$60,000 Online Degree: A Lesson In Digital Business - InformationWeek

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6/25/2014
09:06 AM
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 co-chair of the InformationWeek Conference. He has been covering technology leadership and CIO strategy issues for InformationWeek since 1999. Before that, he was editor of the Budapest Business Journal, a business newspaper in ... View Full Bio
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impactnow
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impactnow,
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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: Author
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,
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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.
Joe Stanganelli
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Joe Stanganelli,
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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.
impactnow
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impactnow,
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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.
ChrisMurphy
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ChrisMurphy,
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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? 
D. Henschen
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D. Henschen,
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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.
Lorna Garey
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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.
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