Top Tier vs Low Cost in Education

Online education only seems to know two markets these days. Whether you look at companies who offer solutions for individual or lifelong learners, but also in the K-12 space and higher education you’ll basically see a ton of free or very low-cost products and solutions, and then there are the offers positioned at the complete opposite of the spectrum, top tier and cost-intensive.

The market in the middle seems to struggle increasingly if it is still existent at all. Let’s take a look at some examples from the different segments within online education.

When we look into learning languages on the Internet we have had the high-priced solutions such as Pimsleur and Rosetta Stone. And they did very well for years with their approach of catering to learners who could either simply afford that software or CD Roms or who saw it as an investment in their future and career and therefore paid the price.

For some time at least there was obviously also missing competition. This eventually changed a great deal with the emerging space of language learning communities such as Livemocha, busuu and some other players on the web some four years ago. Not only did they offer a more modern understanding of what users language learners on the Internet want these days, namely instant feedback, social interaction with other learners, game elements and a reward system, but they also shook up the established players. Their business models are almost the complete opposite. A good amount of the features can be used completely for free, so some users may never pay a dime but the majority will buy one or the other vocabulary package or application in addition to the free community features.

I’m not saying that a Rosetta Stone wouldn’t make good products, I even frequently read good ratings from happy users. There is still a market for these high-priced solutions. What these new players have caused them is to innovate, to bring out new versions with new features faster which I essentially see as a good thing. Their customers benefit from that. On the other hand, we could learn that there is money to be made at the other end of the scale. With their millions of users language learning communities are able to make money even if they only convert a small percentage of their learners into paid customers.

My second example are so called student or learning management systems (LMS), a market that had long been reigned by Blackboard with an almost ubiquitous presence in schools worldwide and putting lots of effort (and money) into marketing.

Certainly, the system doesn’t make the freshest impression from a design standpoint and users have to learn how to use it which suggests that the user experience must not be great, but it has had its success (and quite a bit of it) over the years. In a time when developing technology solutions becomes less cost intensive and where you don’t necessarily need an army of marketing people anymore to get into schools, this market was clearly ready for disruption. It has almost got a bit crowded. New competitors are popping up like mushrooms and want their piece of Blackboard’s pie. Most of them are specialized in either offering a solution for K-12 or higher ed, but what they all have in common is that teachers, professors or even students act as their ambassadors and recommend the products, not marketing people.

Again, if we Blackboard as the top tier solution here, names like Moodle as the open source alternative, but also Edmodo or Coursekit, the social LMS, come to mind. Now, Blackboard has the money and also intelligence to react toward these new dynamics in the market. Their recent acquisition of Moodlerooms, a company that offers solutions for Moodle and thus makes it more accessible for the average user might have been only the beginning.

Similar to my first example, the established player had to innovate but this also seems to leave no room for a fair-priced solution in the middle. You either offer your solution completely for free, what most of the startups in that space decided to do until now at least or you go for a very low price. The only other alternative is to go for premium pricing.

To round this picture, my last example comes from higher education, a very interesting part of education where lots of things are going on. I may not be the first one to consider this, but it caught my eye that they average college or university seems to vanish somehow.

As education online is my field of expertise, I’m going to concentrate on some of the dynamics in this emerging field rather than traditional higher education.

For some years now, we see the Open University (OU) and more recently also the University of the People (UoPeople) building and growing their offer for very reasonable prices to avoid the word low-cost in this context because of its negative connotation. In the case of UoPeople we even speak of a tuition-free university which means that depending on where the student comes from he/she has to pay a reasonable fee whose amount varies due to the country of residence for the administration only. The academic body works benevolent. Both strong in the developing world, although it wouldn’t be fair to reduce them to that, particularly in the case of the Open University as it was funded by Royal Charter in the UK. Both offer attractive solutions for people to get a degree online who would otherwise not likely have the chance to study.

Contrary to that we see the Minerva University develop. With its aim to become the home for elite students from around the globe and recently closing a funding round of $25 million we still have to see what exactly it will be. At the moment, their communication is not yet very elaborate though the team is impressive. Minerva wants to admit their first class in 2014 giving students the opportunity to learn from the best professors aiming to disrupt the elite higher education market.

It looks as if it’s going to result in the question low-cost or top tier once again. The average university seems to get lost.

Picture: George Washington via Shutterstock