Identifying the market

I got a phone call last week from an international consultancy company contracted on behalf of a major U.S. state university, wanting to know if I thought there was a Canadian market for U.S. online degrees. Since I didn’t get paid for my advice, I’m willing to share it with anyone who’s interested. (I do find it annoying that universities will pay large sums to general business consultants such as Price Waterhouse, KPMG, Accenture, etc., who then expect professionals in the field to do their work for them for free.)

So I will share with you the short answer I gave to the consultants, then the long one which only you have access to!

The short answer is yes, but only in niche markets. This means doing careful market research (not just ringing up a few experts), developing a strong business plan, keeping tuition fees relatively low compared with those at the top end of the market in the USA, and being nimble, in that the market will not last long if they are successful, because Canadian institutions will eventually try to take that market back.

Now for the long answer.

Why Canada is not an easy market for foreign online programs

I don’t have any figures, but there are certainly some Canadian students already taking online degrees from U.S. institutions (if you are one of them, I’d be interested in your experience.) Why would they do that, you might ask? Well,

• if they want to get a job in the USA or work for an American company in Canada
• if there is no Canadian university offering the program either face-to-face locally or online
• because they think a big name U.S. university will do a better job than their local Canadian universities.

I’m not saying they are right to think that, but the whole question of comparative quality in post-secondary educations, either in Canada or the USA, is so fraught and subjective that potential students still have a very hard job making those kinds of decisions.

However, for that very reason, better the devil you know. In general, I would argue that most potential students in Canada will look to one of their local universities as their first choice, for several reasons:

• Cost. Tuition fees are generally lower in Canada in absolute terms, but also Canadians may be eligible for grants and scholarships for study, which probably will not apply to online programs offered by a program from the USA (although again there are exceptions.)
• Quality. Nearly all Canadian universities are publicly funded and accredited by the provincial government. There are of course differences in status, but the system is simple enough for most Canadians to be aware of these differences, and the variation between institutions in Canada is nowhere near as great as in the much larger and much more diverse US higher education system. In particular, distance and online education in the USA has been tarnished much more than in Canada by private, for profit diploma mills, making many Canadians suspicious then of any online programs offered from the USA
• Access. In general, most Canadians can get access to the programs they need from one or more of their local universities. 51% of Canadians go on from high school to university, and 60% to some form of publicly-funded post-secondary education. There are already roughly one million course enrollments a year in online courses from Canadian post-secondary institutions, or roughly about 20-25 per cent of all course enrollments

So the Canadian market for post-secondary education in general is what marketers call ‘mature’ and even online learning, while not mature, is certainly not in its infancy in Canada. Many Canadian universities already offer a range of online programs, both for credit and for non-credit.

For instance, there are several online/distance MBAs (Athabasca University, Queen’s/Cornell, Laurentian, for instance) and UBC has been running several very successful online masters programs in education, creative writing and health sciences. This is a market where institutions can more than cover their costs within the current range of government-regulated tuition fees; indeed UBC has been able to add new research faculty as a result of some their online masters programs.

The Canadian Virtual University (CVU), which is a consortium of 11 universities from across Canada, lists over 2,000 online courses from its members, including a total of 57 online masters programs. There are 16 online masters programs in Ontario, Canada’s largest province (with 20 universities). Of the online masters currently available from Ontario institutions, one third are in education, one third in business or leadership, and one third in health or social work (see Ontario Online Learning Portal for Students). There are a few other universities in Canada that are not members of the CVU or in Ontario that also offer online programs, and the number grows each year. Thus there is already a significant Canadian university (and college) ‘presence’ in the online learning area.

Furthermore once a U.S. program starts attracting large numbers of Canadian students, this is likely to draw a response from the Canadian institutions. This happened in British Columbia in the 1990s, when a large number of teachers started taking distance education masters’ programs from Washington State institutions such as Gonzaga University, because there was little available in British Columbia. It took a few years but the B.C. institutions eventually responded and the number of teachers taking out of province online programs is now very much reduced.

Lastly there are more subtle cultural barriers. Canada is not so different from the USA as Canadians like to believe, but there are differences, and they are important. Our laws and government regulations for instance are different. We have different iconic references, different national symbols, a different racial mix. This means content does not always transfer as seamlessly as you would think for countries sharing a similar language and continent. This is not an insurmountable obstacle, but it does require a certain sensitivity to ‘Canadian-ness’ that is not always there in the USA. However, it is probably too costly to adapt existing materials for a specifically Canadian market.

So there are several reasons why some caution would be needed in marketing online programs from the USA for a Canadian market (or anywhere else, such as the U.K. or Australia).

Why there is still a market for foreign online programs in Canada

But Canadian universities should not be complacent. Canadian institutions have been slower than their counterparts in the USA in entering the online professional masters’ market. There are many gaps in the availability of post-graduate online programs in Canada, especially in the STEM (science, technology, engineering, math) areas.

For instance, in Ontario there are no online masters’ programs in food and agriculture, humanities (except Design from OCAD), social sciences, math, science, law or engineering. The situation would be similar or worse in the other provinces. In particular, despite the CVA, which covers only 11 of the 80 or so universities in Canada, there is no national portal for Canadian online courses, so potential students have a hard time looking for online programs offered out of province.

