A study of parents in low-income communities in Hyderabad, India

Consumers of Affordable Private Schools

November 2010

This study was funded by Gray Matters Capital and undertaken by BGM Policy Innovations Pvt. Ltd., herewith known as Policy Innovations. The findings presented in this report are based on the inferences drawn from the observations given the study objectives and limited research scope. Policy Innovations is a public policy and social enterprise advisory firm based in India and its founders can be reached at: naveen@policyinnovations.in or sudarshan@policyinnovations.in Policy Innovations research team: Naveen Mandava, Sandhya Chari, Sharad Baliyan, Aditi Dimri and Sudarshan Gopalan of Policy Innovations. From Gray Matters Capital: Sarayu Natarajan, Molly McMahon and Pradeep Sharma

Executive Summary
Amidst the global initiatives to improve access to education, a new paradigm has emerged in the schooling system in India Affordable Private Schools (APS). In a country enjoying robust GDP growth and a consistent increase in disposable income, APS has enabled a rising number of parents to transition from beneficiaries of the government school system to consumers of private schooling services. Private schools, generally associated with higher income communities, have become accessible to lower and lower-middle income groups as well. Given the size of these income groups, the market for Affordable Private Schools has grown rapidly. The education market for the lower 60% of the population, by income distribution, has been estimated to be worth about $5.2 billion. With such rapid growth, questions about the quality of schooling imparted through APS have been raised. While Affordable Private Schools emerged as a result of unresponsive government schools, quality of APS has yet to be evaluated. Despite this lack of quality assurance, APS parents are active school shoppers. Given this, Gray Matters Capital (GMC) has created a rating system to provide third party information to parents regarding school quality. As a part of this effort, GMC seeks to understand the consumers of Affordable Private Schooling APS parents. GMC is a charitable arm of Gray Ghost Ventures. One of their focus areas is to co-create sustainable business models to increase the access and quality of education for the poor in India. In the current study, Affordable Private Schools are defined as selfsustaining, private, unsubsidized schools with monthly school fees up to `800 ($18). This study has been undertaken in Hyderabad in the state of Andhra Pradesh. Hyderabad is the sixth largest city in India and has a population of seven million. Recent empirical evidence shows that children from as much as Executive Summary - 3 -

65% of households in low-income areas of Hyderabad attend Affordable Private Schools. A substantial number of Affordable Private Schools have come up in the city in recent years, with estimates pegging this number at around 3000. OBJECTIVES As a part of their wider strategy on engaging with parents, GMC commissioned Policy Innovations to conduct an APS parent market research study focusing on two key questions: I. II. What is the consumer behavior of APS parents in choosing private schools? What is the most meaningful way to engage parents for the purpose of disseminating GMCs School Ratings? METHODOLOGY The study was conducted using qualitative Design Research methodology, as well as quantitative survey techniques. Findings suggested that given the high degree of engagement required to understand APS parents, qualitative Design Research methods are better suited for learning about APS consumers. APS PARENTS SCHOOL SHOPPERS Contrary to common perception, APS parents are not indifferent when it comes to making sound and informed decisions for their children. APS parents, like their better-off counterparts, look to education as the key to social mobility and higher income. As consumers, these parents place a premium on education, and spend a significant proportion of their total expenditure on education. Nevertheless, given the lack of third party information, it was observed that APS parents rely on social networks as their primary sources of information. Perceptions rooted in social networks build rudimentary local brands for schools. Parents use these brand perceptions to identify appropriate schools within their area of consideration. In contrast to the common perception that parents do not give much importance to differentiating between APS schools, the Policy Innovations research team observed that parents had well defined perceptions about every school in their area. Executive Summary - 4 -

