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No Small Change: e-Commerce in Distance Education

With online courses so widely distributed outside the institution, it is increasingly important for distance learning programs to be able to support themselves. e-Commerce can help.

Higher education is undergoing rapid and constant change. One area of tremendous evolution is distance education. The resulting competitive environment necessitates that programs take the time to develop comprehensive plans to approach the marketplace, allowing for flexibility, modularization, and the opportunity to generate revenue as well as make a profit. In that respect, the education provided as distance education may be viewed in the context of "knowledge as commodity."

The increased use of the Internet is opening up new markets and allowing for a variety of learners or consumers to access materials previously unavailable to them. Advances in technology are providing faster computers, increased bandwidth, and wireless access. The Internet is more affordable, accessible, and faster than ever before.

Trends like these have made online ventures attractive as a source of business and revenue. Within higher education, one manifestation of this is distance education. The key is to take online materials developed for one audience and then re-purpose them into different sized offerings and into different markets, using the e-commerce concepts of either business-to-consumer (B2C) or business-to-business (B2B) models.

For the purpose of this article, e-commerce is defined as any e-business initiative that is focused around individual business transactions that use the Internet as the medium of exchange, including B2B and B2C transactions. B2B models involve the sale or exchange between two business entities, while B2C transactions are those in which the customer is the end user.

Relating e-Commerce to Distance Education

When relating e-commerce to distance education, it is important to take the business approach and start with a business plan and a business objective. Some business objectives include the development of an appropriate marketing plan, realistic financial projections (revenue and expenditure), planned programmatic growth (increase or decrease), planned environmental scans for alternative markets and competition, and financial modeling to include student attrition.

E-commerce presents an opportunity for programs offering distance education to access a variety of potential audiences of learners. Additionally, e-commerce is about developing an online presence as well as improving operational efficiency, which can be done by optimizing the use of digitally developed materials. This can be discerned in the types of e-commerce relationships developed (B2B or B2C) as well as utilizing the Internet to attract or retain learners.

Entering the Marketplace

It is important to begin the planning process with the intent of both pedagogical and financial success in mind. This means entering the online marketplace only after appropriate planning and preparation have taken place and based upon the knowledge that your institution has some offerings that can be competitive. Entering the competitive marketplace of distance education should be done based on a sound understanding of the institution's capabilities and the product(s) that can be effectively delivered, the competition, the potential market(s), and financial accountability. At each step of the planning process, the institutional leadership should focus on developing a specific product for a specific market while considering potential secondary markets within the business plan, but not as a part of the initial offerings.

Understanding the Institution's Capabilities

Entering the distance learning market just because others have it is not a decision based on a sound understanding of the market, but instead is a reactionary decision made to appease or mollify some constituency. Appropriate planning is necessary to prevent "Fire-Ready-Aim" program development. A planning pitfall, however, is going through the correct steps but basing market entry on the misguided notion that distance education provides a financial windfall. Some estimates indicate that as many as 40 percent of independently developed online offerings never break even. Finally, it is necessary to circumvent the academic inertia that results in some decisions taking so long that the reality then becomes "Ready-Ready-Aim-Aim-Fire"—and a missed window of opportunity.

Prior to or during the evaluation of potential offerings and audience for distance education, an institution should ensure that a sound infrastructure is in place to deliver the offerings. Of paramount importance is getting it right with the first offering and not trying to do too much. Walk before you run. Plans should include consideration of how the infrastructure (faculty, staff, central administration and support services, software, hardware, etc.) would support entering into tangential markets over time.

Part of understanding the institution's capabilities as well as the competitive environment might be explained by the teachings of Sun Tzu. As stated in The Art of War, "If you know the enemy and yourself, you need not fear the result of a hundred battles. If you know yourself but not your enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle."

Knowing the Competition…and Yourself

Consider the relevance of Sun Tzu's comments when entering the competitive arena of distance education. First, knowing yourself can only be accomplished by taking a realistic look at the institution's capabilities to deliver quality online offerings as well as knowing how those online offerings can be stratified into various markets, both B2B and B2C. Knowing yourself also means being aware of your institution's financial position and needs as well as the support of the administration and faculty for these types of ventures. Knowing the competition relates to understanding not only whom you are competing with, but also what markets they serve, how well they serve them, and getting a sense of their future plans. Examples of how to evaluate the competition may include visiting their Web site; collecting relevant data via marketing correspondence, word-of-mouth, trade shows, and meetings; and reviewing different recruitment forums in which you can monitor a competitor's open and new positions.

