Strategic CIO // Executive Insights & Innovation
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6/25/2014
09:06 AM
Chris Murphy
Chris Murphy
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$60,000 Online Degree: A Lesson In Digital Business

UC Berkeley is charging a premium price for a new online Master's degree in the hot field of data science. Can you get a premium price for your online services?

Are you shocked at the $60,000 price tag for University of California at Berkeley's new online-only Master's degree in data science?

Do you then go from shock to envy and ask: How can we get that kind of premium revenue out of our digital business efforts?

In case you missed our article this week, UC Berkeley has completed its inaugural semester of an entirely online, 18-month Master's in information and data science program. Data science is a red-hot career path, and demand for the Berkeley degree is strong, with 28 students in the first class, 28 to 30 in the second, and expectations for 45 in the third. If everyone's paying the $60,000 retail price, that's a fresh $6 million in revenue.

What struck me about the online degree program is that it uses a digital business model to charge a premium price, reaching an untapped market segment to generate new revenue. So many other digital business initiatives focus on discounting and cost-cutting. They offer customers a new way to get a coupon, for instance. Or they add a service, like mobile banking apps, in hopes of retaining customers and attracting some new ones. But if those digital efforts add costs but don't let providers ditch other costs -- if a bank keeps all its same branches and ATMs, for example -- it isn't expanding the profit picture all that much.

UC Berkeley is using digital to reach new customers it couldn't serve with its on-campus education. Digital addressed two limitations. One, the university didn't have classroom space to quickly accommodate a new program. Two, the students taking these courses are people who don't want to come to campus, says Steve Weber, a professor at UC Berkeley's School of Information who helped craft the online instruction material, because they have full-time jobs or family commitments. "We couldn't fit them in the building, but there's also no way they would've come," he says.

[For more insight from Berkeley's Weber, see Big Data Has Exhaust Problem.]

Weber estimates that it took about twice as long to develop the digital curriculum as it would have been to create a regular course. That's because the school had to script out every element of the 90-minute taped lectures, and because there were so many multimedia elements the school wanted to bring into the experience -- video excerpts from outside experts, for example, so it wasn't one talking head lecturing for 90 minutes.

Weber thinks the $60,000 price is fair for what students get. And he maintains that online instruction is "slightly better in some ways" than conventional classroom teaching because instructors must prepare and script out every minute of the sessions, and they can bring in so many diverse speakers and ideas using multimedia excerpts. A downside is that instructors can't react to feedback from the class midstream and adjust their teaching and focus.

As a higher education consumer, I'm not really rooting for the premium pricing business model to dominate online education. I'm hoping models like Georgia Tech's $7,000 online degree experiment offer a road to reining in soaring college costs. Higher ed seems ripe for digital disruption.

But UC Berkeley's new offering provides a lesson in premium pricing and revenue growth that's worth discussing for teams trying to figure out their companies' digital business strategies.

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Chris Murphy is editor of InformationWeek and leader of its Strategic CIO community. He has been covering technology leadership and strategy issues for InformationWeek since 1999. Before that, he was editor of the Budapest Business Journal, a business newspaper in Hungary; ... View Full Bio
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jagibbons
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jagibbons,
User Rank: Ninja
6/25/2014 | 9:18:30 AM
Econ 101
This is an odd situation. Sure enough there is great demand for data science education. I'm very surprised UC Berkeley is able to charge that much of a premium. I'll be interested to see how this plays out over several years and more universities add similar programs at what I expect would be very competitive (i.e. lower) costs. On the flip side though, if customers are willing to pay the price, then there's no need to adjust it. That Econ 101, charge what the market will bear.
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