Commoditization and Competition in Higher Education
In June 2013, The EvoLLLution dedicated a Special Feature to Commoditization and Competition in Higher Education.
The past decade has seen sweeping changes in the higher education space, the most significant of which has been the increasing competition in the post-secondary marketplace. The popularization of online learning has expanded the competitive landscape from the few local institutions and catapulted it onto a global level. At the same time, the number of institutions has ballooned and now includes everything from for-profit schools to MOOC providers and more. What this means is that students must now choose between thousands of schools, programs and courses. But do they see the options as being interchangeable? And how can institutions differentiate themselves?
What Does Commoditization Mean for Higher Education?
While commoditization in the higher education space might appear to cheapen the product, the enhancements, innovations and adjustments that come as a result of competition can make postsecondary education more accessible and relevant for students in need.
As higher education becomes more commoditized, what’s lost is the uniqueness and individuality of different programs. In return, however, the system gains greater efficiency in producing and disseminating content.
The business model being practiced by higher education institutions is becoming rapidly outdated for today’s marketplace. As commoditization impacts the value of postsecondary teaching and learning, institutions must re-think the services they have on offer.
Exploring the Education Boom
As the cost of higher education has skyrocketed in recent years and demands from students for alternative approaches to education have become more prevalent, alternative providers are finding space to succeed in the higher education marketplace.
As higher education institutions adapt to the increasing numbers of competitors entering the marketplace, it’s important to note this isn’t the first time online learning providers have shaken up the industry. However, institutions will need to provide clear evidence of their value going forward if they hope to succeed.
As new technologies begin to make high-quality, lecture-based online education accessible on a global scale at an extremely low cost, traditional institutions must adapt themselves to the new marketplace.
Understanding the Uniqueness of Higher Education
Universities’ and colleges’ ability to produce strength of character is what differentiates higher education from any other product in the marketplace.
The biggest difference between higher education and other industries is that postsecondary institutions do not guarantee the consumer a particular outcome. As competition for enrollments increases, different types of institutions are striving to meet demands from various segments of the market.
As higher education becomes more commoditized, the impact could be extremely negative on students who are already struggling to pay for their education. Further, a commoditized higher education would be more focused on serving as “manufacturing plants” for the workforce, rather than helping mold informed and educated citizens for the future.
As higher education becomes more commoditized, many institutions are partnering with vendors and losing control of the elements that make them most unique, for example, teaching and the content being taught.
Differentiation in the Higher Education Marketplace
Focusing on student assessment rather than instruction is one way institutions can reduce their operating costs and find success in the commoditized higher education marketplace.
There are some specific steps an institution can take to become visible in a crowded and hypercompetitive higher education marketplace.
As increasing numbers of institutions and providers enter the higher education marketplace, the college or university that can best prepare graduates to succeed and innovate in the labor market will be the institution that comes out on top.
Accepting and rewarding prior learning gained from multiple sources is a step institutions can take to succeed in the commoditized higher education marketplace.
If institutions refuse to focus on differentiating themselves with content, they will quickly find themselves unable to compete in the commoditized higher education marketplace.
Exploring the Fungibility of Higher Education
Massive Open Online Courses will not have much impact on traditional, residential higher education. However, as these types of courses begin to garner credit, they will flatten the industry for non-traditional students and make education a more fungible product.
The commoditization of higher education is driven by a false economy where students are convinced of the need to earn a degree, but the labor market does not have the openings to support them.
Determining Higher Education’s Value Proposition
For-profit institutions have created a more business-like higher education industry, where institutions succeed based on outcomes and service rather than name and prestige.
In a commoditized marketplace, the product a particular company is selling becomes less important than the services or supports they can bundle it with.
Higher education can have two distinct value propositions; transformational and transactional. At the moment, online learning captures the transactional element with ease, but the next big innovation is going to be when online learning can dominate the transformational marketplace as well.
There is more to education than simply moving graduates into paid work, but as for-profit institutions dominate more space in the marketplace institutions are being forced to shift their focus largely to preparing the future workforce.
The Effect of Commoditization on Institutions
As unaccredited providers increase their presence in the higher education space, some institutions may look to reduce their prices by partnering with online providers, whereas others may try to ignore the change in the market and simply hope it goes away.
American higher education institutions exist within a vast ecosystem, with a number of players filling different niches. Losing uniqueness and independence would be detrimental to the overall system.
Commoditization pushes institutions to do more with less, but in doing so, institutions have the impetus to become more efficient and streamlined in their operations.
How Will Small Institutions Fare in the Commodized Market?
Smaller colleges are well-positioned to succeed in the commoditized higher education marketplace, but they must focus on using new technologies to help them achieve their value proposition rather than following the lead of larger institutions.
Smaller institutions are positioned to succeed in the commoditized higher education marketplace by maintaining their focus on meeting local needs and serving local stakeholders.
Technology can provide smaller institutions with the opportunity to aggressively compete in the new higher education marketplace, but they must also develop a brand and value proposition that will carry them through the next few decades.
Commoditized Higher Education and Prestigious Universities
As digitization grips the higher education marketplace, the differences between prestigious institutions and the rest of the market are becoming less pronounced.
While price competition will not significantly impact prestigious universities in a negative way, it will have an extremely negative impact on “near-prestigious” universities who try to capture the same market segment as the Top-20 universities in the country.
