Academia is a business at the end of the day. Its raw material is knowledge and this is transformed into qualifications. It is subject to the laws of supply and demand just as any other business would be and more importantly the laws of income and expenditure.
The big issue with nearly all higher and further education establishments is matching expenditure to the value of the brand. Through years of mismanagement, arrogance and poor business sense, most academic organisations carry legacy overheads of forty percent. In the worst examples I have heard examples over eighty percent.
What does that mean? A degree currently costing £3,000 would have a real value of delivery of £1,800 and the remaining £1,200 going towards overheads. Overheads are what it costs to run the working environment. So all the academic managers and admin (staff), heating & lighting, legal fees, maintenance and any other cost you can think of to run the business.
Sidebar: What is worse is your degree is partially funded by the government. I am not sure on the exact ratio but in 2008 it was 110%. Meaning the “income” for the HE establishment was £6250. Later I will explain how your education is provided at a fraction of this with the rest being squandered by your HE institution on inefficiencies. For now though lets forget the funding and look at what you pay yourself.
What is unusual about that? Well commercial business run much smaller overheads with the average estimated to be around 10%. This keeps prices competitive and process and systems have to be efficient and lean.
Why is this important? A commercial training company delivering accredited degrees with its lean management structure will deliver education value of £2,700 and the overhead just £300. Assuming the degree can be delivered at the same quality as the academic model for the same money then it costs £1,800 to deliver and £900 would be profit.
What is the difference? Well it is about how a commercial company would handle a situation with a forty percent overhead. Good business dictates a rationalisation of the overheads until the value of the brand is not damaged and a sustainable profit can be made. Bad business would be to paper over the cracks, reduce the value of the brand and pass the additional cost of all of the inefficiencies on to the customer.
Why would business rationalise rather than make larger profits ? Market forces will determine how value of the education delivered is compared to price. The market itself operates on supply and demand and it is the market that dictates what customers are prepared to pay. Even where the value of the education delivered is high, too high a price will lose market share.
Why have the government raised the tuition fee cap? Simply, it is a far less complicated and difficult an exercise. Excessive overheads exist throughout government and are cultural as much as anything. Culture change takes time. They have gone someway to addressing the liabilities within the overheads by enforcing change through funding settlements and various changes to pension scheme.
What were they hoping to achieve? Ideally, more value to the tax payer and the beneficiary of the educational experience. Where funding is reduced by twenty percent then the overheads MUST reduce accordingly.
What implications are there with the raised cap? Students are consumers. In free competitive markets they can exercise their buying preference. Those institutions that address their overheads and become competitive and offer value for money will continue to exist, those that don’t will fail.
Will that affect the academic landscape? Yes! Where academic institutions do not meet customers expectations then the private sector educational providers will offer greater value for similar quality and price.
In conclusion the government may or may not have proposed an effective way to tackle the underlying sickness affecting higher education today. Too many me-too products from too many institutions offering little added value not least to UK plc but to career prospects of their graduates. However, it is also possible for institutions to fail and some will to the benefit of the consumer, tax payer and commercial providers.
Is it not about time this ethos should be expanded to every government department. As a one time student I say to my peers “You quiet rightly feel angry, ill treated and aggrieved but focus these frustrations towards the right place – Your Institutions. If any raise fees then it’s a clear sign given the margins involved that they do not value their consumer, YOU!”
Tuesday, 30 November 2010
Thursday, 5 August 2010
A passing storm or a window on disaster
PA Consulting has just reported on an online survey (A Passing Storm, or Permanent Climate Change? Vice-chancellors' Views on the Outlook for Universities.) of university VC’s. The report variously reported that 74% of respondents thought it likely that a university will fail; 64% highlighted the growing gap between senior management and their staff and the inability to change staff attitude to change and 81% of respondents that it is at least probable that private universities will offer considerable competition in the near future.
However, with only a 28% response rate it is a poor report to place any judgements on. Indeed, the report is not telling us anything that was not already known but provides the HE sector with the opportunity to moan and fight amongst the Russell Group, the post 92 group etc. A large section of university education in the UK is moribund and is seeking international student fees to keep it buoyant. However, are all those seeking, capable of finding and delivering the appropriate experience for students and does it not distract our attention from the crisis in UK students’ ability to support UK plc.
Surely the argument is what is happening to tertiary education within the broad reach of UK plc education in comparison with our global competiveness and the real quality of graduates entering employment. It is probably too strong to say that we have too many universities but we do have too many universities that are standing still or acting like grown up FE colleges.
We need the speciation of the tertiary sector, started under Thatcher, to be given some direction and assistance to make the transition downwards rather than always upwards. This does mean moving staff, intransigent or otherwise, out of the system and for managers to manage through performance those staff not up to the task. HEFCE have not been empowered to do this despite several attempts to persuade some to re-assess their staff and product mix. Let's celebrate and fund globally competitive research to be truly global but at the same time let's make sure teaching led institutions with very limited research activity but endless spoon feeding of students through the immaculate QA and pastoral support systems are helped to become transition or two year community universities / colleges. This would complete a backward integration into secondary and vocational education that might make education foster independent thinking and capability across all levels of educational attainment to support the transformation of UK plc.
This might also reduce the enormous cost of remedial teaching that has to occur in tertiary education because of secondary educational failures.
Therefore, it is not about private versus public because we are a market based econom: the correct product mix will win through. It is about ensuring UK plc gets maximum value from its investment from contributing to public or private universities tuition fees.
