Nonprofit Colleges Spark New Online Competition, Study Finds

A growing number of nonprofit colleges have become big fish in online education and target a working mature student market long dominated by for-profit institutions. As competition intensifies, more informed consumers will increasingly seek online programs based on price and brand strength.

These were the findings of new research from the Parthenon Group, a strategic consulting firm. The Parthenon has conducted previous studies with favorable results for the for-profit sector, but gives nonprofits a definite edge in this report, titled “Are Sleeping Giants Awake?” Nonprofit universities are entering large-scale online education.

Nonprofits have a lot of ground to catch up. The study identified 11 nonprofit colleges that enrolled more than 10,000 online-only students last year, with a combined enrollment total of 280,000. This list includes Liberty University, Rio Salado College, and Excelsior College. (see expandable graphic). In contrast, the top dozen for-profit organizations enroll 818,000 students online only.

Chris Ross, Parthenon partner and author of the report, said many nonprofits have yet to start realizing their potential. For example, even the less selective public universities have a lot of brand appeal in their regions. But relatively few have stepped up to market their programs online.

According to the study, for-profit colleges do much more conventional marketing to attract students, such as paid advertising or telephone banking recruiting. In contrast, nonprofits still rely heavily on word of mouth.

While nonprofit colleges have dabbled in online education, most have relied on technology providers to help them do so. The study indicates that these ‘online tools’, such as Embanet / Compass, Bisk, Deltak, Academic Partnerships and Pearson, help colleges do the heavy lifting that for-profit organizations do themselves, such as development. courses, IT support and even the generation of “prospects” among future students. This support industry will only grow, the study says.

“You still have a lot of schools that are dipping their toes into online education,” Ross said. “There is a significant opportunity for these schools. “

However, Ross predicted that only a limited number of nonprofits would join the surviving nonprofits as major established players online. And newcomers who haven’t already gained a foothold might struggle to make it among the “big winners” amid the coming consolidation, he said.

According to the study, a few rapidly growing online colleges will stand out, achieving a critical mass of revenue and brand awareness, which in turn can be used to attract faculty, improve the student experience, and help. to develop relationships with employers. The key will be to grow quickly while maintaining academic quality.

“The race is up to scale as quickly as possible,” the study said. “The winners will almost certainly be those institutions that can differentiate themselves in the eyes of students, faculty and amenities. “

“Regional ball game”

The study was based in part on a survey conducted in July of 1,200 students in fully online programs. He found almost identical student profiles in nonprofit and for-profit institutions, with similar ages, incomes, and attendance patterns.

This finding did not surprise Carol Aslanian, online education expert and senior vice president of market research services at Education Dynamics, who said online students from both for-profit and non-profit organizations are now “more similar than different”.

Geography is becoming more important in this competitive environment, Aslanian said, and can be an advantage for nonprofit colleges.

In the past, for-profit organizations could rely on large marketing budgets to attract students across the country. With relatively few choices of convenient online programs for working adults and few obvious differences in the quality of online providers, selling was more about volume than presentation. And prospective online students weren’t particularly demanding consumers, the study found.

According to research, around 50 percent of students apply to just one institution online, and less than one in five apply to three or more institutions. Those numbers have been relatively consistent over the years, Ross said. However, that may soon change.

“Increased competition virtually ensures the emergence of a more sophisticated student consumer,” the study said.

Some associations are already upsetting the online price balance (see graph). Most for-profit organizations charge between $ 400 and $ 600 per loan, according to the study. But several nonprofits charge less than $ 400. Tuition fees in Rio Salado, for example, range from $ 76 per credit for residents of Maricopa County (the college’s home district), up to $ 317 per credit for some out-of-state students.

Additionally, selective nonprofit colleges might get away with charging more than for-profit institutions. This is because students are willing to pay more for a strong brand. The survey found that students enrolled in selective institutions said they would pay nearly $ 5,000 more in annual tuition for an online program than their peers at open access institutions.

Most for-profit businesses are struggling in the wake of the recession and after the latest federal regulatory crackdown. Registrations have fallen at many national channels. The upheaval to attract students will become even more interesting, Aslanian said, if public universities with strong regional brands expand online. (See related article.)

For example, the University of Nebraska can hit all comers in its backyard, she said, whether they are for profit or not.

“It will be a regional football game,” she said, and “a huge challenge for for-profit organizations”.