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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impactnow
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impactnow,
User Rank: Ninja
7/1/2014 | 12:44:29 AM
Re: supply and demand
The professors did indicate the cladses took more time to develop than a traditional course, students are willing to pay so its unlikely the tuition will decrease soon.
Joe Stanganelli
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Joe Stanganelli,
User Rank: Ninja
6/30/2014 | 11:31:33 PM
Re: Econ 101
On top of that, it's marketing/publicity.  "Oh, UC-Berkeley has a $60k online degree program."  "Wow, really?  That's interesting."  And then maybe you start clicking around their website a bit more for a program you actually are interested in.

As for the online program itself, I see a certain benefit in it -- for example, someone who wants the prestige of having UC-Berkeley on their resume, but doesn't want to actually live in hippie central.  ;)
Joe Stanganelli
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Joe Stanganelli,
User Rank: Ninja
6/30/2014 | 11:28:31 PM
Re: College: An overpriced book club
@Sunita: Well, I think it's about having the "branded" piece of paper that says UC-Berkeley on it.  (Even edX won't give you that for free... They'll give you the education, but if you want the piece of paper/diploma, you gotta pay -- which just goes to show how scammy the higher education racket is.)

Better deal: Go to school in Europe.  Schools are dirt-cheap there.  Even with travel, room and board, and language lessons, you'll come out ahead.
jagibbons
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jagibbons,
User Rank: Ninja
6/30/2014 | 11:04:47 AM
Re: Econ 101
If you are first-to-market, like this program, you get the benefit of setting the price to see if the market will bear it. I can't blame UC Berkeley for cashing in while they can.
SunitaT0
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SunitaT0,
User Rank: Ninja
6/30/2014 | 3:27:50 AM
Re: Econ 101
Is the UC Berkeley program worth the cost?

@jagibbons, I dont think people are paying such heavy fees just because its UC Berkely. I think there are hardly any quality courses offered by other colleges in the field of Data science hence people are ready to pay any cost to get quality degree from quality institutes. Once other colleges start giving quality education in Data science i think the course fees will come down.
SunitaT0
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SunitaT0,
User Rank: Ninja
6/30/2014 | 3:23:44 AM
Re: supply and demand
The convenience of online reduces the costs for many because it offsets relocation costs.

@impactnow, valid point. But just because students are saving on relocation costs shouldn't encourage colleges to hike the fees. I think the price should be reasonable enough because college is not investing much on the infrastructure other than uploading the videos to the web.
SunitaT0
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SunitaT0,
User Rank: Ninja
6/30/2014 | 3:20:11 AM
Re: Econ 101
The price is justified because it is a prestigious school offering the degree?

I dont think 60000$ fees is justified just because degree is offered by prestigious school. Many other prestigious schools like MIT are offering education free and I see no reason why cost should kept so high.
SunitaT0
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SunitaT0,
User Rank: Ninja
6/30/2014 | 3:17:56 AM
Re: College: An overpriced book club
Alternatively, you could go to edX.org and get the same premium college education online for little to no cost whatsoever.

Very true. I think $60000 for online degree is very high. Other websites like coursera offers similar kind certified courses for much reasonable prices. I really wonder why people will pay 60000$ to get online degree ?
Joe Stanganelli
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Joe Stanganelli,
User Rank: Ninja
6/29/2014 | 10:56:49 PM
College: An overpriced book club
Alternatively, you could go to edX.org and get the same premium college education online for little to no cost whatsoever.

We are in an education bubble -- and that bubble is VERY close to bursting.
Hospice_Houngbo
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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.
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