Wharton Launches First Online MBA Among Top 5 Business Schools
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The University of Pennsylvania’s Wharton School just introduced the first online MBA option offered by any business school typically ranked among the top five by U.S. News and World Report.
Certainly, this is huge news. It’s a landmark milestone not only for the management education industry but also for higher education worldwide.
The timing of this new announcement seemed surprising. Although 89 percent of 80 American business school deans expected this would happen before 2023, this BSchools report suggests some reasons why many observers didn’t believe that we would have seen such a change come to pass anytime soon; the main reasons are that there are way too many brand disincentives that discourage the super-elite schools from getting into the online education game.
On the other hand, Wharton’s first-mover advantage now puts other schools with highly-ranked executive MBA programs like MIT Sloan, Chicago Booth, and Northwestern Kellogg at a competitive disadvantage. That’s because some of these schools’ most experienced potential applicants will undoubtedly end up diverting to Wharton’s new option instead, which it calls the Global Executive MBA Cohort.
In this report, we’re first going to present an overview of this new offering’s more interesting aspects. Then we will examine the controversy about Wharton’s decision to price its new cohort as the most expensive online degree in the world.
Not Really an MBA “Program”
Wharton’s new online degree would best be called an online “offering” because it’s not technically an MBA program that Wharton is announcing, at least not in the sense that we’ve used that term here at BSchools since our launch in 2018. All the school is really doing is adding a predominantly-online cohort within its existing executive MBA program. The school claims that the curricula will be equivalent.
What’s more, capacity is severely limited, with Wharton only expecting to enroll about 65 students in the first year despite adding new equipment and software that can accommodate up to 95 students. But because this cohort will attend three-quarters of its classes online, comparisons with other online degree programs are relevant, so to make things easier, we’ll refer to the new degree as a “program” even though that nomenclature isn’t precisely accurate.
100 Percent Live Instruction
This option is 100 percent live—and that’s a big first for any online MBA program. About 75 percent of the instruction will come from live, synchronous classes, and the other quarter will take place during a series of five residencies at the school’s campuses in Philadelphia and San Francisco.
No other online MBA program even comes close to this level of live instruction. One has to wonder if Indiana Kelley’s big-budget push into online flipped classrooms emerged because they had been tipped off that Wharton was preparing to offer 100 percent live instruction starting in 2023.
Tough Work Experience Requirement
Wharton’s work experience requirement is the steepest of any online MBA program we’ve ever covered at BSchools. The school will not enroll any applicant with less than eight years of relevant work experience, and the average Wharton EMBA student has about 15 years of experience. It also means the students are relatively senior, with an average age range in their early 40s—and from a networking standpoint, that’s outstanding.
Online Students Make “Sacrifices”
Note that the online executive MBA students make a few “sacrifices.” In exchange for the convenience of not needing to fly to campuses every two weeks, classmates lose the in-person networking opportunities with other students and faculty before and after every class session. At the executive level, many potential students may perceive the loss of this regular, ongoing networking as a substantial disadvantage. Students will also lose the lodging and catering that Wharton provides at no additional charge to its in-person EMBA students.
Is It Really Global?
Wharton brands this as a “global” cohort particularly attractive to students from Europe and Asia who could never attend if they needed to fly to the American campuses every two weeks.
That may be true, but so far, the school hasn’t announced any plans to hold their residencies outside the United States. By contrast, Duke Fuqua’s executive global MBA program has traditionally required students to attend residencies at campuses in major financial centers on several continents.
The World’s Most Expensive Online Degree
This is the most expensive online degree in the world. It is also much more expensive than similar offerings from competitors like NYU Stern, Fuqua, Emory, Michigan Ross, and UC Berkeley Haas. Wharton’s spokespeople justify this extreme pricing strategy by pointing out that online students will receive the same degree as the on-campus students, and the instruction is delivered by the same distinguished faculty.
In fact, a closer look at the costs reveals that the university actually charges a premium price for the online experience. That’s because Wharton priced this option at $214,000, about 1.5 percent more than the school’s on-campus EMBA program price of $210,900.
To help put that sticker price into perspective, consider a few comparisons. The new program’s quoted price amounts to a 73 percent increase over the cost of the average in-person executive MBA program ranked by Poets and Quants, which is $123,415.
And although Poets doesn’t provide an overall average for all the online MBA programs the platform ranks, the platform does provide average prices for degrees from their five most and least expensive ranked online programs. In those terms, Wharton’s online degree costs $94,600 more than the $119,400 average of the top five most expensive online degrees ranked by Poets, a 79 percent increase. At the other extreme, Wharton’s new degree is also $196,775 more than the $17,225 mean of the bottom five least expensive degrees, which means that it is 11.4 times as expensive as that lower average.
