Gambling is an inherently irrational activity. Those who enjoy it are willing to suspend disbelief and be taken in by the thrill of potentially winning against the odds. If they spent their time rationally contemplating just how slim their chances were of hitting the jackpot, they probably wouldn’t place bets.
Higher education institutions and their leaders are a notoriously risk-averse bunch, but when it comes to the current push among many to either build new online programs or expand existing ones, some can’t resist the temptation to behave more like high-rolling speculators than economically rational actors.
For institutions struggling financially due to the downward pressure on enrollments driven by unfavorable demographic trends and growing skepticism about the value of a college degree, it’s tempting to think that the best way to boost revenue resilience is to expand their online program offerings radically.
After all, these programs offer the potential to generate additional revenue in their wheelhouse – tuition-paying students. Adding more students means more money to fuel operating budgets. Furthermore, in the post-pandemic era, online programs have become so much more normalized in a very short time span. Even when students can attend classes in person, they sometimes prefer to log in remotely instead of walking across campus to sit in a lecture hall.
While those are all valid reasons to be optimistic about the potential of online programs to boost revenue, they aren’t sufficient stand-alone justifications for any institution to pursue this strategy to shore up their finances.
How can you ensure your institution’s online program strategy is grounded in realistic expectations about the potential payoff they offer? Avoid these three common mistakes.
Demographic data doesn’t lie: The traditional-age student market will not be the path to future growth for most institutions, especially the many small and mid-size colleges that rely heavily on these students for the bulk of their tuition revenue.
By contrast, the market for adult learners in higher education is substantial and likely to grow. Rapid technological advancements and changes in the nature of work have fueled strong demand for online learning and upskilling. Adults increasingly recognize the need to acquire new skills or enhance existing ones to stay competitive in the job market.
Despite the relatively large size of the adult learner market, these students are more challenging to find and attract than high school juniors and seniors. Adult students are most likely to find information about institutions through their own web research. Rather than purchasing lists or other traditional means of lead generation, institutions must invest significantly in search engine optimization (SEO) and digital advertising for prospective students to know their institution exists.
If the answer to one or both of these questions is no, your institution is unlikely to tap into a market of the size it needs to justify the expense of new programs.
Over time, data have shown that most students who want a traditional residential four-year college learning experience stay within a four-hour drive from home. We also know that adult learners who prefer the flexibility and convenience of online programs aren’t paying much attention to the actual physical location of the institution granting them a degree or certification.
Those two factors lead some institutions to assume they can tap into a much broader market of prospective adult students beyond their region—both nationally and globally. They see the successes of online education behemoths like Southern New Hampshire University (SNHU) and Arizona State University (ASU) across state and national borders as proof of concept.
In reality, regional institutions will attract most adult online program students from the surrounding area where they have an established presence. Building similar national brand recognition will be cost-prohibitive for most institutions—they can’t compete with the SNHUs and ASUs, who spend more on marketing annually than most have for their total yearly operational budget.
If your institution’s motivation for expanding its online offerings is to appeal to regional students with more options, partner with community and business partners to upskill the workforce or spread your institutional mission without the hopes of volume, then online programs and course offerings might be a great option.
The typical private four-year institution charges around $1,500 per credit hour and may assume that’s a reasonable price point for online programs aimed at nontraditional adult learners. But this assumption ignores the reality that the giant online private, not-for-profit institutions come in at a third or quarter of that price. They have the volume of students and economies of scale to make this price point work for them profitably.
The average institution risks losing money instead of profiting if it tries to compete with the large national online education providers from a marketing and pricing standpoint. While it’s tempting to view this endeavor as the Trivago of higher education where we can sell our unused seats at a discount. However, institutional leaders must carefully consider the additional costs of building brand awareness, adding staff, and higher license costs for software.
I am not trying to be pessimistic about online learning programs. On the contrary, my advice comes from caring deeply about higher education. I want leaders to be well-informed from an unbiased perspective as they build revenue resilience, especially when their institutions struggle with enrollment and finances.
There are many examples of institutions that have grown tuition revenue by expanding their online learning offerings because they took a calculated approach to strategically aligning their programs with overall institutional goals by:
But the successful institutions aren’t gamblers – they are keen investors who have counted their cards and accurately gauged their potential market by making data-driven decisions. Any new venture requires a degree of risk, and many are worth taking in higher education’s competitive ecosystem, so long as realistic expectations drive their strategy. As the New York State Lottery’s classic motto goes: “You’ve got to be in it to win it.”
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