1 ESMT No. WP ESMT WHITE PAPER How and Why MBAs Buy an MBA Mario Rese, ESMT Annika Wilke, Ruhr University of Bochum Bülent Gögdün, ESMT Customized Solutions ISSN
2 Citation: Mario Rese, Annika Wilke, Bülent Gögdün; ; White Paper No. WP ; ESMT European School of Management and Technology, Copyright 2009 by ESMT European School of Management and Technology GmbH, Berlin, Germany, All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means electronic, mechanical, photocopy, recording, or otherwise without the permission of ESMT.
3 White Paper 3 Contents 1. Introduction 7 2. Study Design Design of the Questionnaire Data Collection Sample Background of the Analysis Grouping Criteria Methods Results Topic 1: Reasons for Starting an MBA & Business School Selection Criteria Topic 2: Valuation of Different Information Sources Topic 3: Valuation of Different Quality Indicators Topic 4: Self-evaluation of the Respondents and Special Aspects of the MBA Program Selection Process Topic 5: Insights into Application Numbers Summary and Managerial Implications 61
4 4 White Paper Foreword The purpose of this paper is to deepen our understanding of the MBA market. Our focus lies hereby on the customers, that is, on people who are interested in attending an MBA program and who are courted relentlessly by business schools. We analyzed the selection criteria applicants consider, information sources they use, indicators they take into account to assess program quality as well as their decision-making. We hope that the insights will help business schools make their marketing approaches even more effective. This study would not have been realized if there had not been so many supporters. First of all, we would like to thank all survey participants for the time they have invested. We are also grateful for the help we received from business schools that put us in touch with their students. We also thank those who have supported our research with valuable thoughts and candid feedback. Berlin, April 2009 Mario Rese, Annika Wilke, Bülent Gögdün
5 White Paper 5 Executive Summary European business schools compete with well-established US players and ascending Asian schools for qualified and self-confident MBA applicants. Different segments of applicants start an MBA for different reasons and show different preferences with respect to school selection, use of information sources as well as decision-making. Business schools can fine-tune their marketing activities to the segments they are looking to attract. For full-time MBAs, a school s reputation seems to be a particularly important selection criterion. Receiving a high increase in salary after an MBA is seen as a strong quality indicator, as improving career prospects and increasing salary are the number two and four reasons that full-time MBAs attend a program. While rankings are the most important information source, business schools can partly bypass them since the most important five information sources also include alumni, current students, impersonal information sources and professors means of communication that can be easily influenced by the schools. We suggest that business schools should consider career services as being a critical component of the school and also try to achieve excellent placement results. They should also optimize their appearance and communication with the purpose of creating a reputation and to be perceived as a school with a highlevel reputation. Executive MBA participants are also reputation-oriented. For them, improving their career prospects is also of high importance. However, they do not care as much for career services as they usually already have a job but want to expand their professional network. Rankings, alumni, employer and colleagues are the most important information sources. We think that schools that want to attract Executive MBAs should try to establish strong links with industry and build up a reputation within industry. They should also try to distinguish their programs by offering Executive MBAs excellent (career-relevant) networking opportunities.
6 6 White Paper Schools that want to increase the number of Asian students should particularly emphasize career services and placement success. They can also create some competitive advantages if they offer scholarships or financial aid. The communication with Asian candidates should be designed to be more personal, as they regard personal information sources as being more important than do Europeans. Marketing measures should take into account the fact that most applicants regard themselves as being above average and rate their chances of entering their favorite program as being rather high. We think that the schools should appear self-confident, thereby signaling that only strong candidates can attend the program. The two most important differences we identified between male and female students are that women tend to start their MBA at an earlier point in their careers and that they are less flexible with respect to school location than are men. For them, location matters. To get more women into the classrooms, schools should strengthen their local marketing. Another approach could be to highlight the attractiveness of the school location (if given), especially for female students. Schools should also be prepared to accept female candidates with little work experience.
