Online degrees, pricing and the pursuit of scale
Why is UK higher education in widespread financial difficulty? If you work in HE, you won’t struggle to answer this question. There are a number of key factors, but one of the major ones is the level of fees universities can charge UK undergraduate students
From 2017/18 to 2024/25, the fee cap was fixed at £9,250 per year, and over time the value of what it covered was gradually eroded. Everyone can understand this. It’s simple. If the value of what you are paid for something decreases but the costs stay the same or increase, your margins get squeezed and squeezed and squeezed.
The solution that many have reached for in recent years has been to try to recruit even more students. All very logical. But the worrying part of this has been how, in trying to do that, some universities have essentially done to themselves the very same thing that was done to them. They’ve eroded the value of their fees through discounting and deals. There is almost a Stockholm syndrome element to this, with universities becoming increasingly attached to the very things that created the financial challenge in the first place.
In what looks like a set of increasingly desperate attempts to recruit more students, universities have taken decisions that lead to them receiving less income per student. I’ve personally seen discount deals ranging from £500 to £5,000, and many in between.
This is not just happening in the UK, but also in the US, and reporting from US company Niche on a recent enrolment cycle was telling. They found the following, and I quote:
“Discounting emerges as both a source of and solution to higher education institutions’ revenue problem….But more discounting turned out not to be better….The heaviest discounters also had the lowest yields…Raising the discount tracked with missing target, but raising marketing investment tracked with hitting it.”
All of this strikes me as an act of great self-harm in these most challenging of financial times, but it also causes me to reflect on views and practices around pricing and fees more generally in HE, not least in relation to online degrees and courses.
Online degree pricing and perceptions of value
Now clearly there are different layers to pricing in UK higher education. The fee for UK undergraduates is capped and is only malleable in one direction, whereas the fees that can be set for postgraduate and other courses, and for international students in general, are under the control of universities. So there are different levers available based on the type of course and where students are from. There are also other important wider considerations that influence fee-setting, including ensuring higher education is accessible and ensuring that universities are financially sustainable.
But even with all of that nuance and qualification, a fee is not simply a fee. A fee is also a signal. It is not simply the amount you charge for a course. Let me use an example from online education to illustrate. Currently, if you were looking to study an online MBA at a UK university, your options range from an online MBA that costs £57,000 to one that costs £6,000.
I would be surprised if many people reading this are now thinking to themselves, wow, £6k! What great value. Sign me up! When you see the range here, and at the risk of sounding like a total snob, that £6k degree becomes the equivalent of an extremely cheap bottle of wine. Which is not to say that the £6k online MBA or that cheap bottle of wine is necessarily bad, but if we are truly honest with ourselves, our perception of that course will be influenced by the level of the fee, especially when we have an anchor in the form of the highest-priced equivalent on the market. The fee has an influence on our perception of the quality and value of a course.
So if, as we are repeatedly told, UK higher education is high-quality and our universities are some of the best in the world, why are some acting like they’re trying to shift as many flat-screen TVs as they can on Black Friday? This desperation sends a signal that undermines that high-quality message, as does the reduction in fees.
At a time when the voices questioning the value of higher education seem to be increasing and are being amplified, doing something that further undermines the perceived value of a university degree is a self-defeating act. But more broadly than that, it speaks to elements of the sector that don’t seem to fully understand that pricing is about more than just the cost of something. Even in a stratified sector that has universities that can charge £57k and those that charge £6k, this is still the case.
Scale, pricing and financial sustainability
One of the other problematic elements of discounting or pricing things too low is that it can, over time, become an expensive mistake. The tactic of discounting or lowering the price of something has the great advantage of requiring almost no thought at all. Too often, it is driven by desperation rather than strategy, or by a fetishisation of “scale”.
Pricing of online degrees has been a growing area of concern for me in this respect, particularly in the postgraduate market. This market in general has seen significant growth, both in the number of degrees and in the number of online students, particularly in the UK.
When you do the analysis, an undeniable and significant component of this growth has been down to online programme management (OPM) companies partnering with UK universities. These companies have both enabled some universities to develop sizeable online portfolios and significantly increase their online student body.