In choosing schools, APS parents make decisions using certain parameters. These parameters can be broken into three key areas presented below: Availability of schools o Neighborhood School Density Cost of schooling o Fee transparency o Fee flexibility School quality o Teacher quality o Good academics o English and Computers o School reputation: A local brand o Infrastructure Although measures of school quality are often not immediately discernable, parents seek to measure schools along each of these parameters. Consequently, to measure schools along certain lines, parents resort to proxies. These proxies are often created by parents informally measuring their children in daily activities. For example, parents sometimes determine whether a child is receiving good English education by seeing if the child can read news tickers on television. Thus parents experience a knowledge gap between perceived educational quality, and actual quality of schooling that their child receives. Our insights reveal a twofold knowledge gap: lack of access to credible and accurate information sources, and lack of awareness about other potential methods of evaluating schools. PERSONAS In order to better understand APS parents, our study used Cluster Analysis to create three representative personas. These personas breathe life into abstract consumer types, and help us make sense of their behaviors, attitudes, and goals. Having the personas in mind will make it easier to align goals and develop services for higher uptake by APS parents. These personas, Drivers, Enablers, and Passives, help simplify the myriad attributes associated with APS parents. Drivers Executive Summary - 5 -

actively seek out high quality education by engaging with social networks, and considering schools farther away from home with potentially higher fees. Enablers also aspire to send their children to high quality schools, however are more constrained in their means to do so. Passives may have high aspirations, but lack the social networks to gain schooling information. They also lack the level of child engagement required for them to make sense of that schooling information. They are the most resource constrained, and often have to choose the closest, most affordable private school in their locality. RATINGS GMCs School Ratings can help parents bridge their knowledge gap, and support more informed school choices. The study found that despite the fact that APS parents experienced difficulty in gathering and understanding information about school quality, they had not envisioned a solution in the form of ratings. Furthermore, the concept of ratings was not familiar to them in any sphere of life. After finding analogous tools that APS parents could relate to, such as student report cards, the research team set out to gather data on what APS parents might find helpful in a rating tool. In order to map action onto this data, the Policy Innovations research team created a framework: Concept - Content Form - Channel (CCFC), to develop a road map for high adoption. The Concept refers to conveying the idea that is the basis of an activity, in this case, a third-party independent act of comparing schools based on a set of criteria. The next task is developing the set of parameters used to rate schools the Content. The Form deals with arriving at the most intuitive way of presenting the information to a specific target audience. The Channel aspect delves into the most suitable modes of delivery for reaching the potential users.

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Exhibit I The Concept-Content-Form-Channel framework

Idea of the information product Information contained

Concept

Content

Channel
Delivery vehicles for the product

Form
Tangible presentation of the information

NEXT STEPS Learnings from GMC ratings as a case study can be extrapolated for the larger group of APS service providers. The earlier findings inform three strategic steps for potential APS market entrants: Product Development How to develop for the APS consumer Positioning Why the APS consumer should know you Marketing How you should reach APS consumers These entrants could be service providers, school chains, private investors, foundations etc. Any market entrant should focus on key aspects of product development, positioning, and marketing to ensure high demand by parents, and thereby high adoption rates amongst schools. Executive Summary - 7 -

How to Develop for the Consumer Market entrants should be ready to shed assumptions based on other consumer environments, and know that APS consumers may not immediately understand the premise of the product or service being offered. Feature development, resonating with APS parents, is necessary but not sufficient to ensure adoption. Successful adoption will be based on how those features come together to create a user experience the Form. Why the APS Consumer should know you Market entrants to APS parent market must be cognizant of their endconsumer.

Exhibit II Engaging the End-Consumers

Market Entrants
Business to Business (B2B) Business to EndConsumer (B2E-C)

Schools
Business to Consumer (B2C)

Parents

APS services operate on a B2B model with schools, but have parents as the end-consumer. Parents ultimately drive demand and make decisions about which school services they will consume.

Creating a brand with APS parents will guide parents to actively demand schools to employ services from particular service providers. Executive Summary - 8 -

This will drive up the market entrants demand in the overall APS sector. How you should reach APS Consumers Trends are prevalent in the APS parent market. English and computers have become common school characteristics as a result of this phenomenon. Market entrants should create trends for APS parents to adopt their services. New school services should aspire to have similar traction, by gaining adoption from better-off individuals in the community. Market entrants should reach parents through their children as children have the ability to pre-approve services for parents.

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