Recently, the centuries old $80+ billion natural diamond industry has been disrupted with technology that fabricates diamonds in labs for growing use in tech-markets — 5G networks, satellites, and quantum computing. Not to be confused with imitation diamonds (cubic zirconia) these are real diamonds produced through use of heat and hydraulic presses. They can be produced at a fraction of the cost of natural diamonds and even experts are unable to distinguish between natural and lab-produced specimens, which means that they are suitable for yet another application — jewelry. The traditional players are so concerned that some such as DeBeers are investing in the technology.
Further, the Diamond Producers Association launched a marketing campaign meant to combat the disruption with the theme “What is Real is Rare” seeking to convince consumers to value rarity and authenticity (natural diamonds) versus functionality or even beauty.
The concept of authentically branded value applies to higher education as well. Higher education has always been a bit mysterious to most consumers who often rely on marketing, branding, and third-party lists to assess quality. As with diamonds, there is a premise to the “real and rare” strategy in higher education that is critical to its success. That premise is that there is an elevated level of quality that necessarily accompanies the real and rare.
Part of the appeal of the natural diamond was that it had unparalleled sparkle, beauty, clarity and brilliance. The question is what happens when that is no longer true. In higher education, something similar is happening: The old branding system persists despite the fact that research has found no significant difference in lifetime earnings and even well-being among equally matched graduates from hundreds of universities (see Dale and Krueger’s 2011 study, “Estimating the Return to College Selectivity over the Career Using Administrative Earning Data” and the 2014 Gallup-Purdue Index, a study involving more than 30,000 graduates).
The primary disrupter in higher education is not new laboratory technology but the internet. Critics get it wrong when they bemoan the soaring cost of higher education. To the contrary, the cost of “education” has plummeted. The quintessential information and knowledge about any given discipline delivered from the world’s most renowned experts in their respective fields, many if not most in the academy, is available essentially for free. Meanwhile, the cost of attending the academy in person has soared, especially at elite and selective institutions. Now, just as the diamond industry is wrestling with the diminished value of sparkle, universities are grappling with the diminished value of education. The COVID pandemic has spotlighted the challenge. With quality of education no longer a serious differentiator, the best branded universities have begun taking a page from the diamond industry — levering exclusivity for all they are worth.
Does the value proposition offered by the elite and selective institutions remain convincing? So far it is. Natural diamonds still sell, and the parents who collectively spent $25+m to illegally secure admission for their children at elite schools would probably not have been deterred by the results of the Dale and Krueger or Gallup-Purdue research.
But what happens when the solitary characteristic of the thing you are buying that makes it real and rare appears to be what you are spending for it? What happens when the “low cost” choice is elevated to a “value” choice, and perhaps further to the “smart” choice? This would be catastrophic for purveyors of exclusivity because they are dependent upon a very wide range of socioeconomic groups, not merely the wealthy, perceiving their products as real, rare, and worth their cost, to the point of incurring tremendous debt to get them. What happens when that begins to seem imprudent?
A small group of the best branded schools might not only survive but even thrive, despite the lack of tangible differentiation from other schools. However, for many customers, especially for nonwealthy families, and especially in the wake of the pandemic, the “authentic and rare” appeal may fall more and more flat. This will present an existential dilemma to hundreds of universities with attendance costs fairly similar to elite schools but with only a fraction of their branding power. But it also presents a massive opportunity. Fortune favors the bold, and over the next few years, higher education is likely to be transformed by those who can understand and respond to these market realities.
Greg Salsbury is president of Western Colorado University.
Dr. Greg Salsbury is President of Western Colorado University.