7 White Paper 7 1. Introduction While the demand for MBAs is oscillating, the number of graduate management programs has increased significantly over the past years. European business schools have to compete with well-established US brands on the one hand and ascending Asian players on the other hand. This study aims at generating insights for a more effective marketing of MBA programs. The world of MBA programs is highly competitive. If we consider the number of Graduate Management Admission Tests (GMAT), taken as an indicator for the demand of MBA programs, we see in Figure 1 that the demand varies and is still below its peak. Figure 1: Number of GMAT exams taken 275, , , , , , , , , , , , , , Test year (from July 1 to June 30) Source:
8 8 White Paper On the other hand, the number of business schools and graduate management programs has increased considerably over the past few years. According to GMAT, a total of 3,710 new graduate management programs have been introduced from 1997 to 2007: 1,553 of these new programs were launched by European schools, 708 by North American business schools and 1,449 by business schools in Asia, South America, Australia and Africa combined. 1 Even though these numbers include, in addition to MBA programs, Masters of Science in Management and PhD programs, they show the huge increase in supply. 2 Furthermore, this increase in supply is not only about quantity. Some of the new schools and programs have been putting serious effort into increasing the quality of the programs, thus enhancing their competitiveness on the global market. Two examples shall underline our observation: In 2007, the first state-run Chinese business school, Zhejiang School of Management, gained international accreditation for its MBA and EMBA programs. 3 CEIBS (China Europe International Business School), already accredited by EQUIS (European Quality Improvement System), has been ranked eleventh worldwide twice since 2007 by the Financial Times. 4 While US business schools can benefit from a huge domestic market and enjoy competitive advantages as the United States is seen as the home country of the MBA European business schools have to compete for international students with all the other new competitors. The fact that, in 2007, 82.8% of all GMAT score reports were sent to schools in the United States shows how attractive this region is. By contrast, European schools received only 6.4% and Asian schools 4.4% of the GMAT score reports submitted. 5 This intense competition on the MBA market requires business schools to develop a solid understanding of the customers, their needs and their decision-making processes so that they can improve the effectiveness of their marketing activities. Some of the big players of the market, such as the Graduate Management Admission Council (offering the GMAT) or Quacquarelli Symonds (QS, which offers the TopMBA fairs), regularly publish market research studies. However, as with other parties, 6 we feel there is a need for further research to learn more about the customer. We decided to cover traditional topics such as reasons for doing an MBA, use and valuation of information sources, but also topics such as how MBA students rate their chances of gaining entry to their favorite program, how many applications they start and complete, their preferences for quality vs. price, their flexibility with respect to school location, and several further aspects of the decision-making process. We have also put our focus on European and Asian students, as we think that these groups are of more interest to European business schools See GMAC, From Data to Strategy: Understanding Worldwide Trends in Graduate Management Education, 2007, p. 2. See GMAC, Application Trends Survey 2007, p. 2. See the special report on MBAs, Financial Times, Jan. 29, 2007, p. 12. See CEIBS, press release, Jan. 28, See GMAC, World Geographic Trend Report for GMAT Examinees, 2008, p. 8. See GMAC, GMAC Research Report Series, RR-05-10, Nov. 3, 2005, p. 1.
9 White Paper 9 In the following pages, we will describe the study design, the analysis we have run and the results we have achieved. At the end of the paper, we derive some important managerial implications for business schools from the marketing perspective.
10 10 White Paper 2. Study Design In the following section, the different steps within the empirical investigation are described. We start by presenting the questionnaire and the individual questions. We then describe the data collection and outline some characteristics of the sample ultimately obtained. 2.1 Design of the Questionnaire The goal of our project is to get a deeper insight into MBA students decision processes in pursuing an MBA and selecting a business school. Within this context, we focus on the following topics. We first want to learn why people start an MBA and on which criteria they base their selection of a particular business school. We then analyze which information sources are used and how these are valuated during the business school selection process. After examining students opinions about quality indicators of MBA programs, we let respondents valuate several aspects of their decision making process. Finally, we ask respondents to quantify their application activities and require information about socio-demographic criteria and further characteristics relevant to the MBA selection process. In the following section, the individual questions for each part are presented. Topic 1: Reasons for Starting an MBA and Business School Selection Criteria When developing the questions, we tried to consider the most important reasons why people make the decision to do an MBA and why they choose a particular business school. From a student s perspective, relevant factors for these decisions were investigated based on several information sources. We started by examining existing studies that had been carried out by other institutions like GMASS or TopMBA. We then visited several Internet forums where such MBA
11 White Paper 11 themes are dealt with (e.g., businessweek.com, find-mba.com) and analyzed the topics discussed there. Finally, we conducted personal interviews with future, current and former business school students. To refine the huge amount of factors possibly influencing a person s decision for doing an MBA and selecting a business school, we assigned the different factors to categories like financial- or career-related aspects and then, together with MBA experts, selected concrete factors from each category. In total, we opened 10 MBA and 17 business school aspects open for assessment by the respondents (see Boxes 1 and 2). For every aspect mentioned in the box, the respondent was asked to indicate how important it was to her/his overall decision. The level of importance was rated on a scale from not important at all (1) to extremely important (7). Box 1: Questions regarding the reasons for starting an MBA How important are (were) the following aspects for your decision to do an MBA? (answers based on scale ranging from not important at all (1) to extremely important (7)) I want(ed) to have time to think about my career and life. I want(ed) to increase my salary. I want(ed) to expand my professional network. I want(ed) to improve my career prospects. (That means I want(ed) to stay in the same function or field/industry but improve my position in terms of hierarchy and responsibility.) I want(ed) to switch my career. (That means I want(ed) to work in a different function and/or industry than I currently do/did before.) I want(ed) to go abroad. I want(ed) to get a master's degree / improve my level of education. I want(ed) to refresh/obtain new knowledge and skills, i.e., to learn. I want(ed) to set up my own business.
