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The Learning MarketSpace, March 1, 2001

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Written monthly by Bob Heterick and Carol Twigg, The Learning MarketSpace provides leading-edge assessment of and future-oriented thinking about issues and developments concerning the nexus of higher education and information technology.

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QUALITY.COM

In the August 2000 issue of The Learning MarketSpace, we discussed the issue of quality assurance in distance learning from the student’s perspective. To illustrate one aspect of the problem, we described what happens when a student searches several Web sites for the "best" marketing course that is available online--one that is affordable and transferable to the home institution.

That search yields the proverbial "firehose of information". Approximately 240 undergraduate marketing courses are listed on one Web site alone, a deluge of data that most consumers would find daunting to sort through. In addition to the presentation difficulties described in that August column, every Web site that lists online courses suffers from a more important problem: none provides any information about the quality of the courses listed.

What do consumers--students, parents, employers, and others--want to know about quality? Of course, they want to know that the course is "as good as" others, that it conforms to "generally accepted practice" in the profession. While knowing that the course meets minimal or threshold levels of quality is important, what consumers really want is comparative information. Consumers want to be able to differentiate between the hundreds, indeed thousands, of possibilities available to them. By analogy, a prospective buyer needs to know that a car runs, but what the buyer really wants to know is whether it runs better than other cars. That’s the common-sense definition of quality assurance.

Most people in higher education prefer to rely on expert evaluation when thinking about quality assurance. They believe that students cannot make judgments about what constitutes high-quality education because they have not been trained to develop appropriate criteria. Since students do not have enough of a basis to make judgments, so the reasoning goes, "we" have to make the judgments for them. But when we make those judgments, we do it according to our rules, not according to what students may need or want. The best example of this phenomenon is, of course, the utter unwillingness of the higher education community to provide qualitative rankings that compare institutions and offerings.

Those in higher education who favor some kind of qualitative rankings look to consumer-oriented publications and organizations like Consumer Reports or Good Housekeeping, which test every product before giving a seal of approval, as possible analogies. When it comes to online course evaluations, however, these processes are not analogous, since no group of experts could possibly evaluate the ever-growing number of online courses in hundreds of subject areas. Any "expert" can use and evaluate twenty toasters; no expert can enroll in and evaluate twenty much less 240--marketing courses. Expert evaluation of every course is a logistical impossibility.

If technology is the "cause" of the problem--creating a bewildering array of online course choices--perhaps technology can contribute to the solution. Let’s consider three popular commercial Web sites to see if their approaches might suggest ways to solve the problem of undifferentiated information overload. Each of these sites includes sophisticated software that enables multiple parties--including consumers, providers, and experts--to submit and review data about products, services, and transactions.

Amazon.com allows consumers to gain qualitative information about the products offered by means of narrative reviews and a five-star rating system. Two types of reviews are presented: editorial (expert) reviews (e.g., published book reviews) and customer (consumer) reviews. Using the book The Perfect Storm as an example, as of today, about 30 expert reviews and 722 consumer reviews of this book are posted. The average customer rating for The Perfect Storm is four stars. You can read the full text of each review or view the star system to gain a quick summary of customer responses. Customer reviews are also ranked. Each time you read a review on the site, you are asked whether the information was helpful or not, and your vote is tabulated.

eBay.com offers qualitative information about its online trading process through its Feedback Forum. This forum allows you to rate the buyer and the seller, a process that produces a "Feedback Profile" consisting of comments from other traders--an official "reputation." Next to a member’s user ID, you will find a number in parentheses, his or her Feedback Rating. For example, "Mark (137)" means that a member’s user ID is Mark and that the member has received 137 feedback comments from other eBay members. Members receive +1 point for each positive comment, 0 points for each neutral comment, and -1 point for each negative comment. Different color stars are awarded for achieving a particular Feedback Profile. Sellers can respond to negative comments. Narrative comments, each about one line in length, are also displayed.

Zagat.com contains dining information on more than 20,000 restaurants in 44 cities worldwide. Zagat.com offers feedback on the entire dining experience: thirty-point food, decor, and service ratings plus brief descriptive comments and cost estimates compiled from millions of annual surveyor reviews. Anyone can rate a restaurant on the quality of its food, decor, and service by choosing a number from 0 (fair to poor) to 3 (excellent). Visitors to the site can search for restaurants by entering criteria such as minimum ratings for food, décor or service; maximum cost; neighborhood; cuisine; or special features like open on Sunday, credit cards accepted, outstanding views, romantic spots, meet for a drink. One can also display restaurants by categories like top food by cuisine, best buys, most popular, top décor, top food, top outdoor, top service, top romantic or top views.

What are some of the characteristics of these systems?

Preferences. Each site offers a way to sort through all of the listings and display the output according to one’s preferences (e.g., "I am looking for a Miami restaurant that is open on Sunday and whose maximum meal price is $40").

Consumer input. Each site offers a way for the consumer to express his or her views--as a free-form narrative (Amazon), as a one-line narrative (eBay and Zagat), and/or though a ranking system (Amazon and Zagat).

Ranking. Each site offers a simple way for the user to see a summary of consumer reviews--as an aggregate number of positives (eBay), as a five-point ranking system average (Amazon), or as a ranking system that combines multiple factors (Zagat).

Expert input. One site offers a way for the expert to express his or her views (Amazon).

