Part II: Cost Center vs Revenue Generator

CHLOE 9 REPORT RESPONSE (Part two of a four-part series)

By Regina Law

Pandemic Impact on the return on investment (ROI) of Remote Learning

Continuing our exploration of the latest installment of the Changing Landscape of Online Education (CHLOE) report, CHLOE 9: Strategy Shift: Institutions Respond to Sustained Online Demand. In this article, we examine the financial impact of the forced rapid implementation of remote learning modalities. The global pandemic and associated “lockdowns” instigated a warp speed acceleration of online learning programs, requiring institutions to invest more and faster than they had planned. 

In spite of this, it appears that the impact on institution budgets has been much like introducing any other new game-changing technology, albeit in a shorter time span: the cost or return experienced is largely a function of where a given school is – or was at the beginning of 2020 – on the adoption curve. Innovators and Early Adopters – typically about 16% of the market – were obviously the best prepared for the lockdown-driven shift. Meanwhile, Early Majority and Late Majority (68%) can be viewed as squished together into one big “Forced Adopters” mélange, effectively turning the bell curve into a bar chart.

Despite the rapid change, the percentages from CHLOE 9 suggest that universities responded well and have had success in generating positive ROI in a short period of time: “In 2024, 52% of chief online learning officers (COLOs) said online programs generate net revenue,” and “The share that regards online programs as a net cost shrank from 26% to 15%.” This suggests that more than half of institutions have not only implemented functional remote learning programs but have also monetized them successfully enough to at least break even.

However, “Only 17% of COLOs … said they see online as a way to reduce institutional costs, and two-thirds are convinced such a goal is unrealistic.”

So, if online programs are generating a positive return, surely those funds can be used to reduce overall institutional costs. The truth requires a deeper dive into how revenue is shared and distributed across programs and departments relative to their associated costs. We expect, intuitively, that online learning would be more immediately profitable as it is not burdened with traditional brick & mortar costs such as real estate, campus activities, facilities maintenance, and security. However, online learning requires a unique institutional infrastructure – from teaching methodology, to distribution, to learning – and the ramp up costs to establish that infrastructure in a short time frame can be steep. 

The good news is that once an online learning infrastructure is successfully established, the scalability of online learning enables institutions to realize higher returns. With 50% of institutions reporting the tuition cost for online programs as equal to on-campus programs and 13% reporting higher tuition, online learning positions universities to lower the cost per student. 

The virtual nature of online learning also provides an opportunity for universities to expand their reach and scale into international markets. Further, once content is created, the stackable nature of online learning provides institutions with ready material to penetrate multiple channels, including B2B, lifelong learning, and certificate programs.  

So, what has driven the positive returns at institutions reporting them?

• Maturity of implementation – Institutions that were already aggressively pursuing remote learning options pre-pandemic were better prepared to meet the sharp increase in demand, while those who lagged behind were faced with a very sudden “quick, cheap, or good…pick two (as long as one is quick)” decision that is likely still impacting ROI.
• Pervasiveness of online options – Stemming from the previous point, institutions with more robust online offerings and higher online enrollments tend to report remote learning as a revenue generator. Institutions reporting less online enrollment tend to manage those programs as a net cost to support the institution’s mission.
• Shelf life and extendibility of produced content – To stay relevant, all course material needs to be refreshed, but the cost in dollars and resources to produce new online content has likely inspired (or, in the immediate term, required) ways to create evergreen content that supplements updated material and allows amortization of fixed costs.

Looking ahead, how can institutions maximize the ROI of online learning in the new normal?

• Invest wisely – While the pandemic required extremely fast creation of content that was typically focused on direct conversion of on-campus programs, ongoing investment should focus on quality. As the need for “cheap” and “quick” solutions diminishes, investing in stackable content offers universities the opportunity to develop modular, relevant, and timely content that meets the needs of their students, in the formats they demand.
• Keep student needs top of mind – Students expect interaction and engagement, even in online environments, and technology should be leveraged to create EPIIIC (Engaging, Personal, Interactive, Intuitive, Inclusive, and Collaborative) learning. In addition to creating effective and immersive learning environments, the virtual space can and should also be a vehicle for enhanced student support. This will be covered in greater detail in a subsequent article from Robyn Hammontree, our Senior Managing Director, Partnership Development, Learning.
• Leverage your content to reach new channels  – Online content isn’t just for degree seekers. Today’s constantly changing environment demands a continuous need to upskill and reskill, offering a robust opportunity for universities to enter the lifelong learning market. Employers are also investing more to ensure their employees are equipped with the most in-demand knowledge and skill sets. With trusted brands, universities have the opportunity to optimize their content to address these growing markets. 
• Figure out the finances – While we did not dig into the distribution of revenue, institutions must develop financial models that are not only equitable but incentivize academic programs and faculty to sustain and scale online content. Strategic distribution of revenue across the institution can aid in buy-in and growth of critical in-demand programming. 
• Monitor, evaluate, and adjust – Regular evaluation of the impact of online programs on student success (across numerous variables) will guide growth and improvement as well as developing efficiencies of content creation.
• And finally … market your programs! – As we will explore in our next article, communicating the success and quality of online programs is a valuable, yet often overlooked tool in both recruitment and retention.

Look for the next article in this series, focusing on the cost component.