12 12 White Paper Box 2: Questions regarding the reasons for selecting a business school How important are (were) the following criteria for your business school selection process? (answers based on scale ranging from not important at all (1) to extremely important (7)) Availability of scholarships or financial aid Accreditation of the business school Quality of interaction with school representatives during the information search and application phase Fit of the duration of the program to my needs Match of b-school culture with my person Size and quality of the alumni network Strong position of the business school in the rankings Tuition fee Quality of career services (in terms of career placement record, etc.) Strength of the links between b-school and industry Reputation of the b-school as one of the best in a certain region (e.g., Europe) or field (e.g., marketing) Fit of program content to my needs (in terms of program focus, areas of specialization, exchange programs, etc.) Excellence in faculty research activities Fit of the class profile to my personal and professional background and objectives (in terms of internationality, age, work experience, etc.) Convenience/attractiveness of b-school location Excellence in curriculum and teaching (in terms of high academic standard, handson, group and project work, academic rigor, coaching, quality of faculty, etc.) Topic 2: Valuation of Different Information Sources To make a decision in favor of or against a business school, the future MBA student has to search for information about the MBA program offered. From our point of view, it is of interest which information sources are used, if at all, and, if used, how relevant they are perceived as being for the business school selection process. The information sources presented for valuation were collected through a literature review and interviews with current and former MBA students as well as business school marketing professionals. They are listed in Box 3.
13 White Paper 13 Box 3: Questions regarding the relevance of different information sources How important is (was) information from the following information sources in your business school selection process? (Respondents who did not use the source indicated this by marking source not used. If the source had been used, the valuation was based on a scale ranging from not important at all (1) to extremely important (7).) Accreditation agency (AACSB, FIBAA, etc.) Alumni Anonymous people on the web (e.g., in chat rooms where you cannot determine if a person is an MBA student, professor, etc.) B-school's impersonal information sources (website, brochures, etc.) Business school professors Current business schools students Employer or (former) colleagues Friends or family (Mass) media articles, on- and off-line (press, TV, etc.) MBA admission personnel MBA consultants / student recruitment agencies MBA directories (online or print QS TopMBA Career Guide, mba.com, etc.) Other future MBA students/applicants Ranking provider (Business Week, Financial Times, Wall Street Journal, etc.) Previous own experience with the b-school (first degree, executive education, etc.) Next to the valuation of single information sources, we are interested in the respondent s perception of how relevant different groups of information sources are. We differentiated the four groups presented in Box 4. The respondent was asked to assign 100 points in total to each group according to its relevance in her/his decision process. In order to have a clear understanding of which source belongs to which group, the information sources from Box 3 were assigned to one of the groups.
14 14 White Paper Box 4: Questions regarding the relevance of groups of information sources From a more general perspective, how relevant are (were) the following groups in your business school decision process? (Respondents were asked to distribute 100 points to the four groups according to their relevance for their business school decision process.) Third-party information sources (rankings, accreditation, mass media, employer/colleagues, MBA directories, MBA consultants, friends and family, anonymous people on the web, etc.) B-school sources: Personal b-school sources (students, professors, alumni, MBA admission personnel, etc.) Impersonal b-school sources (website, brochures, etc.) Previous own experience with the b-school Topic 3: Quality Indicators We wanted to get a deeper insight into how quality perceptions about MBA programs are formed. Therefore, we presented four statements to see to which degree concrete indicators are perceived as good indicators of a high-quality MBA program. Naturally, we could not take into account all possible indicators but had to make a selection. Based on interviews with business school students and marketing professionals, the indicators shown in Box 5 were selected for valuation. Box 5: Questions regarding quality indicators To what degree do you agree that the following criteria serve as good quality indicators? (Respondents who did not have a clear opinion indicated this by marking don t know. If the source had been used, the valuation was based on scale ranging from I do not agree at all (1) to I totally agree (7).) A high average GMAT score of a b-school's students serves as a good indicator of a high-quality MBA program. A low percentage of applicants accepted serves as a good indicator of a high-quality MBA program.
