Education Technology Startups: Education Technology Companies Need to Redesign Models to Keep Parents Happy

As Covid-driven demand for online education declines, edtech companies need to rethink their models and rethink their value proposition in an increasingly competitive environment. research report Global policy firm LEK Consulting and consulting firm DC Advisory said.

There is growing dissatisfaction with parents enrolling their children in educational technology courses in kindergarten in segment 12 (K-12) and exam preparation categories, including the joint entrance exam (JEE) and national eligibility including an entrance test (NEET), affecting update rates and causing additional problems with education technology models, according to the survey.

The survey surveyed 521 parents to learn about their experiences with edt in the K-12 and JEE-NEET prep segments.

While education technology models in these categories score negatively on the NPS, segments related to adult test preparation and professional development elicited higher levels of advocacy from respondents, the report said.

NPS is an industry metric for measuring customer loyalty and satisfaction, obtained by asking customers how likely they are to recommend a product or service.

“The theme of the survey is not that people have turned away from edtech, but segments that have experienced negative NPS are seeing slowdowns,” Danish Farooqi, partner at LEK Consulting, told ET. “This shows that the evolution of products has not been as fast as it should have been. The sub-segments with negative NPS are the segments most likely to fail right now, giving edtech companies an opportunity to rethink their offerings.”
he added.

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A decline in demand for educational technology also occurs when macroeconomic headwinds create uncertainty around large fundraising. The re-emergence of incumbent players has increased pressure on online learning models, leading to higher customer acquisition costs (CAC).

Currently, Byju’s and Vedantu are among the big online players in the K-12 segment, while Physics Wallah and Unacademy are among the top competitors in the JEE-NEET space. The refresher list includes names like UpGrad and Eruditus.

NPS GROWTH

According to an LEK and DC advisory report, only 30% of parents surveyed said they were likely to renew their current K-12 education technology provider subscriptions, with the segment earning a negative NPS of -4%.

Parents cited the lack of proper channels for resolving doubts and the poor quality of teachers as the main reasons for their dissatisfaction. The report cites improvements in response rates to clear-of-doubt questions and greater engagement with students as key areas for improvement.

For the JEE-NEET segment and undergraduate exam preparation, the lack of an immersive environment, including opportunities to interact with peers, class sizes, the quality of teaching materials, and channels for resolving doubts, were key reasons for offline competitors crowding out educational technology offerings, the study says. said. The quality of teachers is also a concern for respondents.

JEE-NEET’s online learning offerings had the lowest renewal rate among surveyed respondents at 14%, resulting in a negative NPS of -3%.

Students who used the Internet as an additional source of exam preparation reported higher levels of satisfaction compared to students who used it as their primary exam preparation option.

“Education companies will have to extend the lifetime value (LTV) path and the problem is that the LTV path is not where it should be,” said Nitin Bhatia, managing director of DC Advisory.

This is happening even as education companies like Byju’s, Unacademy, Physics Wallah, and now Vedantu have made offline forays this year by launching physics centers, also helped by the acquisition of old offline learning centers.

“The cost of customer acquisition has increased due to higher dropouts, and with increasing dissatisfaction, the customer life cycle has been reduced,” said LEK Consulting’s Farooqi. “Now this is happening with many investors asking questions about the quality of earnings and asking for directions to profitability, making it harder for some individual companies. Growth rates will return to pre-pandemic levels in terms of the industry,” he added.

In the Adult Test Prep and Professional Development segments, 20% and 37% of respondents likely renewed their subscriptions, with NPS at 9% and 42%, respectively.

“For the adult learning and vocational training sub-segments, there is no real offline replacement and these online learning sectors will post healthy growth projections. There was an empty space and online players filled that gap,” explained Bhatia of DC Advisory.

According to him, in the future, the exam preparation segment will become a two-tier market, the first of which will be a hybrid game of offline and online learning modules at a higher price, and the second will be a low-engagement module based on deep technologies, at a higher price. low price. points.

STABILITY OF EDTECH MODELS

The resurgence of traditional learning channels in some cases calls into question the sustainability of edc models, even as tech companies’ NPS turns negative and investors force them to focus on profitability.

Recently, Byju’s in its deferred results for 2020-2021 reported a huge loss of Rs 4,588 crore compared to Rs 262 crore in the previous financial year.

The largest test preparation company, Unacademy, reported an 85% increase in net loss for fiscal year 22 to Rs 2,848 crore compared to Rs 1,537 crore in the previous fiscal year.

“Edtech companies may need a certain level of choice about what they need to keep as their core,” Bhatia said. “In a way, it’s surgery where parts that are unstable have to be let go and resources need to be reallocated.”

Earlier this year, Unacademy announced its decision to phase out the K-12 segment and close the Mastree and Swiflearn subsidiaries it acquired between 2020 and 2021. Although the company has cut its monthly expenses from $20 million to $7 million, Unacademy founder Gaurav Munjal tweeted last week that he wants to make the company profitable as soon as possible.