The SAT is changing (again)
The Collegeboard's recent announcement that the SAT will change in Spring of 2016 has created ripples throughout the test prep and tutoring world. Collegeboard President, David Coleman, explained the changes during a press conference on March 5th. One of the more intriguing topics involved the decision to enlist Khan Academy as the provider of free SAT preparation. Many folks in the tutoring industry became rightfully concerned. If Khan Academy provides free SAT test prep, what will happen to the for-profit tutoring and test prep companies?
Although concern is an appropriate response to the issue, a viable alternative may be enthusiasm. Why enthusiasm? Well for one thing, historically test changes create consumer anxiety and anxiety generally translates into opportunity for companies with the right mindset. For example, although the SAT is changing, it is not changing for two years. In the interim, the media hype around the test will create greater public awareness. And greater public awareness will generate an increase in things like web hits, lead flow and call volume between now and Spring 2016. Not to mention the fact that when a story like this is routinely carried by national media, it can turn into free PR.
Another benefit from the announced changes includes the consumer segmentation between current 9th, 10th, and 11th graders. Students in 10th and 11th will still see the current SAT. On the other hand, 9th graders may be faced with a choice: take a known test or try the new one. In any case, consumer segmentation tends to help companies focus their marketing messages through more discrete targeting of email, direct mail, SEO etc. Said differently, there is both marketing momentum (from the media hype) and a market based consumer-segmentation event that should allow forward thinking business people to better target their messaging.
Still not convinced? Consider also that the ACT will likely benefit from the change (think New Coke and Pepsi). The comparison is not ideal nor identical but it is likely that the ACT will extend its lead in overall test takers through at least the Spring of 2016. The caveat here is that the ACT plans to offer both the traditional paper & pencil test as well as a digital version in 2015. In my view, this is still an opportunity.
You may be thinking, "okay, great, the next two years could be fine--even good-- but what about after that?!" I'll answer your question with a question: if you were a stockbroker and you knew two years in advance that the main stock in your portfolio, lets call it 80% of that portfolio, could be reduced to 0, what would you do? Would you lean on other stocks in the portfolio? Maybe reposition and lean on the next closest stock (ACT)? Would you could look to expand your holdings of many smaller stocks (subject tutoring, SSAT, college admissions). There are myriad scenarios available but each is unique to the region and market in which you compete. So what should you do?
Given the timeline and the access to information, I would recommend considering the following:
1. Become an expert in the New SAT. On April 16th, when a sample version is released, learn it intimately.
2. Be able to talk intelligently about the differences between the current SAT, the ACT, and the New SAT.
3. Take an aggressive posture with events and informational campaigns in order to establish thought leadership.
4. Decide which test will be the main stock in your portfolio and begin developing or searching for updated curricula while also investigating services that can digitize content.
5. Look to reduce expenses. This will insulate against a "worst case scenario." Generally, rent and personnel fuel the expense engines of test prep & tutoring companies. If your lease is coming up for renewal, renegotiate and take less space.
6. Revisit the rationale behind service delivery. If you have not ventured into online tutoring for example, start to explore its utility.
7. Identify a new product or service that is closely associated to test prep & tutoring and build it out (going vertical).
8. Segment your current successful offerings into additional product lines and try to expand the margin on those new products or services.
9. No matter how you proceed, be transparent with your team and solicit their thoughts and opinions.
Diversification, preparation, and expense reduction are key ideals when drastic changes occur to a market. Although these are uncertain times for test prep & tutoring, there is always great opportunity for those with the vision and the ability to execute.
Warm regards,
Kevin
