Understanding the National Online Higher Education Market

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Understanding the National

Online Higher Education Market

2008 USDLA Conference

Mindy Hershberger

Research Manager

Online Higher Education Learning Collaborative

Eduventures, LLC

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Market Estimation

Eduventures estimates that at the close of 2006,

there were

1.5 million students

in 100% online

higher education degree-seeking programs.

•

8.5% of all students

at U.S. degree-granting, Title

IV eligible schools

•

20% of all adult students

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The National Online Market 483,113 701,295 936,727 1,518,750 1,822,500 2,132,325 1,219,000 55% 45% 17% 20% 24% 30% 34% 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 2002 2003 2004 2005 2006F 2007F 2008F 0% 10% 20% 30% 40% 50% 60% Online Students Growth 8.6% of headcount at degree-granting schools Estimated 20% of age 25+ headcount

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Market Landscape: The Online Market Is Becoming Increasingly Competitive

Institutions need to move towards…

1) greater differentiation and 2) stronger brand development

Are we facing the online revolution’s counter-revolution? # of Institutions with Online Education Programs Colonizing the Frontier Gold Rush The Age of Competition The Age of Brands # of Institutions with Online Education Programs Colonizing the Frontier Gold Rush The Age of Competition The Age of Brands • Price • Accreditation • Quality • Selectivity • Pedagogical model • Delivery model • Student outcomes • Brand 1990-97 1998-2003 2004-07 2008+ Copyright © 2008 Eduventures LLC

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Understanding the National Online Higher Education Market

Eduventures’ Online Higher Education Learning Collaborative (OHE-LC) of 70 postsecondary

institutions nation-wide commissioned the OHE-LC research team to conduct a study of the national market.

2-Part Study Conducted in 2007:

• Part I: Survey of 2,153 prospective higher education

students nationally

• Part II: National, regional, and state-wide online higher education market sizing & analysis

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First Preference in Delivery Mode, By Age of Respondent

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First Preference in Delivery Mode, By Degree of Interest

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Differences in Motivation Among Students Choosing Different Delivery Modes?

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Perception of Quality of Online Learning

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Perception of Quality of Online Learning

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Why did respondents believe online education was “inferior”?

On-campus programs/courses will always be known for better interaction between faculty and

students 84%

Socializing and networking with other students is much more difficult online 77%

Most employers regard an online education as second-rate 57%

Online education is more open to cheating and fraud 50%

My family and friends would be much less impressed by an online degree compared to a

degree taken on-campus 46%

An online library is no substitute for a traditional library 39%

In my profession (or intended profession), online education is not respected 36% Most online programs are too career-oriented, and less intellectually demanding than many

campus-based programs 33%

The subjects I want to study are not available in online programs/courses 31% It’s very hard to tell the difference between online programs from different universities/colleges 30%

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If you were going to study online, what type of experience would be important?

I’d want to know there was always an instructor I could talk to 72% If my computer went wrong, I’d want to know I could get help quickly 53% I’d want to study mostly on my own, and not have too many group discussions

or other group activities online with other students 51% I’d want lots of group discussions and other group activities online with other

students 23%

I’d like another online student to be designated as my “buddy”, so we could

help each other learn online 23%

I’d like to be able to regularly see and hear the other online students “live”

(e.g.using webcams) 21%

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What can schools do to increase your interest in online study?

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Conclusions, Part I…

• Online learning is most popular among adults aged 25-54 years – working professionals most likely looking to

complete a degree begun in past years, increase their pay/performance in their current job, or change careers

• Interest in online learning is not negligible among other age groups

• Highest online interest is for Associate’s and Bachelor’s degrees

• Majority of respondents have never taken an online course from a college/university. Experience does increase

perception of quality

• Faculty-student interaction is a key concern among learners when considering online education

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Understanding the National Online Higher Education Market

Eduventures’ Online Higher Education Learning Collaborative (OHE-LC) of 70 postsecondary

institutions nation-wide commissioned the OHE-LC research team to conduct a study of the national market.

