Costs of eLearning: A Practical Guide

A Practical Guide From Michael Allen

All organizations depend on excellence. Effective ongoing training and motivation are essential for effective performance. Unfortunately, it is easy to think that good training is not a difficult step and therefore you should seek a small budget. Being just another box to check and offering only half-hearted support, emerging training is not only ineffective but, ironically, incredibly expensive.

What? Is low budget training expensive?

Yes. Time is not returned. Learning that doesn’t improve behavior is wasting everyone’s time—and that’s expensive. It drains productivity, frustrates students, and wastes resources that could be fueling your organization’s growth.

Of course, just spending a lot of money does not guarantee high quality. In order to reduce the cost of developing an effective custom eLearning, I will draw from our decades of experience at Allen Interactions, where we have encountered and successfully solved a wide variety of training and operational challenges in almost every industry, involving almost every obstacle imaginable.

The Myth of One-Size Pricing

Pricing eLearning based on estimated learning time is traditional and simple, but flawed. Not every student needs the same amount of sitting time to learn a skill. So, while we often use “per hour” cost estimates for convenience, this assumes the same experience for every student—which is not true. With flexible learning solutions that adapt to individual needs, adapting content to strengths, weaknesses, and prior knowledge, we ensure that all students achieve success, not just some, and we do so in less time.

The duration of the stay can change and should be very different. So what about using the expected seat time estimate? The average completion time does not reflect the amount of training that needs to be created. What needs to be considered is the range of learner needs and the appropriate eLearning experience for learners across the range as well as early preparation and ability.

Adaptability is a game changer. eLearning, when done right, can reduce time to success by getting over 40% of trainees through training and back to work very quickly. Although achieving this result requires advanced design and technology to adapt to various needs, the large results easily compensate for the associated development costs. For example, in our work with AutoNation, flexible eLearning led to a 22% increase in productivity and $10 million in additional revenue, all while optimizing onboarding and reducing time away from core work. We can develop a lot of great eLearning for a fraction of $10 million–a profit that will come back year after year.

Furthermore, once eLearning is developed, the cost of delivering it is almost free. Unlike traditional training, which measures in terms of headcount (think influencers, venues, and trips), digital solutions can reach thousands—or millions—with negligible incremental costs. This growth makes eLearning ideal for a distributed workforce, as seen in our Mary Kay Cosmetics project, where 3.5 million learners are on board in 35+ countries with 90% engagement and 80% completion rates through personalized micro-learning.

Key Factors Influencing the Cost of eLearning Development

The main drivers of eLearning development costs are:

• Content readiness and complexity
• The degree of readiness of the trainee
• Motivation to learn
• A relevant teaching paradigm
• A degree of success is required (taking into account the cost of operational errors)
• Operating frequency (long-term storage requirements)

Why Invest in Performance-Focused eLearning?

Ineffective eLearning is a hidden cost killer. It leads to a lack of knowledge, lack of skill development, and lost productivity—potentially millions in opportunity cost. But with a well-designed learning experience, we get quantifiable wins: faster intelligence, increased delivery, and guaranteed proficiency for all students.

As the conceptual table below shows, the cost per student decreases as training becomes more effective. It is true that the initial investment costs are increasing, but in the low investment organizations are penalized with very high costs.

It is important to note that the table is not based primarily on investment value, however. It is based on the practice of digital delivery training. In levels 1 and 2, training is negligible. It hardly makes sense to invest in teaching and learning or eLearning. The forgetting curve is steep, and students don’t have the opportunity to practice. Practice is important for skill development and retention.

The best eLearning uses intelligent and dynamic simulations and offers continuous practice spaced out over weeks and months after the initial training is completed. This keeps students performing at their best and provides a basis for continued improvement as tools and processes in the workplace are refined.

Cost vs. Costs

Many organizations, especially large ones, have responsibilities that are divided between different people and departments. Some are responsible for keeping costs down while others are responsible for quality of services or sales revenue. This separation of ideas often leads to viewing training as a separate cost, for example, an investment made in resources or institutions. But there are few more important and valuable investments than investments in people.

Training is, indeed, an investment—an investment in people with benefits that are not only efficient and effective, but also increased retention of employees who receive personal rewards for excellent performance and increase their loyalty to their grateful organizations.

On the other hand, poor training is expensive. In fact, poor training is the most expensive and least affordable training. It leads to mistakes, lost customers, product recalls, workplace injuries, high employee turnover, and even lawsuits. It increases the need for additional and continuous training to combat the ineffectiveness of previous training.

Let’s create eLearning that changes behavior and drives your success. – Michael Allen, PhD, CEO and founder, Allen Interactions Inc.

Go One Step Ahead

This Buyer’s Checklist compilation is excerpted from my book, Rethinking eLearning: What Works. What Doesn’t. What is missing.

They are designed to help buyers of custom-built or off-the-shelf eLearning make smart investments.

As a training buyer, you don’t need to have all the skills an Instructional Designer or developer should have to create great eLearning, but you do need to know what to look for when specifying your criteria.