15 White Paper 15 A high increase in average salary (post-mba compared to pre-mba) of a b- school's students serves as a good indicator of a high-quality MBA program. An AACSB accreditation serves as a good indicator of a high-quality MBA program. With regard to ranking, the higher the extent to which a b-school student s opinion is integrated in a ranking, the better it is. Topic 4: Self-evaluation of the Respondents and Their Decision Process In this part, we solicited for further information about the respondent s attitudes with respect to the decision process. We did this in two ways. In one part, the respondent was given several statements with word pairs and s/he was asked to indicate which word better describes her/his opinion. The response format was a seven-point semantic differential, that is, it was possible to choose a position that favors one of the words presented but not 100%. If the respondent felt indifference about both words, s/he could mark the middle point (the fourth scale point). In a second part, the respondent was given several statements for which s/he was asked to mark her/his degree of agreement. The questions, word pairs and statements are presented in Box 6. Box 6: Questions regarding the self-evaluation of the respondents Below are several word pairs. Please put a check mark in the position on the scale that best describes your opinion. (answers based on a seven-point scale) My chances of entering my favorite MBA program are (were)... extremely low (1)... extremely high (7) My flexibility in terms of school location is (was)... extremely low (1) (I wanted to go to one particular city)... extremely high (7) (I would have gone to nearly any city in the world) In my b-school selection process, I focus(ed) mainly on... price (1)... quality (7) Overall, my decision process is (was)... rather emotional (1)... rather rational (7) I think my profile as a candidate is (was)... below average (1)... above average (7)
16 16 White Paper For me, finding the right MBA program is (was)... extremely difficult (1)... extremely easy (7) Please mark your degree of agreement with regard to the following statements. (answers based on scale ranging from I do not agree at all (1) to I totally agree (7)) I have a very good knowledge of the MBA market. For me, judging the strengths and differences between the business schools is (was) very difficult. Topic 5: Insights into Application Numbers For a business school, it is interesting to know how many applications a prospective MBA student starts. Since an application for an MBA program consists of several steps and, thus, the application at a business school can be cancelled during the process, we decided to differentiate between the number of applications the respondent had started and the number s/he completed. To complete the questions, the respondent was asked to indicate how many acceptance offers s/he received (and, for future students, how many applications were still pending). The wording of the questions is presented in Box 7. Box 7: Questions regarding the number of applications For how many MBA programs did you start an application? How many applications did you complete? (As many schools have an application process consisting of several steps, you might have aborted some of the applications you started.) How many acceptance offers did you get? For how many applications are you still waiting to hear about? Topic 6: Characteristics of the Respondent Next, the respondents were requested to give some classifying information about themselves (see Box 8). Among the information asked for, there were sociodemographic aspects like gender, age or work experience, but also the GMAT score achieved. Already at the beginning of the questionnaire, the respondent was asked whether s/he is a future, current or former MBA student and which type of MBA s/he is interested in, studying or has finished.
17 White Paper 17 Box 8: Questions regarding characteristics of the respondent What is your gender? [select from a list] You were born in [year]. Which is your country of nationality? [select from a list] When you start(ed) your studies you are going to have (had) years of work experience. In which field of study did you obtain your first degree? [select from a list] Your GMAT score is points. Which of the following statements best describes your current situation? I am still deciding whether to apply for an MBA program. I want to do an MBA and I am currently collecting information about b-schools and MBA programs. I have applied for one or more MBA program(s) but have not made my final decision where to study. I know where I am going to study but I have not started my studies yet. I am an MBA student. I am an MBA alumnus. Which type of MBA program are you interested in, currently studying or did you complete? Full-time MBA Part-time MBA (an MBA program for working professionals taking place on evenings and/or weekends) Executive MBA (part-time) (an MBA program for working executives who have a managerial position and significant management experience) Distance MBA or Online MBA (Part-time/Executive) 2.2 Data Collection Our population consists of all future, current and former MBA students, that is, those people who are currently in an MBA/business school decision process or who have already made these decisions. Current and former MBA students were
