In the traditional direct response business of for-profit education, companies have increasingly taken the leap to more branded advertising (e.g. UOPX branding the Cardinals stadium) in order to differentiate themselves in a competitive marketplace. There is a great article in Harvard business Review this month that sheds some light on the issues our industry will face as we move toward a greater brand spend - titled "If brands are built over years, why are they measured over quarters."
As for-profit educators move toward a marketing model with increased branding dollars, they will initially have trouble meeting the major sales goal they are traditionally measured on quarterly - conversion rate of direct marketing leads. In the short term, for every dollar of spend taken away from direct marketing, operators will need to increase the expected conversion rate of their sales force to meet sales goals. There is no reason to believe this is possible - and it is likely that an increased focus on branding will have a negative short term impact on financial results. So, similar to a traditional CPG brand, where there is a tradeoff between promotional spend and branded advertising spend, for-profit educators must balance the long-term benefit of branding versus the more short-term rewards from increasing the lead buy.
Here I ponder two big questions: (i) will for-profit educators be able to make the right short-term/long-term tradeoffs as they allocate their marketing spend between branding and direct response marketing and (ii) will the companies that have recently gone private - Laureate and EDMC, have an advantage as they will be able to make long-term investments without quarterly Wall Street scrutiny.
I'll end with an interesting quote from the article- which speaks to managerial incentives and how the decisions made today will affect our industry in the many years to follow: "The use of short-term sales data as a yardstick for brand performance can interact in unfortunate ways with the tenure of a brand manager—which is typically quite brief, often less than a year. Any brand manager who takes a long-term perspective—investing in advertising or new-product development—is likely to benefit the performance of subsequent managers, not her own."
Comments