Strategic CIO // Executive Insights & Innovation
Commentary
6/25/2014
09:06 AM
Chris Murphy
Chris Murphy
Commentary
Connect Directly
Google+
LinkedIn
Twitter
RSS
E-Mail
50%
50%

$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.

In its ninth year, Interop New York (Sept. 29 to Oct. 3) is the premier event for the Northeast IT market. Strongly represented vertical industries include financial services, government, and education. Join more than 5,000 attendees to learn about IT leadership, cloud, collaboration, infrastructure, mobility, risk management and security, and SDN, as well as explore 125 exhibitors' offerings. Register with Discount Code MPIWK to save $200 off Total Access & Conference Passes.

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
Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
<<   <   Page 2 / 3   >   >>
Hospice_Houngbo
50%
50%
Hospice_Houngbo,
User Rank: Strategist
6/29/2014 | 9:11:00 PM
Re: Econ 101
The price is justified because it is a prestigious school offering the degree? Recruiters should be more concerned about the skill sets and the knowledge of the subject rather than where the job applicant got his/her degree from.
impactnow
50%
50%
impactnow,
User Rank: Ninja
6/29/2014 | 2:15:59 PM
supply and demand
Higher education is one area where the brand lives on in its most ofe valentl form. Students will pay for well respected degrees online with the hopes of landing high paying jobs. The convenience of online reduces the costs for many because it offsets relocation costs. Online masters degrees will continue to grow to suit this market.
JonNLakeland
50%
50%
JonNLakeland,
User Rank: Moderator
6/27/2014 | 8:56:46 AM
Re: Econ 101
@jagibbons:

The fact that it was a UC Berkeley program is probably why some feel the price is justified. I doubt that the University of Pheonix or other primarily online schools could get away with this pricing, even if they had the exact same curriculum.
Henrisha
50%
50%
Henrisha,
User Rank: Strategist
6/25/2014 | 3:10:22 PM
Re: Econ 101
You're right, it will definitely affect the market. It would be a different story if what's being offered is of subpar quality for that lower cost, but it's not. I definitely see this shaking things up.
jagibbons
50%
50%
jagibbons,
User Rank: Ninja
6/25/2014 | 2:39:31 PM
Re: Econ 101
I would expect to see some stiff competition in the future. If someone else can deliver a quality program at a lower cost and chooses to do so, that can affect the market. Is the UC Berkeley program worth the cost? Who knows. Is it is worth the cost just because it's from UC Berkeley? To some.
ChrisMurphy
50%
50%
ChrisMurphy,
User Rank: Author
6/25/2014 | 2:35:29 PM
Re: Econ 101
 jagibbons, we haven't seen what I would consider stiff price competition in on-campus degrees, so should we expect that in online degrees? 
zerox203
50%
50%
zerox203,
User Rank: Ninja
6/25/2014 | 1:44:49 PM
Re: $60,000 Online Degree
You're all right; there's a lot to talk about here. The main reason for that being the course is untested yet, and we have no data (or even anecdotes) to suggest what this is worth, if it's the wave of the future, or if it's just a flash in the pan. Sure, thirty students is a lot at this price range - but is it a lot in general, and is it sustainable? Will people actually get Data Scientist jobs with this degree? Are these first-time students, or people going back for something extra, as Lorna suggests? We have no way of knowing - which means in the meantime UC Berkeley can say anything they want about how worth the investment this program is.

That's not to suggest that they're lying - who knows? Projections only go so far, and they're as liable to be wrong (or more right than they imagine) as anyone else, I wonder if there's a lesson in there about online revenue. I could put a product up online tomorrow for $60,000. Depending on my industry, the fact that it's digital may or may not mitigate my risk in doing so - and it may or may not increase my chances of being successful. The story of the gentleman who sold the iPhone app a few years back that did nothing but doubled in price every time someone bought it comes to mind. He made thousands - that doesn't mean it was a 'good' idea.
D. Henschen
50%
50%
D. Henschen,
User Rank: Author
6/25/2014 | 1:17:23 PM
Paying for the name, reputation
It is UC Berkeley. I'd guess Northwestern's online big data analytics degree is also in the same price league. Want a bargain? Look to lesser schools or even MOOCs.
jagibbons
50%
50%
jagibbons,
User Rank: Ninja
6/25/2014 | 11:44:43 AM
Re: Econ 101
That's really a great question. As a manager, I couldn't justify shelling this out for one of my staff, but I'm sure there are organizations that could.
Lorna Garey
50%
50%
Lorna Garey,
User Rank: Author
6/25/2014 | 11:43:29 AM
Re: Econ 101
Right, though I wonder how much of that market is employers covering that cost for employee training on on eextreme, and on the other, how much is people going into debt expecting the course to pay off in a top salary? I'd be interested in knowing what potential employers think is the value of this course.
<<   <   Page 2 / 3   >   >>
The Business of Going Digital
The Business of Going Digital
Digital business isn't about changing code; it's about changing what legacy sales, distribution, customer service, and product groups do in the new digital age. It's about bringing big data analytics, mobile, social, marketing automation, cloud computing, and the app economy together to launch new products and services. We're seeing new titles in this digital revolution, new responsibilities, new business models, and major shifts in technology spending.
Register for InformationWeek Newsletters
White Papers
Current Issue
InformationWeek Tech Digest, Dec. 9, 2014
Apps will make or break the tablet as a work device, but don't shortchange critical factors related to hardware, security, peripherals, and integration.
Video
Slideshows
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
Join us for a roundup of the top stories on InformationWeek.com for the week of December 7, 2014. Be here for the show and for the incredible Friday Afternoon Conversation that runs beside the program!
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.