Online Classes...Education in the Free Market

Are web-based classes growing in popularity? Boston University is doing it, as is University of Illinois,
UC Berkeley,
University of Massachusetts
Harvard Extension


Are web-based classes the jet fuel for democracy? Will education be a product deliverable to everyone? Will education be a "process" experienced by more people normally "unavailable" to classes because of parenting issues, employment limitations, or a lack of mobility? Do online classes boost family values as more fathers and mothers are able to take classes, as their children sleep, however irregular the hours?

FACT: Online teachers (teaching a web-based class) generate four times more revenue than the typical classroom teacher. The average classroom holds 35 to 40 seats or students. The well-managed "online instructor" has between 125 and 150.

It appears there is money to be made, and people are willing to pay for the convenience of online college courses.

Web-based classes certainly bring in money to the school! More teachers need to know the secret of managing them, so all schools can prosper. Successful online teachers who can organize and coordinate students can help spread the word about how to maximize the online potential.

What should colleges charge for the service of online schooling?

Finding the optimal market price would require experimentation.

If the school boosted tuition at five dollar increments, the schools would expand the quarterly revenue, by several percentage points. And they could continue to ratchet up $5 for several quarters. But (diminishing returns!) at a certain point, the school would start to lose money, as students went elsewhere to spend their online money, tired of the higher rates, and able to shop elsewhere for lower rates.

It appears the school could raise prices for a time and not lose many students, probably because of the convenience factor: online classes can be absorbed at the discretion of the student, at 2:00 AM, 6:00 PM, midnight, noon...totally convenience driven.

Mothers with children can take classes: it's a family values issue: moms (and dads) can work a job, be with the kids and take a class, with few sacrifices (except perhaps for REM sleep).

But consider another scenario. Consider if a business lowered prices on a popular product, such as a class (or shoe, or handbag). Sales would go through the roof, at first. Each $5 drop, would (my guestimate) bring in 100 more applicants for the class. Much more revenue would be generated, as the lower price makes the product more available. The unfortunate side effect is that the school would probably run out of resources, namely teachers who would be willing to cope with the exploding workload. But, you would agree that slight dips in price would bring in more applicants, therefore more students, and therefore more revenue.

Of course there is the prestige factor (or 99 cent store effect) to consider. My wife will not step into a 99 cent store. I love the place. Things we need are 50 cents and 2 dollars cheaper per item, but my wife is irritated by the perceived loss of prestige merely walking into such a store, with such a defined product line, pricing structure and clientele image.

A similar effect could be at work as we think about school costs. Paying "less" for a school course could mean only one thing: the product is counterfeit, damaged, or tainted. I understand and appreciate this fact of human nature if people carried this impression (however superstitious and indefensible it may be).

Associated with this idea is this: what does education do for a person? Is education a "product" or a "process" that we "get" when we go to school? Is the effect tangible or intangible? Can we quantify the effect or is the "effect" an elusive "quality" that is clouded by the imprecision of subjective impressions? Debate continues on this question.

Should a school lower prices on a popular product? It depends on what consequences they want: 1) do they want to attract more students? 2) do they want more revenue? 3) can they afford to spend more on resources (teachers, computer networks) to catch up with the drain on resources created by the boom? 4) can they afford the questions about the value and prestige concerning their diploma?

Economics and value...very interesting how people make decisions about their purchases.