Monday, September 13, 2010

Here's A Novel Idea - Money Back Guarantee

by Daniel L. Bennett

American business was transformed forever some time ago when firms began focusing on customer satisfaction, producing great schemes such as the money back guarantee, risk-free trials and the mantra that the "customer is always right." Kaplan's visionary CEO Andrew Rosen wants to bring this concept to higher education. In a letter sent to ED Secretary Arne Duncan in response to the controversial gainful employment and other stringent new regulations of his industry, Rosen
suggested that by making the introductory portions of its for-profit higher education program "risk-free," and the tuition refundable, the company could address any concerns over how students are recruited into the program or whether they get what they pay for.
That this customer-focused idea stems from the for-profit sector does not surprise me the least bit. The economics of education do after all require that for profits to be made, a provider must offer
educational services that are in high demand. Those educational services would not likely be in high demand for long if they were of dubious quality or did little to increase a student’s employability. The track record of for-profit education is long enough at this point that if the industry were providing a product of little value, the customers would be aware of this and simply go away. They have not. Demand at for-profits is as strong as ever. If demand for a product is strong, the product must be providing something of value for the customer.
Kaplan's proposition, if permitted to come to fruition, will only enhance the value of its product. Let's hope that state and federal regulators, as well as accreditors, will see the potential of such a customer-focused approach to higher education and clear the way for Kaplan and others to change the market in a positive way.


Rebecca said...

Don't suppose you noticed University of Phoenix's University Orientation program (piloted last year, with the rollout announced on the quarterly investor call a few months ago).

All students who enter with fewer than 24 transfer credits will be enrolled in a 3 week free orientation course. The student becomes familiar with the resources available to them, gets an idea of what will be required of them as they proceed, and goes into their first paid course better prepared. The university knows that no one is entering blindly, can verify that the student has the right technology available and has at least the basic skills necessary to succeed in college.

As was mentioned at the quarterly call, in the short term this will cost money since some percentage of those students will drop out and some percentage will fail. Previously, on the books at least, those students generated some tuition revenue.

However it's better for the student, better for the school, and better for the taxpayer to make sure everyone knows what's going on upfront.

This was in the works long before Kaplan's new idea. I haven't heard you guys talk about it, though....

Daniel L. Bennett said...

Thanks for bringing the University of Phoenix's program to our attention. Yet another fine example of innovation from the sector.