18 18 White Paper asked to remember their behavior, etc., during the time they decided to do an MBA and selected a business school. Since, from our point of view, the MBA market is an international market, we did not impose any restrictions with regard to the respondents countries of nationality or residence. Thus, it seemed most appropriate to carry out an online survey that could be accessed from all over the world with the help of any web browser. To avoid any response effects based on the order of the questions, they were randomized within each part. In order to check the questions for comprehensiveness and to detect any problems connected to the filling-out of the questionnaire, a qualitative pre-test was carried out with current business school students in November Subsequently, in December 2007, a quantitative pre-test was realized with 61 members of the defined population. The final data collection was carried out in January and February of Although it was not possible to reach all potential respondents, we wanted to address as many future, current and former MBA students as possible. By using different communication channels, we aimed at reaching different types of MBA students: those who are actively searching for information on the Internet as well as those who do not use the Internet for these purposes. We sent s to those people who had expressed their intention to start an MBA. The majority of the group participants (about 90%) had already taken the GMAT. Since the GMAT test result is used by nearly all business schools as one criterion of selection of their program participants, this figure may be used as an indicator for a strong interest in starting an MBA. Moreover, several business schools mainly from Europe agreed to forward an presenting the research project to their current and/or former MBA students. In addition to these personal invitations to participate in the study, we aimed at reaching people via forums. We opened threads in MBA forums such as or and described the project. Finally, some MBA website providers agreed to publish a banner that called attention to the survey and was directly linked to its start page. 2.3 Sample In total we received 820 completed questionnaires. Of these 820 individuals, 66.1% are male and 28.7% female (missing data: 5.2%). This sample composition is similar to the one obtained by QS latest MBA Applicants Research. 7 In the 2007 Applicant Survey, 61% of the participants are male and 39% female. The median age is 29 years (mean: 30.9), where the youngest participant is 20 years old and the oldest 60 years old. Compared to QS, we seem to have attracted a slightly older group of respondents, as the average age of QS respondents is The geographical distribution of the sample based on the country of nationality shows two foci. To a large extent, the respondents stem from Europe (n=360) or Asia 7 See QS World MBA Tour, TopMBA.com Applicant Survey 2007, p. 10.
19 White Paper 19 (n=285). A more detailed overview of the nationalities represented in the study, aggregated to regions according to the United Nation s classification scheme (see is given in Table 1. Table 1: Nationalities represented in the sample Region (top 3 countries) Number (n=820) Share (100% in total) Asia (India: 158, China: 88, Turkey: 17) Europe (Germany: 63, UK: 35, Finland: 31) North America Latin America and the Caribbean Africa Oceania (Missing data)
20 20 White Paper 3. Background of the Analysis Against the background of our research goal, we carry out two different types of analysis. First, we are interested in getting an overall picture of, for example, the relevance of different information sources in students business school selection process. We achieve this by presenting and interpreting descriptive results of the questions presented in Section 2. Second, in order to get a deeper insight into these results, we investigate whether there are any differences between groups. In the following section, these grouping criteria and the analysis methods we use are described. 3.1 Grouping Criteria We start by differentiating between male and female respondents. As can be seen in Table 2, there are n=542 male and n=235 female respondents in the sample. Table 2: Number of male/female respondents (Grouping Criterion 1) Group Male Female Number of respondents 542 (69.8%) 235 (30.2%) n=777 (missing data: n=43)
21 White Paper 21 We also built four groups based on the type of MBA the respondents are interested in, are studying, or have already finished. The first group, Full-time MBA, includes respondents who are interested in, are attending or have concluded a Full-time MBA program. The second and third groups consist of respondents who are interested in, are attending or have concluded an Executive or a Part-time MBA program. The fourth group, Distance MBA, includes respondents who are interested in, are attending or have concluded a Distance MBA program. Table 3 shows the respective group sizes within our sample. Table 3: Number of Full-time, Part-time, Executive and Distance MBA students (Grouping Criterion 2) Full-time MBA Executive MBA Part-time MBA Distance MBA Number of respondents 580 (70.7%) 89 (10.9%) 101 (12.3%) 50 (6.1%) n=820 The sample was further split into three groups based on the reported GMAT scores. In total, 542 of the 820 respondents revealed their GMAT test result. The groups were defined by the 25% and 75% quantile: that is, the first group consists of the approximately 25% of the sample with the lowest GMAT score, the third group consists of the 25% of the sample with the highest GMAT score and the second group consists of the 50% in-between (see Table 4). Group 1 consists of 150 respondents (27.7%) with a GMAT score smaller than or equal to 610, group 2 of 255 persons (47.0%) with a GMAT score between 610 and 710, and group 3 of 137 respondents (25.3%) with a GMAT score equal to or higher than 710. Table 4: GMAT scores (Grouping Criterion 3) Minimum score 25% quantile at 50% quantile at 75% quantile at Maximum score GMAT score Number of respondents 150 (27.7%) 255 (47.0%) 137 (25.3%) n=542 (missing data: n=278) In addition, we decided to take a closer look at the work experience the students had (have) when starting their MBA. In the same way we established the