Porter’s Five Forces: Focus on Higher Education Marketing

Higher Educators have more varied challenges than perhaps any other field. You have enormous client service issues, administrative challenges, budget challenges, etc.

Day to day crisis management gives you little time to think about the big picture – and when you do, focusing the conversation on workable solutions usually entails negotiations across departments and lines of authority. Here’s a tool to help: illustrative examples of some of the issues educators face, organized according to the Five Forces model.

To start, Michael Porter’s Five Forces Analysis tool is a way of looking at the challenges a business has to address by grouping them into five buckets: Suppliers, Buyers, Competitors, the Threat of Substitution, and the Threat of New Entry.

These specific forces acting on an enterprise are always evolving, and obviously differ for every business sector. Here are our thoughts to get you started:


Determinants of Supplier Power:

Although, as an educator, you are not necessarily accustomed to thinking of it this way, your “supply” is teachers and infrastructure. And both of these impact your pedagogical choices.  For example, if you’re thinking of shifting to an emphasis on STEM courses to meet the growing demand, prepare for an increase in salary costs.  According to the Bureau of Labor Statistics National Compensation Survey, the average post-secondary STEM teaching salary is $85,827, while the average humanities salary will run a relatively cheap $78,134 (Law professors account for the bump up to $78,000. Without them that average is $71,123 – $14,000 cheaper than STEM per position!)

And what about infrastructure? Let’s say you’re ramping up lab sciences. They’re attractive, but have a big impact on facilities. So you think, great, I’ll go talk to development about funding a new science building. While you’re there, talk to them about tacking on an endowment to support new facilities long term – not just through the building phase. It’s exciting when the big name goes up on the shiny building, but the heat’s got to get paid for and the roof won’t last forever. Physical plant demands reduce your salary budget, weakening your ability to attract and keep top teaching talent.

Determinants of Buyer Power:

Educators have globalized the student pool in the past decade, and while the influx of foreign students and their beautiful, beautiful full-tuition-plus-fees contributions have lifted the bottom line, there are clouds on that horizon: cuts in Saudi and Brazilian scholarship support caused applications from those nations to plunge, and the softening of the Chinese economy, the increase in domestic institutions, and political antipathy toward the west are showing up in lower Chinese application statistics. Price pressure is international, and students are shopping for value– commentary is bubbling up in student blogs that price is a consideration.

Determinants of Competitive Rivalry:

Domestically you also may be feeling competitive pressure. According to the National Center for Educational Statistics, the number of 4-year postsecondary public and private 4-year institutions has jumped from 1,957 in 1981 to 3,026 in 2013 – a 54% increase.  Meanwhile the NCES predicts a rise in the overall number of students of only 16.8% between 2016 and 2025.  That spells more schools competing for fewer students, more schools in consideration, thanks to the Common App, and more students shopping for value.

Threat of Substitution:

Students are increasingly approaching education in a consumer frame of mind. That translates into grade inflation, greater accommodation of special needs, and a ‘shopper’ mentality that has loosened the grip of the 4-year tradition. The NCES study on the Persistence and Attainment of Postsecondary Degrees shows an increase in ‘mixed menu’ education. The four-year degree is now interspersed with  gap years, 2-year programs, online courses, summer courses, and life experience. All of these competitive options are driven by the increase in traditional tuition, the increase in student debt, the decrease in ROI, and the pressures on universities to adapt to accommodate an ever-widening variance in student needs. There is also more interruption to the traditional track among Latinos, a growing market that educators need to keep an eye on. If you’re a traditional four-year institution, you’re likely to see fewer “straight-thru-in-8” students, more transfers, and more chaos. Might want to bump up the admin budget in the admissions office.

Threat of New Entry:

Are you up on “Stackable” credentials – certificates, EMBAs, associate degrees? They’re getting more popular as employer-sponsored on the job training goes the way of the dodo bird and the pension fund. Employees now expect to be lifelong job switchers, with continual retraining falling on their own shoulders. That’s ratcheting up the market for credentials acquired for a job switch or upgrade. These ‘stackable’ credentials are a key component of ‘as-needed’ thinking in education, and a contributor to the concept of student-as-consumer. Prepare thyself.

Next Steps

As marketers, our view on the five forces impacting educators is that of an outsider, and the examples we’ve given here are likely just the tip of what you are dealing with. But we’ve set the model up for you — now we recommend taking your challenges and categorizing them according to Porter’s five forces model for yourself. You will likely find that it lends perspective to what you can and can’t fix (i.e., the global economy) but what you can (and must) anticipate…more non-traditional students, more demand for non-traditional course structure, etc. We hope you find it a helpful tool.