In all cases, the software enables easy input and tabulation of the data. No research studies or surveys need to be conducted. Up-to-date, cost effective, easy-to-use quality assurance information oriented toward consumer needs and interests--that’s what each of these sites offers.

If we wanted to build on the ideas suggested by these three dot-coms to construct a system suited to the quality assurance needs of higher education’s students, how would we do it? What would be its characteristics? In our next issue, we’ll take a look at some options.

--CAT

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DOGMA AND OXYMORONS

I picked up a copy of The Chronicle of Higher Education the other day and there, staring boldly out at me in 72-point type, was the question de jour. "Can Colleges Make Money on Distance Education?"

Now, some would hold that this is an interesting question. Some might even maintain that it is an important question. I, on the other hand, think it to be an absolutely vacuous question that does little other than demonstrate the sorry state of confusion in higher education. Certainly, if you are a for-profit organization, this is not only an interesting and important question, but an absolutely critical one. Perhaps with the exception of Amazon.com, no business can long continue without demonstrating a surplus of income over outgo--profit if you will.

Profit carries with it the expectation that something, usually quite a bit, is known about the cost of producing services or products. Prices are then established to be something in excess of cost depending upon how the provider views the price elasticity of potential consumers. Some markets--that of Walmart for instance--seem to work well with a very thin profit margin but very high sales volume. The boutique market is characterized by high profit margins on low sales volume. Of course there isn’t a boutique market if you are competing head-to-head with Walmart. If your service or product looks too similar to that of a mass- marketing competitor, you must find some differentiator that makes your service or product appear different in order to make a profit as a boutique. Even then you are likely on thin ice--just ask Apple how they are doing in competing with Dell.

For good and sufficient historical reasons, colleges and universities operate as though they have a single product--a student credit hour. To be sure they have tweaked this bundled product a little. The price is so much a credit hour up to some maximum and no charge beyond. State legislatures have pushed most public institutions into two tier pricing--so much a credit hour for in-state students and something different for out- of-state students. Historically some credit hours may contain the rider of a "lab fee" or other modifier to help "defray" the cost of courses that are particularly expensive. A price is then established by subtracting from the costs any non-tuition income and dividing by the number of credit hours to be sold (subject to the minor tweaking). Any excess of income over expenses is then plowed back into facilities or operations hopefully mitigating the size of future tuition increases. In our historic style of operation, future tuition increases are as sure as death and taxes.

In today’s global economy there are all sorts of pitfalls in such an approach. Potential competitors who decide to do real cost accounting at the course level quickly discover that some courses are considerably less expensive to offer than others. Rather than choosing to cross- subsidize the expensive courses with the less expensive, they will likely "cherry pick" the less expensive courses and make a business of offering just those. Disaggregation has become the watchword of the Internet economy. Some courses offer the potential for significant cost reductions if the mix of labor and technology is changed. The Pew program in large enrollment course redesign is clearly demonstrating this. There is certainly potential to carry the substitution of expensive labor for less expensive--adjuncts or teaching assistants in lieu of full- time senior faculty--to new levels in the "mass market" world that can be envisioned through the use of computer and communications technology.

Very few colleges and universities have any idea of the cost of offering the various courses listed in the institutional catalog. To stem the competition from "cherry pickers," they rely upon their historic geographical franchises (either the de jure or de facto absence of competition), the boutique approach (our institution is better than others because...), provider-supplied subsidies (state support, philanthropic gifts, etc.) and the absence of uniform transfer of credit standards.

So, why would institutions want to "make money" on their distance education offerings when this is not an issue with their residential instruction? And why are none considering the Amazon.com approach of "buying market share" with prices that are less than costs?

The answer seems obvious. Many institutions, or at least the management of many institutions, view the offerings in their distance education programs as "second class"something out of the mainstream of their mission which is viewed in the historical context of providing residential instruction. These last two words are important. Residential means that the students find their learning venue on the campus. Instruction means labor intensive. The lower the student-teacher ratio the better.

Providing learning opportunities outside the realm of residential instruction is frequently viewed as yet another potential cross- subsidy to the cost of residential instruction. Lest you think I am imagining this, let me suggest you review the public utterances of your local college or university president on this subject. Hopefully some are viewing these new learning venues as an opportunity to experiment with new organizational and compensation structures but I doubt it.

The political costs of beginning the transformation of our not-for-profit institutions of higher learning to a new era of competition are simply too high for most of our institutional administrations. One has only to look at recent parallels--the regional Bell monopolies come immediately to mind--to understand that only loss of market share to new competitors will create sufficient trauma to initiate a new way of looking at the role of higher education in 21st century society. One sure way to invite new competitors is to price the cost of new learning offerings artificially high in order to subsidize high-cost residential instruction.

In the context of historical dogma surrounding higher education, "making money" is truly an oxymoron. In the quick or dead world of the Internet economy, "making money," or at least truly understanding costs and pricing, may not be such a bad idea. But, done for the wrong reasons--and so far all the reasons seem to be wrong--it simply delays an adjustment that higher education needs to make.

We should apply the same yardstick to our distance offerings as we apply to our residential. If "making money" is not an issue for the latter then it shouldn’t be for the former. Otherwise, we give every evidence that our non-residential offerings are out of the mainstream of our mission and on a par with "making money" from the concessions at the football stadium, selling logo-bearing apparel in our campus store, or awarding the campus cola franchise to Coke or Pepsi.

--RCH

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Copyright 2001 by Bob Heterick and Carol Twigg