The Potential Market(s)

It is important to start distance education offerings with a strong understanding of the marketplace, which in some instances means focusing on one or two particular target markets. When the time comes to diversify, the B2C application relates to the "knowledge as commodity" approach as applied directly to the end user, in this case the learner. The learner can participate in various types of offerings, ranging anywhere from an entire program of study to continuing education and lifelong learning courses. This could involve direct, target marketing to the learner for whatever the offering should happen to be or to a general population. Consider the example of an online program for registered and practicing pharmacists that allows them to upgrade their skills and degree. The reason for developing multiple B2C markets over time is to provide multiple means of generating revenue.

Next, take the same distance education offering developed above and apply a B2B model to it. It should be possible to see a market diversification model for distinctly different markets. The offering developed for direct-to-consumer use can be sold either in its entirety or piecemeal to another college or university who brokers the content to a third party. This arrangement allows another institution to provide distance education to its constituents without having to develop the full infrastructure necessary to do so. It can also be a very quick means of entering a market and derives an alternative source of revenue for the institution based on its initially developed offering. Payment for the content can be structured in a variety of ways.

Sound Financial Models

The development of distance education offerings can be expensive and lead to financial challenges. For this reason, it is imperative to consider any and every means by which these offerings can be re-purposed into various markets. This will improve the return-on-investment for product development, delivery, revision, and infrastructure support as well as provide increased revenue and subsequently lessen dependence on a single market.

The B2C model is a direct fee-for-service arrangement between the institution and the learner. The key to this model is diversifying the offerings in order to provide several revenue streams. One way to accomplish this is to develop distance education offerings at the largest programmatic level that the institution's resources will permit, and then determine how that can be split apart and sold in various units to various markets.

Consider as an example a 45 credit hour, two-year-long, online, non-traditional pharmacy program marketed to registered pharmacists seeking to obtain their doctor of pharmacy degree. This program could be broken down into macro certificate programs, small-scale certificate programs, or continuing education, each of which could be sold directly to the learner both within the same large-scale market of pharmacists or to specific target markets of the population of pharmacists. The use and subsequent re-use of the materials to a variety of learners allow the cost of developing the distance education offerings to be spread over multiple markets and increase the chances of generating a profit. As stated earlier, it minimizes single-market dependence and provides the learner (consumer) with various pricing structures that may better serve their needs. The key is to minimize or eliminate the financial problems that can result over the long term.

Now, take the same non-traditional doctor of pharmacy program and apply a B2B model to it. It is possible to see a distinctly different model regarding the potential clientele as well as the financial modeling. Within a B2B model, the non-traditional doctor of pharmacy program is sold either in its entirety or in pieces to another college or university. In either case, the contractual arrangement can be structured to allow for either a lump-sum purchase of the content or a revenue-sharing arrangement where each party gets a set percentage of the tuition generated.

The second revenue model allows for continuous income over the life of the contract and control over the content sold, which has significant advantages. An example of this is selling the content to another institution, contracting for 45-55 percent of all revenue generated, and doing no more than providing the content and assessment components of the program. All other services—from admissions, to library, to student advising—are provided by the purchasing institution.

Combining both the B2C and B2B models will place the institution in the best position to ensure that adequate revenue will be generated to support the institution as well as provide the financial basis for continued improvement and new program development. There is a caution to diversification, however, and it relates to ensuring adequate staff to administer the various types of offerings. Appropriate staffing levels need to be considered prior to entering into any type of re-purposing venture.

Taking Interest

As institutions seek new and innovative ways to remain competitive and cope with the changes taking place within higher education and the marketplace, the integration of e-commerce models of business will become more prevalent. It is imperative that colleges and universities provide themselves with the best possible chance for success, which may mean integrating different ways of thinking about how to re-purpose distance education offerings into various markets. Now more than ever, students are becoming consumers, and distance education is a competitive marketplace. The appropriate integration of e-commerce into higher education can benefit all involved if done well.

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