"We spend a lot of time and effort getting a student and matching him with a tutor. Once they like each other, both might realize they have a relationship for at least the rest of the year if not longer, so why not leave TutorVista? Once I have trained and certified a teacher, what keeps me from being dis-intermediated? When we went to raise money this was one of the biggest questions. Dis-intermediation happens when people get greedy. We keep the price so low it becomes unattractive for the teacher to go direct. The cost of acquiring a customer for us today is $300, and an individual tutor would incur higher acquisition costs. The amount of money they will make from a student won’t cover it. And we charge $100 unlimited for any subject but one tutor can typically only teach one subject."
Which growth path for TutorVista?
In December, 2006, TutorVista’s second round of funding garnered a further $3 million from Sequoia, plus $7 million from Lightspeed Venture Partners and $750,000 from Silicon Valley Bank. This capital allowed the firm to raise its branding and marketing expenditures while expanding geographically. As the summer of 2007 neared, K. Ganesh was thinking about what would be the best growth path for the business. Online tutoring was likely to evolve into a market with a few big winners, and he wanted to ensure that TutorVista took advantage of its early entry to build critical mass and emerge as one of the best-known names in the field. Within the present business model, there was still room to grow revenues by focusing on more ad sales once traffic grew large enough to make the effort worthwhile, and to experiment with different pricing structures. It was more important in the short run however to maximize the customer base and prove to investors that TutorVista could attract and retain customers with high lifetime value at a reasonable acquisition cost. With this in mind, four alternative growth paths seemed most promising: geographic expansion, product expansion, channel growth, and diversification.
Geographic expansion
TutorVista had launched a site in the UK in early 2007, and was looking at Canada and Australia as logical markets. All three were English-speaking countries where a significant proportion of primary and secondary students aspired to higher education and might require tutoring to improve their school performance. All three also had well-developed Web infrastructure and a growing percentage of homes using broadband Internet access.
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Ganesh wondered whether now would be the best time to get into even bigger geographies with more growth potential. In North Asia, for example, parents commonly invested large sums of money in after-school
tutoring to help their children prepare for good high schools and universities. However, outside Singapore, such tutoring usually took place in the native language, such as Japanese, Korean, or Mandarin. Could TutorVista successfully compete against established local players who had a physical presence and taught in the students’ native tongue?
One way to penetrate such markets would be through language teaching. In the first half of 2007, TutorVista had launched in Korea an offering of English as a second language. The first student was a 50 year old man who said he felt the world was passing him by because he did not speak English. However, pursuing adults as a primary market would run counter to TutorVista’s business model, since their lifetime value is less than that of a youth.
Product extensions
To some extent products and markets were intertwined. Ganesh explains:
"We know math and English are the most sought-after tuition subjects in the US and UK. The maximum price keyword we buy is “help with English.” “English” is the #4 searched keyword on the Internet; you can guess what the first three are. We spent our marketing dollars on math and English and the prophecy fulfills itself. We don’t know how much of a market there is for other subjects because we don’t spend our money there."
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TutorVista might expand its customer base if it embarked on a marketing campaign specific to different subjects, such as languages, science, or social studies. It could also offer more courses geared toward test preparation, speed reading, vocabulary improvement, or other more specific topics. The challenge would be keeping customer acquisition costs down. Ganesh comments:
"We can do cooking classes, for example, but the cost of acquiring a student will be so high that we cannot create a profitable business. We can service someone who comes to us for a cooking class, but we can’t go find them. For example, some of our students want to learn Mandarin, and we can teach that to them profitably, but we haven’t found a profitable way to acquire students who want to learn Mandarin."
Another possible way to acquire new customers via new products would be to offer a broad range of archived lessons on the site and charge for accessing them. TutorVista’s tracking systems ensured that the firm knew which topics within a domain were the most popular, e.g. which subjects in mathematics or grammar seemed to prove the most troublesome for high school students. Why not then provide a library of recorded multimedia lessons online and charge separately for access to them? Remarks Ganesh:
"It’s an appealing idea to
have canned sessions that can be consumed on a self-service model. We haven’t done it yet because our priority has been to make it simple. We don’t want a completely self-service model, since the personalized tutor who can help you step by step is key to our stickiness. There is a Korean company that has done very well with canned instruction though."
A third product extension would be to serve the market for supplemental tutoring funded by US government agencies. However, this would require a fundamentally different business model. Under the “No Child Left Behind” Act of 2002, the US federal government paid for supplemental educational services through state governments. Some states required tutors to have a social security number or undergo background checks. Consequently TutorVista’s policy was to pursue tutoring opportunities funded by students, their parents, or schools, not governmental agencies.
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written by Tony, March 14, 2011
written by Zarka Zargar, September 10, 2010
My question to Mr. Ganesh is that why this cheating and discrimination towards Indian customers. This is absolutely unethical, unfair and punishable act by a company for its frauds.
written by D K Pradhan, December 23, 2009
written by Janaki, October 13, 2009
I am working for www.igtutor.com now, the way they deal with their employees is really outstanding. Their payscae is also good compared to that of tutorvistas, anyway thanks to Mr Ganesh for implementing this innovative ideas, as a teacher I must thank him for taking the first step.
written by Justin Kidder, December 28, 2008
written by Gaurav Sharma, November 28, 2008
written by Deepthi Ramesh, September 22, 2008
I have been assossiated with Tutorvista for past 2 years.It has been a wonderful journey.I am deeply indebted to Mr.Ganesh for giving me this oppourtunity.What makes me proud is the fact that sitting in a remote village of India,I virtually reach the American homes everyday.Tuorvista has opened a new chapter in my life.Thank you.
written by RK, September 10, 2008
written by Binesh Kutty, September 10, 2008
written by RK, September 09, 2008
written by rajkumar, September 03, 2008
I really appreciate his work.
I am well wisher to him
all the best to your future business.
Rajkumar
math lecturer
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