advantages are the price (it’s free!) and the level of possible customization.
Where things get a bit more complex is that some open-source LMSs charge you a yearly subscription fee. This fee covers customization, installation, integrations, and maintenance.
Those are precisely the things your IT department would have to do on their own if you chose to go with a completely free open-source option.
In that case, your total cost of ownership would have to include such things as hosting, buying plug-ins, and the salaries of the person or people in your IT department in charge of maintaining the LMS.
- High level of flexibility and customization.
- Unlimited users (as long as you don’t buy any third-party content).
- Not quite free: the total cost of ownership can often rival that of a SaaS LMS.
As you can see, there are quite a few pricing options available when you’re looking for a learning management system. But what goes into determining those prices?
We have the answers in the next section.
Factors that affect how much an LMS costs
Working on an LMS implementation plan often comes with a bit of sticker shock. These are sophisticated apps with complex features that usually don’t come cheap. Here are the factors that affect how much an LMS ends up costing you.
1. Additional fees
Every LMS vendor bundles their prices a bit differently, so be sure to always ask for an itemized list of fees. That way, you know what you’re paying for.
Most often, the additional fees for a new LMS are:
- Onboarding and customer support: Some companies include onboarding and ongoing support in their pricing. For instance, you may have to pay more for priority customer support.
- Set up fees: Similarly to internet and cell service providers, an LMS vendor can have this administrative fee that covers getting your new system up and running.
- Content migration: If you’re switching from one LMS to another, you probably want to take your best e-learning content. Some vendors charge for this on a flat rate basis, while some charge depending on the content you want to bring over. Some even offer it for free.
2. Features and modules
Similar to pricing, different LMS providers offer different functionality.
What is considered part of your package deal versus an add-on with an extra cost differs depending on the vendor.
Here is a list of features that can affect the price, depending on the company:
There are integrations for just about everything these days. Some of the most popular include:
Otherwise known as SSO, this automates the login process with authentication provided by the likes of Google and Microsoft. It’s similar to how you can log in anywhere with Facebook.
This way, your people don’t get bogged down with keeping track of 17 different passwords.
These integrations make it simple to host virtual events, webinars, and conferences directly within your learning platform in real time.
Authoring tool integrations let you quickly import e-learning materials to your LMS from an authoring tool such as Elucidat or Adobe Captivate.
With SCORM compliance taken into account, you can easily create content for your learners in the authoring environment that works best for you.
Integrations with e-commerce and payment gateway portals are quick options for selling learning content in extended enterprise use cases.
Be sure to ask about security parameters for credit cards and other payment methods to make sure everything is safe and secure so your audience has the best experience possible.
Integrating an HCM/HRIS system (like Ceridian or ADP using an API) to your LMS can provide many benefits.
From user provisioning to allowing the HCM/HRIS to be the single source of truth for user information.
These integrations can help you spot patterns related to the effect of learning on profitability, career development, employee satisfaction, and retention.
Customer relationship management tools (like Salesforce) can be integrated with your LMS using an API to train sales teams with relevant content in the flow of work without leaving the software they use most.
That way, sales training becomes continuous and on-demand, ensuring your sales reps or channel partners always have the most up-to-date know-how.
Platforms that enable gamification allow you to incorporate competitions, badges, rewards, and leaderboards into your training. This creates an engaged and motivated learning community.
For those reasons, this feature has become a huge part of enterprise learning as we know it.
Being able to offer training to partners and customers is a great way to grow your profit margin! But it does come at the cost of more users as well as the need for advanced customization and functionality.
If this is what you’re looking for, ensure the e-commerce functionality is secure and accessible to your audience’s region. Some vendors refer to this as “multi-portal” functionality.
If extending your training to customers, partners, or members is of high importance to you, be sure to ask about “branching” and “parent-child” relationships between user groups. This can be a costly misstep.
Whether your audience is team iPhone or team Android, it’s essential to make sure your learning program is mobile-friendly.
Mobile learning means that your LMS is accessible from a mobile app so your learners can learn in real time, no matter where they are.
Your phone goes just about everywhere you go, and your learning materials should too.
Some vendors charge for use of their mobile app, and some even offer a custom-branded standalone mobile app. If branding and white labeling are important for you, this is the golden ticket.
Some companies offer a catalog of free training courses, some charge an additional cost, and some will put you in touch with a third-party content provider.
While it may sound tempting to create and push your content for each learning path, we suggest making the most of your time and money by evaluating your content offerings before going the homemade route. Why make it in-house when you can save time and money?
Social learning modules
Social learning is a great way to keep learners engaged and encourage them to collaborate and share best practices, even across the globe.
Features such as comments and forums take the best of social media and apply them to online learning.
Advanced custom branding
There’s a reason companies spend so much on branding – it provides a seamless experience for users and fosters a strong sense of identity.
The same goes for white labeling your LMS so that everything looks and feels like it belongs to your company.
An important caveat – customization is beautiful and great for your brand but can run up the cost.
3. Agreement length
Agreement length can be a big factor in the final price of your shiny new LMS platform.
As expected, LMS vendors are more likely to give you discounts if you decide on a longer commitment period.
Generally, an LMS deal lasts between one and five years. When choosing how long to commit to an LMS, you’ll want to strike a balance between allowing enough time for your ROI to be maximized and over-committing.
That’s why many companies choose an agreement length of three years. It’s enough time to see if the LMS is performing well for your needs, but not so long that you get stuck with an incompatible e-learning solution.
4. Hidden costs
Expect to run into some hidden costs in the LMS price. Or at least costs that you might not be considering when deciding which LMS to choose.
Some examples of these costs include:
- Licensing fee: some LMS vendors charge this fee on a yearly or quarterly basis. The licensing fee ensures the contract is valid and your users can access the LMS. Make sure to ask any potential vendors if they charge this.
- Add-ons and integrations: depending on the vendor, certain integrations and add-ons might be paid offerings. Or, integrations with some applications could be behind higher subscription tiers.
There are plenty of things to take into account when you’re shopping around for an LMS. From determining your learning needs to crafting a comprehensive request for proposal.
Then, of course, there’s your budget. There are many different pricing models out there, but paying by the active user is the most popular for a reason.
You don’t commit to a hefty yearly license or overpay for user seats you don’t need.
That’s the pricing model we use at Docebo. To find out more, schedule a demo today.