Friday, 30 July 2010
Educating in the face of economic cutbacks: the importance of marketing
Government borrowing to promote the recovery of UKplc from recession will have an enormous impact on the public sector over the next economic cycle. The forecast budget reduction in Departmental spends are already cutting deep into the sector’s strategic planning processes. However, it is perhaps important to remember that research from previous major recessions[i] indicate that those companies continuing to invest in marketing activities through the recession gained market share over those competitors that reduced their spend.
Therefore, in the radical business transformation and recovery processes that will now be launched within the public sector it is important to ensure that efficiency gains obtained or proposed are not at the expense of capacity and capability to deliver the changes required. Cutting staff resources in the absence of parallel infrastructure changes or product offer normally leads to inefficiencies in delivery and staff burn out as work flows actually do not diminish.
In this discussion with Dr. James Macaskill, who has successfully led two higher education and further education colleges through previous reforms, we talked about the role of Marketing and Communications during periods of change.
What do these changes mean for the Education sector?
Cut, cut, cut. With universal agreement the most important aspect to any education sector is its reputation for delivering a high quality curriculum and employing motivated academic staff to engage and immerse students in studies that provide vital, vibrant and viable routes to learning and employment. For any individual institution it will be managing this reputation within the niche market it is serving. Public sector providers are coming under enormous pressure to change in response to industry criticism about the work readiness of students leaving teaching and learning institutions.
Thus the future Education sector will have to deal with less income from government sources, more competition from the private sector for profitable areas of delivery and generating more income from private or alternative sources of income. They will have to come to terms with managing quality enhancement resources in different ways in general admissions procedures, curriculum development and in streamlining point of delivery and assessment methods. Given the diversity of learning needs in the student population institutions will have to balance teaching time, quality assurance time and income generation time. Getting closure to the industries they serve will have to be a major activity to rebuild confidence in their ability to deliver work ready work force entrants.
Historically most institutions in the sector have based their business strategy on delivering an assumed annual allocation of central funds and recruited accordingly. A few have chosen to develop new strategies of dynamic growth and development thus diluting their dependency on conventional funding streams. Moving forward the certainty of these funding levels, year on year, is less clear and institutions will be forced to devise sustainable business strategies based on identifying and developing the demand side of their business while retaining core capacity to deliver the supply side requirements more efficiently.
What part does Marketing have to play?
In an uncertain future, institutions are or become more risk averse and always tend towards a refuge of certainty. However, moving forward institutions will need a wider appreciation of uncertainty and their Johari profile. That is a higher probability of certainty is based on your understanding of uncertainty through “known:knowns”, “unknown:knowns”, “known:unknowns” and “unknown:unknowns”. This requires the buy in of all staff across the organization to adopt a marketing orientation and for the infrastructure to capture and track market related information.
This is a challenge for traditional marketing departments who have been primarily seen by the organization as a promotions and advertising service team. New marketing departments have to have a more authority and an integrated approach with front of house, admissions and quality assurance systems and have authority within the institution to determine market responsive business strategies. This will result in more effective market intelligence, better use of data in general and help build customer relationship data bases to understand market shifts or trends.
Managing brands through a recession[ii] requires
1. Maintain level and volume of your marketing activity and where possible your budget to ensure your brand remains visible to your clients;
2. Maintain contact with your clients and speak directly to them using your knowledge of their buying preferences to segment your market and through personalised mailings and sell your brand values not just product benefits;
3. Automate your data and build up a customer relationship management system that improves the data mining and performance management capability for your marketing investment;
4. Be innovative in your approach to the market and through new product development that allow you to quickly respond to market conditions ahead of your competition;
5. Ensure an effective search engine marketing strategy is developed using branded and non-branded keywords.
What challenges does Marketing face?
One of the biggest challenges for education Marketing is the diverse range of target audiences and customers for its services while ensuring a strong call to action and potent marketing message. The recovery process will require key corporate decisions about centralizing marketing budgets or decentralizing marketing budgets as well as prioritizing high impact areas and building in measurable parameters for the return on investment for the marketing budget deployed.
In a planning scenario where budget cuts are being sought marketers have to compensate for the absence of sufficient budget to cover all the demands arising from staff for their course recruitment activities and traditional media activities. The available funds have to be stretched across lower cost web enabled services, social media and PR strategies. Therefore, the main challenge facing marketing has to be preserving the market orientation of the organization while it is making budget savings across the organization. However, managing social networks effectively and producing sufficient relevant information to distribute and gain traction is itself a time consuming activity. Therefore, for the social media strategy to be effective it should be developed and communicated effectively to internal gatekeepers and embrace the students body to ensure that the required activity levels can be maintained consistently across the year.
An effective brand strategy is critical to ensure control of sub-brands, product ranges and their impact on the corporate brand and message. However, does the business strategy require these sub-brands to compete against one another for resources or is the curriculum specialism the brand and therefore determines the niche marketing strategy. Again key gatekeepers have to make choices in the strategies they pursue but should be informed by appropriate market information.
The brand strategy must be clear in its approach to internal brand communication and support the change programme to bring all staff on board. This is critical in moving the organization forward and in making customer facing staff comfortable with brand changes and relevant updates in information. By providing a coherent internal branding strategy with easy access to online support there should be parallel improvements to customer service.
At a time where marketing budgets are increasingly under scrutiny it is crucial that education marketing plays its role efficiently in developing and deploying:
1 Brand Strategy;
2 Marketing and Communications Strategy ;
3 Social Media strategy.
[i] Alexander L Biel, “Converting Image into Equity” in Brand Equity and Advertising, ed. David A Aaker and Alexander L Biel ( Hillside, NJ: Lawrence Erlbaum Associates, 1993), 67-82.
[ii] JAMacAskill “Five tips to retain brand value through a recession” M4siz Limited white paper Spring 2010. (http:www.e-ducational.com/index_files/brandvalue.htm
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