However, on a total cost basis, the charges will amount to much more than that $214,000 quoted price. The reason is that Wharton will require students to attend a quarter of the degree’s credits in person to graduate, so most of them will need to pay for a series of flights to the school’s campuses in Philadelphia or San Francisco. In one of the most insightful editorials of his career, Poets’ Editor John Byrne points out that those travel expenses plus the interest charges on student loans will make this online degree cost at least a quarter of a million dollars.
He also points out that this pricing strategy seems counterintuitive and contrary to industry trends. Poets’ top-ranked online MBA program at Indiana’s Kelley School only costs 33 percent of Wharton’s degree, and Carnegie Mellon’s second-ranked online MBA program costs almost $75,000 less.
As we had predicted years ago in this 2019 BSchools article, the online iMBA program at the University of Illinois’ Gies College of Business by 2021 had enrolled 5,407 students with, in Byrne’s words, “many of them resembling the age and years of work experience of Wharton’s traditional EMBA candidates” with on average 11 years of work experience. But Illinois priced its degree at only about $23,000—which kicked off a trend that continues to surprise many observers and industry analysts.
Three years ago, Boston University’s Quenstrom School of Business had introduced an online MBA degree at a price intended to match that of the Illinois iMBA. Now, across town from BU, the latest school to fall in line with this trend is Northeastern University’s D’Amore-McKim School of Business, which in August 2022, slashed the price of its online MBA degree by almost half to $45,000.
But Wharton is bucking this trend. By applying what’s essentially a super-premium, luxury brand pricing strategy, they’re doing the opposite of what all these schools have done. Now, why would Wharton do that?
Buried at the bottom of Byrne’s op-ed appears a telling clue. It’s a quotation credited to the dean at a rival business school:
My hunch is that the principal driver is the additional net revenue. While they could also have increased the size of the full-time MBA program, I think at 850 they are already at a limit with respect to the quality they can sustain with the applicant pool. Adding 60 or 120 new full-time students will have a severely detrimental effect on the quality metrics of the MBA class. Those metrics are not made public for the EMBA classes.
Think about it: If you sat on the committee at the University of Pennsylvania with the authority to authorize a new academic program like this one, how would you vote given the following specific facts?
- Frequently the costs for executive MBA programs are paid for by the employers, not by the students themselves. Those employers are often large Fortune 1000 corporations.
- Diluting the quality of your executive student body by adding additional students is not that much of a concern. That’s because unlike most forms of graduate management education, executive MBA programs typically don’t reveal those metrics to the public.
- Because your business school is generally ranked among the top five by authorities like U.S. News, demand for spots in your executive program is essentially inelastic. The buyers don’t care that much about whatever price you charge, and you know that you’re going to sell out all the seats in each class that you can provide.
- Your current on-campus executive MBA program with about 238 students earns a total of about $50 million each year.
- Starting in the 2024 academic year, this proposed online MBA program, at a capacity of 95 students for each of the two class cohorts, would earn an additional $40 million each year, and that’s an 80 percent increase. In other words, the new program could almost double your executive program’s earnings within two years.
It’s a no-brainer, slam-dunk decision, isn’t it? Given these facts, what faculty committee would not authorize creating a new online executive MBA program that charges according to a super-premium, luxury brand pricing strategy? There aren’t many university committees that would be willing to leave this kind of money on the table.
The Online MBA Market Remains in Flux
The new degrees from Wharton and Northeastern demonstrate how the online MBA degree market remains in flux. However, as it has since 2019, this market is moving mostly at the higher- and lower-priced extremes that cater to very different market segments.
Because of Wharton’s new program, we may see a bifurcation develop within the online MBA marketplace. For example, should they also introduce online MBA programs, super-elite schools like Chicago Booth and Northwestern Kellogg will probably attempt initially to compete with Wharton by introducing similar, high-priced online MBA programs available only to seasoned executives. If they don’t, they risk a brain drain as some of their best-qualified potential applicants to their in-person executive programs end up in Wharton’s online EMBA cohort instead.
However, new super-premium market entrants will not likely influence schools like Illinois Gies, Boston Quenstrom, or Northeastern to raise their tuition rates anytime soon. That’s because of these schools’ remarkable abilities to deliver quality education at scale—a capability unlikely ever to interest super-elite schools like Wharton during our lifetimes.