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Buying Local, Online

July 23, 2010

That online education knows no geographical limitations is considered one of the platform’s more disruptive qualities.

To entrepreneurs, it means that for-profit educational companies, such as the University of Phoenix or Kaplan University, can grow very large and make a lot of money, very quickly. To regulators, it means headaches. To highly visible traditional universities, such as Pennsylvania State University or the University of Massachusetts, it means an opportunity to take cues from the for-profits and create new revenue streams.

To smaller universities with less national cachet, it might mean an opportunity to grow the brand and enroll students from across the country, even the globe. But it also might mean they need to fight for their lives.

Online education has been seen as a godsend by many students, particularly adult learners, who need more college in order to boost their professional prospects but whose many responsibilities -- to jobs, families, etc. -- make it difficult to enroll in courses at a brick-and-mortar institution, even a nearby one. “You could be three blocks from the campus,” says Carol Aslanian, a senior vice president of market research at EducationDynamics, a consulting firm, “but because of work and children, you could [feel] barred from the campus.”

These days, those students are likely to enroll in an online program. And because online education knows no geographic bounds, the move to the Web could pose serious challenges for institutions that until now have been able to draw reliably from their local and regional populations.

These institutions do, however, have something working for them: Students like online learning, but they also like the tangibility of having a "real campus" nearby. A 2008 study by the Sloan Consortium noted that 85 percent of online students were taking courses through universities located within 50 miles of their homes. “Institutions believe that online will open up their enrollments to more students from outside of their normal service area,” the study said. “However, the reality is that this has not yet occurred in any large numbers.” Richard Garrett, managing director of Eduventures, says that in routine surveys his firm has done over the last three years, roughly 65 percent of online learners have said they prefer an institution with a physical presence within 50 miles.

Regionally focused institutions are pouncing on this lingering loyalty to the local variety as an opportunity to solidify their home-field position, as outsiders increasingly try to recruit students out from underneath them. “More and more, when we work with less well-known institutions that are better known in their own regions… the direction is relatively clear: why not attract local populations, rather than national?” says Aslanian. “These individuals know them, local employers know them, and they have greater credibility” in the area, she says.

“The question is, do you target nationally?” says Paul LeBlanc, the president of Southern New Hampshire University. “Boy, that’s a really hefty marketing budget you need to do that.”

The 2008 Sloan study did predict that the growth of online education could squeeze out institutions that are slow to adopt big-time Web strategies. “There may soon be a change in the online education market and landscape,” its authors wrote. “Schools that succeed in attracting a widening radius of online students may grow at the expense of others remaining totally locally focused.”

But Garrett says he often advises universities to avoid the temptations of the “global campus,” pointing to the complications that can attend such ambition. In order to succeed online in the long term, Garrett says, institutions need to stake their value on something beyond the merely being online. Christian institutions have been able to work the faith angle. Similarly, regional universities can play up their ties to local employers that have hired their graduates for years, Garrett says.

LeBlanc, for the moment, is following Garrett’s advice. He says that while he hopes Southern New Hampshire might in the future draw students to its online programs from far away, he has focused its recruiting energies on the Northeast, where its brand has the most pull.

Competing with deep-pocketed outsiders, particularly for-profits, has become more difficult as they have begun advertising heavily in Southern New Hampshire’s market and spending significantly on search-engine optimization in an era where many prospective students’ first stop is Google, LeBlanc says.

The major for-profit institutions, meanwhile, have also recognized online students' preference for a nearby campus, and some have used their considerable means to open satellite campuses around the country. Aslanian recalls a recent conversation she had with a clerk at a motel in northern Massachusetts who said she was giving serious consideration to the University of Phoenix since they had opened up a campus in Boston -- even though she had no interest in face-to-face classes. Just knowing it would be nearby was enough.

So far Southern New Hamphire’s efforts to recruit online students from within the region have been successful, he says; Its online programs grew 27 percent last year, and brought in $22 million. LeBlanc says he hopes to double that within the next four years.

Kim Spiezio, dean of adult and graduate education at Cedar Crest College, in Pennsylvania, has so much faith in the sustainability of local appeal that he predicts that as nonprofit colleges continue to build up their online arms, they could start winning back significant chunks of the market from for-profit competitors. Commercial institutions, because they did not have to coax skeptical faculties to buy into the online modality, have gotten an early jump, Speizio says; but at the end of the day, all else being equal, students will always buy local.

There is also the matter of “hybrid education” -- online learning that has some face-to-face component. Garrett points out that while students are growing more comfortable with fully online courses, many still prefer hybrids. A highly publicized (and somewhat controversial) report from the U.S. Education Department suggested that hybrid courses might be the most effective form of online learning. And taking a hybrid course means that students will have to choose an institution that has a nearby campus. Here too, regionally focused institutions could demonstrate their value, Garrett says

That is, if they can establish that foothold before Phoenix and Kaplan build outposts down the street.

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