Secondly, should Harvard, Stanford or MIT start offering for-credit online programs, there would certainly be a large take-up in Canada of such programs. For the still prestigious, Tier 1 research state universities, such as the University of California, Arizona State University or Penn State, brand recognition in Canada would be less compelling if there are suitable Canadian alternatives, although for graduate programs, many Canadian students might still be interested.

Lastly, good marketing is likely to attract potential students in Canada who may well not be aware that similar programs are already available in Canada where they do exist. Even as a so-called expert in Canadian online learning, I was unaware of most of the programs listed in the CVA and Contact North portals. Canadian universities are still remarkably provincially focused when it comes to marketing online programming. Which brings me to my next point.

Why don’t Canadian institutions market online programs in the USA?

Well, some do, but not many, and there are good reasons for this.

First the U.S. accreditation system is byzantine and bizarre, and totally ill-adapted to the move to online, distance education, but without accreditation from one of the regional accreditation agencies in the U.S., any Canadian online program would not be recognized for financial assistance, credit transfer or by many employers. Indeed (although the federal regulations are currently under discussion) it may be illegal to offer programs to students within a state without approval from that state (and to get approval you may need a ‘physical presence.’) Despite the very large cost in getting regional accreditation, some specialist Canadian institutions, such as Athabasca University, have done so. I’d be interested to know though if they feel it was worth it, in terms of the numbers of U.S. students it has attracted. (Yes, you are correct: the U.S.A and Canada are partners in a free trade association called NAFTA, but it doesn’t apply to education – or forestry, for that matter.)

Second, the reverse is true regarding brand recognition and local preferences. Many U.S. citizens don’t even know where Canada is, let alone know whether the University of Waterloo is a bona fide institution and not a diploma mill. (I once shared an airport shuttle bus in Los Angeles with two American businessmen complaining they needed a passport to go to Toronto. ‘Anyone would think it was in another country,’ one said. I’m not making it up, and for British Columbian’s it may well be.)

So Canada, and Canadian institutions, do not have a strong enough brand image for most Americans, although some institutions, such as the University of Windsor, have done an excellent job in building partnership with institutions just across the border in Michigan and Detroit – but not, so far, in online learning.

Why these are the wrong questions

The real question should be (for both Canadian and U.S. online program developers): Is there an international market for online professional masters’ programs, to which the answer is a resounding ‘yes.’

It really doesn’t matter what country a student is in. If the program being offered meets a need, and the student can afford it, then they will take it, whether it comes from the USA, Canada, Australia, Spain, India or Brazil. Brand recognition helps. Canadian public institutions produce high quality, government accredited online programs. There is no distinction in the degree transcripts whether the program is offered at a distance or on campus. With its rather monolithic public higher education system, it would have an advantage if it could only market a Canadian rather than a local or provincial brand (but then it has the same problem in attracting international students to on-campus programs).

U.S. states trying to regulate whether students can take a program from out of state are like King Canute trying to stop the tide from coming in. All you can do is say ‘Caveat Emptor’ – buyer beware.

One way round the ‘not invented here’ attitude to out of state or out of country programs though is to develop a partnership with local institutions of a similar ‘status’ level. The University of British Columbia developed a very successful partnership with Tec de Monterrey in Mexico for a graduate program in educational technology. UBC developed most of the content, but the program was available in Spanish from Tec de Monterrey and in English from UBC. UBC’s offering of the program drew almost 30 per cent of its enrollments initially from English-speaking students from other countries all round the world. Similarly, Tec de Monterrey marketed its program in South America as well as in Mexico. Queen’s University in Canada has partnered with Cornell University in the USA to market a joint online MBA. These partnerships help to get round the accreditation issues.

Admission of international students to an online program can be more of a problem, as can issues of security in terms of exams and assessment, but these are not insuperable problems. If the institution already has an admission policy for on-campus international students this should apply just as well to online students from another country. Local proctoring (again using a partner institution) can help with examinations, but even better is to use authentic assessments where students have to apply their knowledge locally or within their own work or social context. This form of assessment is ideal for professional masters ‘ programs.

Furthermore, it helps when initially planning an online program to take into consideration that there is probably an international market (indeed, this helps with marketing the program even locally). This means choosing content carefully so it can work in a wide variety of international contexts, and to take advantage of the different perspectives from the international students.

Lastly, when developing a business model, the inclusion of international students can make the difference between loss and profit, because in well-designed online programs, the marginal cost of each additional student should more than cover the delivery costs. UBC found it did not need to charge a premium tuition fee for international students, because the business model depended on getting enough enrollments at the government-regulated tuition fee (for domestic students) to break even. The international students were an important contributor to breaking even without having to charge them a premium price. So pricing policy is also an important factor.

In conclusion

Yes, there is a market for international students in online programs, and there will be a market in Canada for specific professional masters offered by well-recognised and legitimate U.S. universities, provided they fill a gap not currently being met by Canadian institutions – and at the moment there are many such gaps.

However, it may be a mistake to focus on marketing to specific countries. Institutions will (even in Canada) respond relatively quickly to what they may feel as foreign incursions into their market. The world market (especially for programs in the English language) is large enough to attract more than enough high quality students to credit-based programs – just look at the response to MOOCs, which don’t offer formal qualifications. The trick is good marketing, making sure the materials take into consideration an international market and are not focused on specifically local or national issues, and having a good business plan. And partnership with foreign institutions would be a wise move. So while not easy, it is feasible, but if the reason is solely to make money, then it will, ironically, be a harder sell. Students will pick up on that remarkably quickly.