Some, but not all, have done so based on pretty low pricing. Some can point to significant enrolments on the back of that. But sustainable success is rarely as simple an equation as that. The lack of profitability of some OPM companies is evidence that, while a low price mixed with a dedicated sales and marketing operation can drive impressive enrolment numbers, it doesn’t always make for a financially sustainable or profitable business over longer periods.
One of the archetypal pricing examples often cited by many in the online education sector was the University of York’s online MSc Computer Science degree. This was one of many programmes launched through its partnership with OPM company Higher Ed Partners around 2018/19. It was priced at £7,800. This was miles below the average you’d expect from a Russell Group university, the most prestigious grouping of UK universities.
If the scale of student numbers is the metric that has become most important to you, this strategy is a winning one, and if you have a dedicated sales team, you can recruit a lot of students. Quite why you would seek to injure your margins so viciously when you’re already sharing the revenue from programmes is, though, beyond me. Although we do not have any available public reporting that can tell us the profit and loss, what is patently evident is that the fee for this programme could justifiably have been much higher.
While we don’t know the financial impact of this erosion of value, there is public reporting of the second-order effects of this strategy on student experience. Nouse, the University of York’s student newspaper, has the best reporting on this from 2022, highlighting how the course was oversubscribed and how a group of students had a complaint to the Office of the Independent Adjudicator for Higher Education (OIA) upheld.
What this price signalled to those students was not great value for money for a degree from a Russell Group university but, to use a student’s own words, “a conscious choice to prioritise income over student experience and even the University’s reputation.” Oh, and in case you're wondering, the price of that same degree is now £11,040 and the partnership that manages it is soon to be no more.
On the whole, I fear the online education sector has too easily fallen into the trap of becoming fixated on scale. It’s a fixation that is evident in internal university documents that show finger-in-the-air projections of 3,000 to 5,000 online students in five years. Or in the big strategic targets, with recent examples such as the University of Bradford’s Strategic Plan 2025-2035, which says that it will deliver “High quality online educational programmes, attracting 10,000 additional students by 2035.” Which I really, really, really, really, really, realllllyyyy hope is not shorthand for a suite of cheap online master’s degrees.
If you want to offer high-quality online degrees, I’m delighted for you. There’s a group of people who will want to learn what you teach and will want, or need to do so without time and place constraints. But if it’s high-quality and high-value, like you say it is, treat it like it is through how you price it. Then do some grown-up marketing that supports a good price for that degree and conveys its value. You may find people saying, as one on The Student Room did, “I chose the [University of] xxxx [online] course … and I decided it was worth the extra £5,000.”
Pricing online degrees for value and sustainability
Now, it’s important to lay out what I am and what I am not saying here. I am not pretending there is no price stratification in the sector by university reputation and brand, or that there are no genuine affordability considerations. On affordability, I have highlighted in the past how any strategy aimed at reaching online students internationally requires you to be aware of affordability in the countries in question.
What I am arguing for is more of a value-based pricing approach, so that the amount universities receive in fees for online degrees and other types of degrees supports a financially sustainable sector.
For online degrees, I have heard too many stories of universities complaining that, after a period of years, either on their own or through a partnership with an OPM, they have essentially not built something that is financially sustainable, even though they might have students numbering in the hundreds or thousands.
I have seen online degrees that could justifiably be priced higher, and I have seen companies that, rather than having the really serious marketing chops to position and recruit to an online degree at a decent price, only know how to sell cheap degrees through expensive and samey digital marketing tactics backed up by sales teams. If that’s buying-in marketing capability, I’d want my money back.
I’ve also seen online degrees too often positioned as the cheap alternative, instead of the flexible, necessary alternative that they are for so many online students.
The simple lesson here is that building a financially sustainable sector does not simply rest on bringing a begging bowl to the government. It is something that universities themselves have a responsibility for, even if they do not have exclusive influence over it. The answer to the question of whether a degree is valuable, which is a question increasingly posed more generally, or whether an online degree is valuable, which has been a lingering question for longer, is not to engage in pricing shenanigans that reinforce arguments about the erosion of its value and cause more financial pain. Rather, it is to have the backbone and smarts to defend its value and to set fees that reflect that and support a financially sustainable sector.
