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Selling to Online Consortia - A Smart Strategy for Smaller Firms

Copyright 2001 Eduventures.com, Inc.

August 23, 2001 -- The proliferation of online postsecondary consortia and alliances helps public institutions to maximize both Internet opportunities and scarce resources, while minimizing the manifold risks and challenges of launching and supporting an online program. These consortia range from state initiatives, such as the Kentucky Virtual University, which coordinates the online activities of a number of state colleges and universities, to national initiatives, including Great Britain's recently announced e-University and Canada's Canadian Virtual University; postsecondary alliances and consortia are even emerging on an international basis, with Universitas-21 - comprised of more than 15 leading international institutions - one of the most ambitious endeavors to date.

Within the various web-based consortia and alliances, the critical nature of resource allocation decisions creates highly scalable outsourcing opportunities for private sector vendors and an attractive customer-developed distribution channel. For web-based companies looking to gain traction in the online postsecondary environment, an effective strategy should include trying to tap into the growing number of online consortia and alliances; by leveraging a consortium's existing distribution infrastructure, smaller firms can exploit their sales and marketing resources to gain access to organizations that can enable rapid and widespread distribution of a company's products and services.

One company that is employing this strategy with some degree of success is Smarthinking, a provider of web-based tutoring and academic assistance for college students in core subject areas such as math, statistics, economics, grammar, and chemistry. The company recently announced agreements with six state online postsecondary consortia to deliver its services to students enrolled in virtual classes at potentially more than 140 institutions. These customer wins extend Smarthinking's sales momentum from late spring, when the company announced that it had been selected to participate in the eArmyU portal, a $453 million online learning initiative announced by the Army in late 2000 and managed by PricewaterhouseCoopers. For a web-based tutoring company that has battled skeptical investors since its early days, these contract wins go a long way toward validating the value proposition and market opportunity identified by the company.

The business implications are clear for web-based postsecondary companies pursuing this type of sales strategy - keep sales and marketing lean, invest heavily in managing customer relationships, and drive product and service adoption through effective training and end-user support capabilities. The success of the business strategy and model employed by a company like Smarthinking is not only in securing relationships with various consortia, but also in the energies devoted to ensuring broad adoption of the company's services on an individual institutional level. By demonstrating how its solution can enhance teaching and learning for students and professors at a local college level, Smarthinking has the opportunity to weave its service into the evolving fabric of Internet-enhanced education delivery at these institutions; moreover, successful user experiences at a campus or school within a consortium can serve as a catalyst for sparking adoption at other consortium partner institutions.

In today's challenging economic climate, Smarthinking's market predicament is not unlike that of many of the web-based postsecondary ventures launched with much fanfare and great promise 18-to-24 months ago: a bold concept for migrating a key academic service - tutoring and academic assistance - to the Web to augment institutions' student academic resources and capture data that offers insight into the teaching and learning occurring at institutions. The challenge for Smarthinking - and many other web-based products and services firms - has been demonstrating to prospective customers and investors that institutions have been willing to pay real dollars for the company's solution; in a vicious market-driven "chicken-and-egg" cycle, Smarthinking needs institutional customers to generate revenues, and needs revenues - with an adopted solution - to assuage risk-averse institutions. The ideal customers to target in this difficult market environment are postsecondary consortia.

Postsecondary online distance learning consortia represent a key customer acquisition strategy for small, web-based postsecondary providers seeking to distinguish themselves in the marketplace. And, instead of simply talking about scaling their solutions, these companies would be executing on strategies for scaling their customer bases. Given today's current economic climate, pursuing relationships with the myriad distance-learning consortia, state-wide virtual universities and multi-state alliances could provide the most revenue-rich opportunities for postsecondary e-learning firms.