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.