2-Part Study Conducted in 2007:

• Part I: Survey of 2,153 prospective higher education students nationally

• Part II: National, regional, and state-wide online higher

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Online Delivery & Geography- the theory

• Online delivery implies geography is

irrelevant-“the death of distance”

• “study at the best schools in the country/world”

• 100% online schools imply a certain rootlessness

and non-geographically specific reach

• For-profit pioneers used national reach to scale

• Co-location of student, faculty and institution was

no longer a fundamental pedagogic value

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Online delivery & geography- the reality

• When considering an

online program, c.60% of consumers care about geography

• Suggests majority of online market is local/regional,

and minority national • Consumers with a

preference for online delivery were also

geographically-minded, but had a broader

definition of “local” Branch campus within 10 miles 30% Main campus within 10 miles 11% Branch campus in state 9% Best regardless of location 32% I would never select an online program 14% Main campus in state 4% National market Local markets

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Geography matters in online higher education 36% 17% 11% 27% 4% 4% 1% 0% 5% 10% 15% 20% 25% 30% 35% 40% Local (within 50 miles)

State Region National U.S. abroad International Other

Online student headcount distribution – 53% of online students live in the same state as the providing

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Why else does geography matter in online higher education?

•

State regulation-

assumes a

geographically-bound system; why is Capella University licensed

in 14 states?

•

Tuition

- should student location determine tuition?

•

Faculty

- some state boards require online faculty

to be licensed in that state

•

Pedagogy

- how does geographical distribution of

online students affect pedagogy?

•

Services

- how might local v. national online

student focus affect student services?

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Eduventures Study on

Regional/State/Local Online Markets

Eduventures conducted a study to size the market for online degrees on a regional, state-wide, and local

scale, using data from the following sources:

• National Department of Education IPEDS system

• Looking at the Top 10 largest adult-serving schools’ online activity in a particular geographic area

• Existing Eduventures data regarding market size and online headcount

• Existing Sloan-C data

• Used a combination of synthesis and modeling to go beyond the existing national market sizing data sets

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Online headcount concentration- by state All Learners

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Key factors…

• Presence of one or more larger online active

schools

• Influence of a substantive online state consortium

• Population growth or rural setting (consumer

survey)

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Online headcount concentration by state-Adult Learners

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• Key drivers include population growth, military

installations and neighboring states, as well as

regulatory requirements

• “licensed for what?” is rarely clear (programs,

recruitment, faculty, address, marketing)

Online active schools licensed out-of-state

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Online-specific licensing…

18 states; 9 schools Only Arizona, Nevada,

Tennessee and Wisconsin appear to assert jurisdiction over out-of-state online

delivery to state residents as such- but there is clearly a gap between assertion and

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Why do students care about geography?

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Key institutional questions about the geography variable

• How important and stable is consumer demand for “local” online programs? How can different providers play to or counter such demand?

• In a more crowded market, and in terms of more generic programs, will more schools begin to use online to serve “traditional”, often local constituents?

• Will National players respond with marketing technique/spend, and a refreshed “distance” online value proposition?

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Conclusions, Part II…

• Geography matters in online higher education, and will grow more important in the future

• Mainstreaming of online delivery will shift local/national online market dynamics- closer to more localized higher education market

• More “locally” oriented schools have an opportunity to address consumer demand for “local” online study

• In order to remain competitive, more “nationally” oriented schools must counter this trend

• State oversight may mean “local” regulation of a national market

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Final Thoughts

• Online enrollments will likely continue to grow in the

coming years, though we are beginning to see stabilization • Online education will likely continue to be most popular

among working professionals, though it will become increasingly incorporated into traditional on-campus programming

• We will continue to see a market emergence of local online providers, which will drive competition in new ways, in

particular for national providers

• We will need to continue to monitor the development and interplay of postsecondary education licensing and online education

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Thank You

Mindy Hershberger

Custom Research Manager

Online Higher Education Learning Collaborative Eduventures, Inc.

Prudential Tower, 9th _Floor 800 Boylston Street

Boston, MA 02199 617-532-6092 (Direct)

mhershberger@eduventures.com

Any questions?

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