BrightStar Education Group operates for-profit post-secondary education schools that provide Medical, Business, Technical, Culinary and other vocational curricula.
Headquartered in Denver, Colorado, BrightStar Education Group is pursuing a consolidation of its postsecondary education offerings. Starting with the acquisition of Institute of Technology, a leading for-profit postsecondary education company serving more than 1,700 students at four campuses in northern and central California, BrightStar plans to expand its growth. Through a $50 million capital investment from parent company Arlington Capital Partners, BrightStar has plans for additional campuses and curricula and strategic investments and acquisitions.
Jim Haga, President and CEO of BrightStar, has generously agreed to an interview. Jim is a member of the Higher Education Management Group of Linked In.
KH: BrightStar Education started with its acquisition of the Institution of Technology (3 campuses). What’s your thinking behind the ‘buy rather than build’ approach? Do you plan to stick with this approach in the future?
The ‘buy versus build’ strategy is a classic question and actually applies to both campus expansion as well as new program development. To answer your question, I would say that buying has allowed BrightStar to build a better foundation.
When you build, especially in an effort to launch your first campus, you might find yourself constantly inventing the wheel; whereas you could have acquired a successful platform and employed your energies in an effort to move a good school to great.
Today we have a build as well as a buy strategy underway which enables us to expand our geographic footprint through branching and acquisitions. In addition, we will develop (build) several new programs internally and work to acquire (buy) colleges with programs of study which will elevate our existing system.
KH: Studies suggest that the demand for online higher education continues to grow. What is BrightStar’s current use of the Net, and what are your plans for the future?
We’ve taken a two-step approach.
We are developing a unique delivery system called, MyIOT (named after our schools, the Institute of Technology). At present the system is used to reinforce residential delivery and to improve student outcomes. A student will log into the system from home to review material presented in the classroom and to complete practice examinations. In addition, we’ve embedded dynamic tutoring into the system. Tutoring is delivered using whiteboards, steaming video, PowerPoint presentations and audio conferencing until 11pm. Our goal is to improve retention by reducing student anxiety over an upcoming class or exam.
The second and final step will arrive this time next year when we begin to offer a handful of programs online at MyIOT.
KH: Studies suggest that proprietary schools have not increased tuition as much as traditional colleges and universities (U.S.). How much of a factor is competitive pricing in your market?
JH: I do keep my eye on traditional colleges and universities; however we typically exclude them when developing a local competitive analysis. Students shopping for a traditional college versus a for-profit institution will often use a slightly different set of criteria when selecting a college.
Generally speaking, competitive pricing is important to some degree, if you use price as a means to measure quality. How your price point compares to others says a lot about your institution. If your strategy is to be the least expensive, you will naturally be unable to brand your institution as a premium product. If you have a first-class product, you should price accordingly and be prepared to defend that position. For the most part we have always been a price leader and backfilled that pricing strategy with excellent faculty and staff.
KH: Traditional colleges and universities have been more reluctant than proprietary schools to outsource aspects of their operations. Do you see opportunities to outsource more aspects of BrightStar’s operation?
JH: Some believe outsourcing will devalue education. Too often though, tradition is defended and innovation is demonized. I would suggest that outsourcing makes perfect sense if you can improve your margin without sacrificing student services and outcomes. BrightStar has been careful not to outsource critical functions; I’m equally as concerned when vendors outsource an essential piece of his or her business. Student dissatisfaction will quickly erode short-term financial gains. We do outsource one function, a portion of our financial aid processing. I’m pleased to report that we are happy with the vendor relationship.
KH: BrightStar currently operates three campuses under a single brand. What is your current marketing strategy? What role can the Internet marketing play for a provider of your variety?
JH: Internet marketing is a critical part of our overall marketing mix.
Today, approximately 45% of our leads are generated using Internet marketing (website, blogs, affiliate relationships, streaming video email campaigns and more). The Internet has allowed us to lower our cost-per-lead (CPL) and cost-per-start (CPS) each year; during the same period of time our student headcount has doubled.
We are able to acquire an Internet inquiry for $45 – 65 and our lead to start conversion is 10-13%. That’s attractive especially when compared to television and other traditional media sources. The cost of a television lead is $230 to $400; the lead to start rate for television is 13-16%.
Thank you for this opportunity to speak to the members of the Higher Education Management Group of Linked In.