When Dr. Edwards Deming returned from Japan in the early 1980s, he evangelized to American companies on the secret of Japanese industrial expansion and the virtues of focusing on market share and unit growth over seeking an all-the-market-will-bear pricing strategy. Deming also dismissed the notion that high prices necessarily denoted quality or prestige. He saw high prices as destructive, even threatening longevity. Is there a Deming lesson to be learned for American institutions of higher learning?
The economics of higher education has radically changed in the last ten years. Widespread discounting, draconian cuts in state funding, and declining enrollments are the new normal. Under these financial constraints, universities should consider a strategy that emphasizes growth in market share versus maximizing the per student price.
Today's network-based economy is congruent with this principle as evidenced by Amazon's success. Deming taught that scale makes an enterprise successful, even over covering costs at the outset. This is why many companies with scaling potential have been valued so high long before they achieve profitability.
A focus on market share drives up demand, brand recognition, and revenue—and gains pricing power in the long run—all things U.S. universities should consider to flourish in the future.