Wharton’s Big Bet: Why would anyone pay a quarter of a million for an online MBA?

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At a time when institutions of higher learning are frequently criticized for the cost of their degrees, the Wharton School is making a bold move by launching an online MBA program at the incredible price of $214,800.

Is it a blind bet for Wharton to price this Executive MBA program, 75% of which will be delivered via the Internet, at exactly the same price as its all-in-person Executive MBAs in Philadelphia and San Francisco? Or was it a smart strategic move, leveraging the school’s tremendous brand power and the desire of more applicants for greater flexibility?

Either way, Dean Erika James’ decision for Wharton to become the first M7 business school to offer an online MBA is a new turning point in online learning. The program will be the most expensive online degree in the world, and Dean James is launching it as more people question the value and return on investment of the MBA as a whole. In the end, most students recruited into this program will end up paying a quarter of a million dollars or more for their online degrees, once you factor in student loan interest and travel expenses for the 25% of the program that is in person. And while there’s no questioning the quality of an EMBA from Wharton, the school’s program couldn’t even crack the top five in the recent Poets&Quants ranking of the best programs in the world.

EXECS COULD TAKE ALL 19 ONLINE COURSES AT HARVARD BUSINESS SCHOOL FOR 15% OF WHARTON’S ONLINE DEGREE

Pricing is counter-intuitive, even insensitive to major macro trends. Last week, for example, Northeastern University’s D’Amore-McKim Business School slashed the cost of its online MBA program, originally introduced in 2006, by $40,000 from $85,000 for its program. legacy now retired. Indiana University’s Kelley School’s top-ranked online MBA is one-third the cost of Wharton’s and Carnegie Mellon’s blended online MBA, which lasts three years (compared to Wharton’s 22 months) and offers many in-person sessions, costs almost $75,000 less. Thousands of students, many of them the same age and years of work experience as traditional Wharton EMBA candidates, are now enrolled in online MBA programs at the University of Illinois and the University of Boston, where the cost of the entire degree is less than $25,000.

Here’s another way to look at it: Executives could take all of the online courses available at Harvard Business School for a total cost of $33,250. For that sum, they would receive 19 courses in everything from business fundamentals to leadership and management, entrepreneurship and innovation, finance and accounting, strategy, business and the society. Harvard’s course titles are just as compelling, if not more so, than Wharton’s core curriculum, as the courses have been designed to be essential business learning and each is self-contained. A sample: Business Analytics, Strategy Execution, Negotiation Mastery, Design Thinking and Innovation, Disruptive Strategy, Global Business, Sustainable Business Strategy, Sustainable Investing, Leading with Finance, Alternative Investments, and Power & Influence.

Moreover, there is no better brand of business education in the world than Harvard Business School, which has put its best teachers in these online courses. Each HBS course not only provides knowledge and skills, but also CV-worthy credit. HBS even teaches its online students how to list their school certificates and references on LinkedIn and their old-fashioned written resumes. Take each of these courses for $33,250, just 15% of the cost of Wharton’s new online EMBA. Of course, you don’t come together in live internet classes or in-residence sessions and you don’t technically graduate. But at this price differential, who should discuss the value proposition?

THE TECHNOLOGY WAS INTENDED TO MAKE ONLINE LEARNING MORE AFFORDABLE AND ACCESSIBLE

Add to all of this the fact that when online learning first became possible, most people believed that technology would make higher education more affordable and accessible to learners around the world. While there are plenty of online options for cost-conscious consumers, many business schools in particular have put high prices on online versions of their MBA degrees, usually taking advantage of their reputation and rankings. .

For almost all business schools, Executive MBA programs have, or at least are expected to have, healthy profit margins. Wharton’s existing in-person EMBA programs on both coasts already bring in approximately $50.1 million in total revenue annually. At advertised tuition rates, the first online cohort alone would bring in $15 million in additional revenue. The second year, this sum. would quickly increase to $30 million in additional revenue each year.

It should be noted that the cost structure of online or blended programs is likely to be very different from that of in-person programs. Faculty salaries, the largest cost component, can be significant upfront in a new online program due to course development, but ongoing faculty costs become significantly lower than in-person programs. So over time, the online format is likely to have significantly higher contribution margins.

WHARTON FACES SEVERAL SERIOUS CHALLENGES WITH ITS NEW ONLINE PROGRAM

EMBA programs generally have lower academic and admission requirements than full-time MBA programs, although Wharton’s offerings are highly regarded and considered exceptionally rigorous. The unstated understanding is that a school’s reputation is largely shaped by graduates of full-time programs, and any negative reputational consequences of lower admissions quality are more than offset by excess revenue. that these programs generate.

While this increased revenue is attractive, Wharton will face several strategic challenges with its new program. For one thing, the school is betting that the online format won’t significantly cannibalize its in-person programs in Philadelphia/SF. But parity pricing makes this a tough proposition. If one thinks the educational content and experience is identical, why would one choose the mandatory 50 Friday/Saturday trips to Philadelphia/SF in the same 22 months, get affidavits from employers that they get on a Friday out of two on leave, and spending hours commuting when they could confine the residential components to a few modular weeks?

On the other hand, Wharton will inevitably be faced with the fact that students of both formats will want the flexibility to switch between the two formats at will. To manage this flexibility and avoid an unexpected concentration of demand in one format or another, Wharton will need to impose restrictive rules on when students can transfer and for how long. The flow of students is likely to be greater from in-person to online format than vice versa, and Wharton is likely hoping to manage greater capacity in its online electives than in classroom courses. It will come as no surprise that some full-time MBA students require access to certain online courses.

WILL FULL-TIME MBA STUDENTS BE MET?

Another obvious challenge is that adding a cohort or two of students to an already huge student population will require more faculty resources. Full-time students are likely to react negatively to both a perceived dilution of Wharton’s MBA and the diversion of faculty from teaching the full-time MBA.

These are not inconsequential challenges to manage. And ironically, they get tougher if the program is a big hit and grows into what Wharton hopes will eventually lead to the recruitment and enrollment of two online cohorts per year.

A rival Dean points out that the real question is why Wharton is doing it in the first place. “My hunch is that the main driver is incremental net income,” he says. “While they could have increased the size of the full-time MBA program as well, I think at 850 they are already at a limit in terms of the quality they can maintain with the candidate pool. Adding 60 or 120 new full-time students will have a seriously detrimental effect on MBA class quality metrics.These metrics are not made public for EMBA courses.

So is it a bet or a safe bet? Whatever the answer, it’s a bold decision and the most important decision in the first two years of the new Dean’s leadership.

DON’T MISS: WHARTON’S MBA IS LIVE, $214,800 GLOBAL EMBA LAUNCH or A DEEP DIVE INTO WHARTON’S EXECUTIVE MBA PROGRAM

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