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Competing Via Differentiation in Higher Education

An institution taking a differentiation approach will focus its efforts on making its offerings more attractive than those of its competitors. An institution using this strategy usually has recognizable branding backed by effective marketing. Its product or service is superior in one or more dimensions, and it’s backed by associated research, development, and innovation.

Higher Education Strategy Series: This is entry #4 of this series. This page describes the whole series and provides links to all of the articles.

The lack of either recognizable branding or an existing standout feature should not deter an institution from using this generic strategy. It would simply have to establish its brand in the marketplace (and clarify what it stands for), doing the work internally to improve the feature that it wants to use as its basis for differentiation. Or maybe the institution has an effective brand image, but it is based on some feature that does not map well to online learning (e.g., physical location ). This does not mean that the institution should give up on this feature — access to local corporate partners could be a differentiator in the new online program just as “campus facilities and beauty” differentiated its face-to-face programs. In this case, the feature (“attractive to students in the local area”) does not change, but the tactics for framing the benefit does. This is not always possible, but creativity can go a long way toward addressing seemingly insurmountable challenges.

Baseline knowledge

The general approach to pursuing a differentiation strategy involves understanding each of the following dimensions — target market, strengths and current standing, brand, and competition — and combining that knowledge into an actionable plan for creating a valuable differentiation in the market.

Target market

An institution needs to understand the prospects it is pursuing in the market. It needs to understand what they desire in their education, what outcomes they are looking for, what type of experience they want, what emotional message they might respond to, and so on. Every bit of knowledge an institution can gather about its target market can be used to define a program attractive enough to prospects that they will enroll in it. Of course knowledge is expensive to gather and, at some point, an institution has to make a decision; however, a basic understanding of an institution’s target market is necessary before moving forward on any program. Without an adequate understanding, you are shooting blindly at a target that may or may not exist.

Strengths and current standing

An institution needs to understand its own strengths and weaknesses relative to its competition. This is vital for determining which facets should be emphasized in its messaging to the market. It is also key to prioritizing: determining which facets need investment simply to bring them up to par, and which need investment in order to make them leading, differentiating factors.

Brand

An institution’s brand is a consolidation of what it stands for and what it means to students and the market as a whole. Maybe the brand is built on decades of experience in the face-to-face education market. Any goals the program has and any strategies the institution implements have to be formulated within the context of its current brand. The degree of market awareness (or lack thereof) of the brand has to influence the formulation of those goals and strategies. Further, the specifics of the brand itself make certain program goals and strategies easier or harder to achieve and implement. An institution needs to have (or acquire) a deep knowledge of its own brand before making any deep commitment to invest in its online programs. Having acquired that knowledge, it then needs to ensure that a program’s goals and an institution’s approach to online learning can work within that brand.

Any assumptions that an institution makes about its brand need to be particularly vetted against geography. Many higher education institutions have deep ties to their local communities and are well known in their geographical areas; the history of an institution can have a distinctly local flavor. Few institutions have brands with a national draw; even in the cases of those that do, it takes significant effort to maintain it over time. This information clearly spills over into the analysis of target market and competition.

Competition

Finally, each of the above dimensions must be understood in direct relation to the institution’s, school’s, or program’s competition. Find out: Who is the competition? What do they charge? What are their major features? The answers to these questions provide a context to understand its own program and how it is perceived by target prospects. It also provides the context for determining which of its own features need investment, and at what level.

In summary, knowledge of these dimensions can inform the institution’s leadership as they make an actionable plan for designing and creating a program that provides a differentiated value proposition to prospects. The key is to focus on a differentiator that prospects would value and that would prove difficult for competitors to react to, copy, or defeat.

Appropriate situations

A differentiation strategy is appropriate to use in the following situations:

Non-price-sensitive market

In a price-sensitive market, cost is a strong factor in determining a prospect’s purchasing decision. In such a market, you would probably see a strong downward pressure on prices, since any additional increase would reduce the number of students who enroll in the program. An implication of this is that if a program is in a price-sensitive market, then it is difficult for its institution to justify investments in that program, since it is not going to be able to recoup those investments by raising prices (i.e., higher tuition). On the other hand, if it is not in a price-sensitive market, then a program can charge higher prices. But non-price-sensitivity does not mean that prices can be raised on a whim — the institution has to justify higher prices by providing more value. In a non-price-sensitive market, the choice for the institution becomes “How should we provide that value so as to capture more students and more tuition dollars?”

Competitive market

If a program is in a competitive market (e.g., the market for online MBAs), then an institution cannot just offer a standard program. It cannot simply charge a low price, because the market already includes programs at a wide variety of price points. Further, a range of non-degree substitutes exists as well (executive education, local community college, MOOCs, books, etc.). The only real option here is to devise a way of differentiating the program from other offerings through some feature or (more likely) some set of features targeting a specific customer set.

Customers with specific under-served needs

A market that has “customers with under-served needs” means that there are prospects in the market who would be willing to pay more for specific programs but that such programs do not exist. If a program with such services were to be offered, those prospects would flock to it.

I have observed a serious problem with many institutions: They go to market with a program designed to address the needs of a customer set (either the whole market or a subset of the market), and either those needs are already being adequately met or there simply aren’t enough customers with those needs to justify the program investment. It is likely that some powerful faculty or leader within the institution had an idea for a program based on his/her limited or biased knowledge of the market, and it turned out that the market simply didn’t exist or could not be adequately exploited by the institution. Thus, the program ends up a failure, and all the time and money invested in it is wasted.

  • The target customer set has to be well defined
  • They have to be well understood
  • They have to be reachable in a cost-effective manner
  • T hey have to be willing to pay for the program at a price that can justify the institution’s investment in it.

Without these four conditions, any differentiated program will fail to live up to expectations.

Unique resources that make it difficult to copy

If an institution already has resources in place (e.g., a well-understood pedagogy; a method of supporting students; a uniquely supportive alumni group), then building technologies and offerings that take advantage of those resources would be a difficult-to-copy differentiating factor. The platform used by Harvard Business School Online that builds on their world-famous case teaching method is such a resource. It is not that these resources can’t be copied, but the effort required to do so provides the originating institution time to secure and maintain its leadership position, enabling it to garner superior returns and/or enrollments.

In summary, when an institution is armed with the appropriate knowledge of the market, competition, and its own resources, and it applies a strategy of differentiation in a suitable situation, it should have confidence that prospects will receive the program positively and that it will have corresponding success in the market.

activities

For this series, I am posing activities for an educational leader to complete. The unifying project for these activities is to define a medium- and long-term plan for competing and winning online.

  1. What is your program’s target market? How does this relate to the university's target market? Are there differences between the target for an online program and if it were offered as a residential program? Who does it appear that your competition targets?
  2. What are the strengths and weaknesses (of either your program or your institution, whatever makes sense) compared to 3-5 of your competitors? This, of course, means that you need to do some research into those competitors.
  3. What does your brand mean? At the institution level, particularly. What do your competitors' brands mean?
  4. What potential customers have underserved needs? How would your program reach those customers? How would your program serve those customers?
  5. What unique resources does your institution have? How could this be incorporated into your program?

Feel free to reach out to me if you have any questions or comments. 

Keep Learning

Define and Act on Your Institution’s Strategy

Dr. Scott Moore has written a 15-part series on defining and acting on a higher education strategy to guide leaders during these difficult times. It is targeted at educational leaders who are participating in shaping their school's actions during and after the COVID-19 pandemic.

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