Published on 2015/07/24

Development Costly but Delivery Variable: Costing and Pricing Online Offerings

The EvoLLLution | Development Costly but Delivery Variable: Costing and Pricing Online Offerings
Though it can be less costly to deliver online programming than traditional, face-to-face programming, the tools and technologies used to create a robust online learning environment make them somewhat costly to produce.
Due to the perception that it is cheaper to offer online programming than traditional, face-to-face programming, many colleges and universities have been pushed to add these courses and programs to their roster. But, is designing, developing and delivering a truly high-quality, high-value online offering cheaper than crafting an equivalent face-to-face program? In this interview, Craig Weidemann discusses the factors that play into the costing and the pricing of online courses and programs offered at Penn State and shares his thoughts on the perspective that, by definition, online should be cheaper.

The EvoLLLution (Evo): How do the factors that go into determining pricing for online programs differ from those that determine on-campus tuition?

Craig Weidemann (CW): Penn State World Campus conducts a five-year financial pro forma on each new program, including a diligent initial evaluation coupled with ongoing monitoring of expenses. We obviously consider expenses, but also consider completion rates, in-state versus out-of-state, ability of students to pay, employment opportunities for graduates, the availability of scholarships and financial aid and—for graduate programs—market pricing. We assign both direct and indirect program costs in determining our tuition.

The obvious major difference between determining on-campus and online tuition is the cost of the campus physical plant. Students attending at a distance, along with a growing number of faculty and staff working at a distance, mean that costs for classrooms, space for student-facing services and faculty and staff offices are eliminated or significantly reduced. At the same time, there are many common expenses that impact tuition both on campus and online, such as legal affairs, billing, advising, student services, admissions, and curriculum and faculty development. The biggest cost for any higher education institution is people costs, and that is just as true online as on campus.

As we continually push to enhance student engagement and student success for our online students, there are emerging costs that are unique. We make significant annual investments in new educational technologies to improve services and the quality of instruction for online students, including embedded tutoring, security, test proctoring, coaching services, CRM software, 24/7 services, instructional design, and analytics. So while physical plant is a big cost driver for on-campus students, technology plays a similar role for online distance education.

Evo: From the institutional side, are online programs more cost-effective to create and deliver than on-campus programs?

CW: I would venture to say that it is more costly to develop online programs and somewhat less costly to offer them.

The real challenge with creating a quality online learning program is: How do you create a rich, engaging experience for students at a distance? We constantly ask ourselves: What does it mean to be a Penn State student who never steps on campus?  How can we ensure that a student in Oregon, for example, has a true Penn State experience?

In the instructional area, the most significant unique cost in creating and delivering online programs is for learning design. We have more than 200 learning design specialists embedded in our colleges and campus. This is a new expense for the university, but an imperative one if we are to create online programs with outstanding pedagogy.

With the rapid emergence of the ed tech sector, we must constantly test new applications and services to create rich online experiences for our students. We are adding specialists in learning analytics and adaptive learning technology, as well as more multimedia specialists.

We don’t know what costs are going to be out there in the future to provide a rich online experience. Are we going to provide tablets for every student?  Virtual reality headsets? We can’t necessarily anticipate those costs.

Years ago, if online education was just correspondence classes online, that was a lot less expensive. The richness of what we’re trying to provide now—a highly engaged and collaborative social learning experience—can be very costly to create.

Evo: What do you think of the perspective that online programs should be cheaper than on-campus programs because students don’t use the same campus infrastructure?

CW: Our faculty and admission and program requirements are the same whether a student studies face-to-face or at a distance. However, as I mentioned above, there are unique and constantly emerging new costs to offering programs at a distance. That being said, at Penn State we do charge World Campus undergraduates a lower tuition per credit hour than we charge students in residence at our main University Park campus. Our students attending face-to-face have access to an array of services, learning opportunities and extracurricular activities that at this time are not realized by students studying at a distance.

As Penn State strives to achieve our vision of increased access and affordability for all students, online courses are playing a key role. More and more of our traditional face-to-face students are taking online courses in the effort to reduce their time to degree, reducing their overall costs for their education.

Evo: As technology advances, how do you think the cost of creating and delivering high-quality online courses will change?

CW: As we continue to improve the total student experience at a distance there will continue to be new costs we haven’t even thought about yet, whether for technology, innovative pedagogical approaches, student support, or student engagement activities.

Rapid improvements in learning and content management systems will reduce costs as we know them today. However, as I mentioned above, new technologies will add costs that we cannot fully predict today. The emergence of personalized learning through adaptive learning technologies, predictive analytics and open educational resources will change the way that we think about online learning and ultimately will fundamentally change the cost equation as well. We don’t know what that learning environment will look like — but we know it will look different.

We are working very hard to provide a rich experience for our distance students, and that seems to be having an impact. Our online students are twice as likely as residential students to join the Penn State alumni association, for example. They really want to be part of Penn State.

Ultimately, many of the innovations in online pedagogy for distance students will be embedded in the traditional academic enterprise. These innovations could alter the physical plant with the emergence of more hybrid classes and classroom spaces designed to allow more collaboration and interaction, impacting on-campus budgets as well as their online counterparts.

This interview has been edited for length.

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Key Takeaways

  • While it is costly to develop extremely high-quality online and distance programming—especially compared to the older correspondence courses—they are slightly less costly to deliver.
  • One of the biggest challenges for distance education providers is creating and offering an online learning environment that is truly engaging for distance students, making them feel a part of the community in the same way an on-campus student would.
  • While existing technologies are going down in price, new and emerging technologies that enrich the online learning experience are coming onto the market and it’s difficult to predict how those tools will impact the cost of creating and delivering online programming.

Readers Comments

Michelle Ball 2015/07/27 at 9:56 am

I think explanations like these will go a long way toward improving student satisfaction just by letting them know where their money is going and how dedicated administrators are to providing the best possible learning environment. Like everyone, students just want to know that their money is being put to good use.

Christine Henkler 2015/07/27 at 1:03 pm

It’s true to a certain extent I think. There’s no way to replace on-campus extracurriculars and sports teams. But even access to library resources and web access to campus talks and events can go a long way toward at least making sure online students get a taste of the campus culture.

Muvaffak GOZAYDIN 2015/12/21 at 5:28 pm

Yes, originally development cost of an online course was too expensive. Around $ 300.000-400.000 for a 15 weeks long course.
Now there is free openeedx by edx . Cost is nill . Improvements are being made on openedx everyday which is wonderful .
Please comment if you use openedx successfully.

Muvaffak GOZAYDIN 2015/12/21 at 5:30 pm

Good universities must stop to charge high fees for online courses .
ASU and PennState are charging little over f2f course charges for online courses .
Cost of online course is 1/10 of the f2f .

Susan Farber 2015/12/30 at 9:55 am

Craig Weidemann shares valid observations as to the expense and necessary investment of time and thought in the development or creation of online courses.
It is also critical that course design and content is revisited periodically, so the course remains fresh and responsive to students.
It will be fascinating to find out the degree to which other institutions are choosing to invest funds in online course development, and how they are measuring the return on this investment they may be experiencing.

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