The following is part five of a five-part post about education in development and Bridge International Academies.
In the last post, I talked about how Bridge is able to leverage its economies of scale to both utilize huge amounts of data to make decisions and, once those decisions are made, they can be rolled out en masse. I will give a few concrete examples of how this works in practice.
Last September, we wanted to see whether offering a free month of school and having a grand opening ceremony with a bouncy castle would boost enrollment. So we did what most respectable startups exploring a new product or market would do: we tested it. Of the nine schools we opened last September, four had a grand opening ceremony (GOC) and first month free (FMF), two had only FMF, one had only GOC, and two had neither. When I looked at the numbers, the results were amazing. Not only was initial enrollment nearly three times what we had experienced in the past, but the conversion rate – the most important factor in measuring the efficacy of a marketing promotion in retail – was 85%. This is practically unheard of in retail. In other words, 85% of people tried the product and decided to buy it. When was the last time you started paying after the free trial expired?
When I shared the results with the management team, the action was relatively decisive. With the 30 January-2012 schools scheduled to be opened in only eight weeks, they changed everything. Effective as soon as possible, every new school would have a grand opening ceremony and every new student would be given a free month of school. And, to make it fair, all 60 schools would have a GOC in January and every student would receive January free. One by one, the managers detailed what needed to be done and set to work.
The IT team began making changes to the billing system and the smartphone application; the training team began prepping the training facilitators to communicate the new policy, and the operations team went out to each school to explain the changes directly. Marketing began contacting companies that rent bouncy castles and negotiating prices, while government relations reached out to the elders in the community and invited them to attend as “Friends of the Academy.” Within 24 hours of my sharing the analysis, the company began preparing for a monumental change in the way things were done. In January 2011, our largest school opened with 200 students. In January 2012, the biggest had more than 700.
For me, the policy change had even greater implications. Since each cohort of schools opened with different policies, regulations, and circumstances, it was difficult to isolate determinants of performance without introducing incredible amounts of bias. But now, every school had a grand opening ceremony and January became a free month for every single student. Therefore, the maximum attendance in January effectively equalized every school and made them as close to comparable as they would ever get. Now, all of a sudden, we were able to actually measure the how factors like population density, school location, cost competitiveness, income levels, urban/rural, and relative importance of education, influence school size and profitability.
From our market research, we had hundreds of consistent variables about each community. So I built a massive Excel model and ran some basic correlation analyses and scatter plots to identify the most important factors in determining where to open a school. Based on the analysis, I created an algorithm to actually project the size of the school after one year that was accurate within a range of 100 students at 80% of schools. We automated the report creation and incorporated a profitability model into each one, which would dictate land price and school size. And, just like everything else at Bridge, once we had it right, the new report became part of the Bridge model, and is there to stay until the data proves it wrong.
In the next post, I will talk about other social enterprises and why I think the term is a misnomer. If you have questions, feel free to email me at josh@developeconomies.com.
Develop Economies’ Music Recommendation