The Impact of MOOCs on Higher Education’s Commoditization
Free online courses are providing skilled workers with an accessible pathway to advance their skills and knowledge but are not in a position to change traditional higher education as yet.
MOOCs have not yet disrupted the higher education space in any significant way, but they could have a massive impact on the importance of providing students with a better learning experience at institutions, whether online or on-campus.
Opinions as to how MOOCs will change teaching and learning in higher education are varied, but that they are completely changing postsecondary education is not in dispute.
Strategies to Compete in the Commoditized Marketplace
Standing Out by Looking In: How Operational Efficiency Creates an Exceptional Experience for Students
Whether an institution looks to decrease its costs, improve its offerings or increase its market share to succeed in the commoditized marketplace, the airline industry provides an excellent example of how these strategies must be paired with efficient operations to be truly successful.
Implementing more effective marketing practices can provide the base on which institutions can succeed in the commoditized higher education marketplace.
In a commoditized marketplace, higher education institutions that take the time to plan strategically are more likely to succeed.
By collaborating on major ventures, institutions can expand their offerings and programs beyond any internal limitations in expertise without having to break the bank.
Commoditization and Higher Education’s Status Quo
While some institutions chose to ride the flying carpet of government subsidies following the economic recession, others used the time to begin developing new and innovative programs to buoy them in the changing marketplace. Now that the rug has been pulled out, the institutions that committed to change early are the frontrunners to succeed in the commoditized marketplace.
As higher education becomes increasingly expensive for students and as low-cost technology-enhanced substitutes continue entering the marketplace, higher education institutions will need to adapt past the status quo to survive and succeed.
Case Studies: Competing in the Commoditized Marketplace
Low-cost for-profit institutions such as Patten University have implemented strategies — such as not accepting Title IV funding from the federal government — to keep costs low for students and to compete in the commoditized adult education marketplace.
As a public institution that does not receive state funds, CSU-Global is able to accomplish its mission of serving adult students by operating nimbly, responding to needs as they arise and delivering programs that are in-demand across the labor market.
Colleges and universities have many resources to compete in the highly competitive professional development marketplace, and having name recognition is an added bonus for larger institutions. The biggest drawback, however, is the inability of these institutions to dedicate large numbers of full-time staff to these training endeavors.
Choosing Between MOOCs and Traditional Courses
MOOCs allow students the opportunity to learn the material they need to advance their careers without forcing them to conform to the mold of a given institution.
Since most individuals pursue higher learning for tangible outcomes outside of knowledge enhancement, traditional higher education institutions are still preferred over MOOCs by prospective learners.
Students interested in learning for learning’s sake should turn toward MOOCs. However, if an individual’s objective is career advancement or change, a traditional degree or certificate is still the most effective option.
Massive Open Online Courses have value for adult students looking to return to higher education, but there are a number of hurdles standing in the way, not the least of which is the challenge of accreditation and credentialing.
Low-Cost Degrees and Higher Education’s Commoditization
Low-cost options simultaneously catalyze the commoditization of higher education and cause institutions to shift their focus from seat time to learning outcomes as a measure of their effectiveness.
By creating a model that shows higher education can be delivered with almost no financial burden for students, low-cost post-secondary providers appearing in the market have the potential to completely revolutionize the delivery of degrees in North America and across the world.
Low-cost higher education providers are pushing institutions across the country to cut costs to reduce the prices of their degree programs. However, these cost-saving measures are coming at the expense of the interpersonal interaction that makes higher education a valuable investment in the first place.
Commoditization and Higher Education Around the Globe
Higher education institutions are starting to consciously work toward improving the quality of postsecondary learning opportunities to help the industry overcome the perception education is a simple commodity.
There are many similarities between higher education in the United States and Australia, but the government support of tuition levels mean Australian higher education institutions must compete on factors other than price.
In Portugal, higher-priced private institutions are providing a pathway to professional degrees for students who would not be able to access the higher-quality public institutions. These professional degrees have become more critical in the wake of the recent economic crisis, as students are looking to enroll in degree programs that can move them into high-earning careers quickly.
In Finland, undergraduate students — whose education is subsidized by the government — tend to choose higher education institutions based on reputation, while professional and continuing education students tend to base their choices on the student experience offered.
A recent change in the government-subsidized tuition structure in the United Kingdom has made clear to higher education institutions that price is a significant factor for students looking to enroll in a postsecondary program.
Non-Traditional Higher Education and Commoditization
As students in the higher education system become increasingly older and non-traditional, personalized learning opportunities and higher education programs geared toward local business needs are going to be critical for institutions to offer.
Prospective students — both traditional and non-traditional — are increasingly seeing higher education as a commodity, with different institutions differentiated by cost and not much else. It’s up to institutions to step away from the pack and effectively communicate the advantages their institution can offer, and in many cases continuing education leaders can help their institution stand out.
The Impact of Commoditization on Students
The commoditization of the higher education marketplace provides students with more choice and access to the further education, but intangible “quality” is not being properly assessed as institutions are increasingly judged on price.
Commoditization can make higher education far more accessible for non-traditional students, but given the competition beginning to characterize the marketplace, it is becoming more difficult for students to determine which programs are right for them.