higher education seminar 10 june 2003. will ethridge president higher education and international
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Higher Education seminarHigher Education seminar
10 June 200310 June 2003
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Will EthridgeWill EthridgePresidentPresident
Higher Education and InternationalHigher Education and International
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ThemesThemes
US Higher Education is a growing and stable US Higher Education is a growing and stable businessbusiness
Pearson is the clear leaderPearson is the clear leader– breadth and quality of productsbreadth and quality of products– strength of sales forcestrength of sales force– leadership in use of technologyleadership in use of technology– cost advantagescost advantages
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Industry trendsIndustry trends
Knowledge economy fuels demand Knowledge economy fuels demand
Strong enrollment growth at community collegesStrong enrollment growth at community collegesand proprietary schoolsand proprietary schools
Stable industry, mildly counter-cyclicalStable industry, mildly counter-cyclical
Benefits from favorable demographicsBenefits from favorable demographics
Steady 5 – 7% growthSteady 5 – 7% growth
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2.65 2.752.90
3.20
1999 2000 2001 2002
2.65 2.752.90
3.20
1999 2000 2001 2002
US Higher Education marketUS Higher Education marketTotal gross sales, $bnTotal gross sales, $bn
Source: Management Practice DataSource: Management Practice Data
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Sales Rep
The sales process (US)The sales process (US)
Professor Student
Collegebook store
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US Higher Education US Higher Education textbook markettextbook market
Source: SIMBA, The College Publishing MarketSource: SIMBA, The College Publishing Market
New textbooksNew textbooks(includes Custom)(includes Custom)62%62%
Trade booksTrade books1%1%
Course packsCourse packs6%6%MultimediaMultimedia
6%6%
Used textbooksUsed textbooks25%25%
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Pearson US Higher Education Pearson US Higher Education overviewoverview
Net revenue increased Net revenue increased from $277m in ’98 to from $277m in ’98 to $940m in ’02$940m in ’02
Underlying CAGR of 8.0%Underlying CAGR of 8.0%
14% revenue growth in ’02 14% revenue growth in ’02 vs. industry growth of 8% vs. industry growth of 8%
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Pearson is the market leaderPearson is the market leader
US Higher Education Sales Source: Monument Information Resources (MIR)US Higher Education Sales Source: Monument Information Resources (MIR)
OthersOthers10%10%McGraw-Hill (#3)McGraw-Hill (#3)
20%20%
Thomson (#2)Thomson (#2)25%25%
Houghton Mifflin (#4) Houghton Mifflin (#4) 6%6%
Wiley (#5) Wiley (#5) 5%5%
(#1)(#1)Pearson Pearson EducationEducation34%34%
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0%
2%
4%
6%
8%
10%
12%
14%
1999 2000 2001 2002
Pearson EducationRest of industry
0%
2%
4%
6%
8%
10%
12%
14%
1999 2000 2001 2002
Pearson EducationRest of industry
% change in gross sales vs. prior year% change in gross sales vs. prior year
Growing ahead of the marketGrowing ahead of the market
Source: Management Practice DataSource: Management Practice Data
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Two great companiesTwo great companies
Prentice HallPrentice Hall
BusinessBusiness
Science and technicalScience and technical
Liberal ArtsLiberal Arts
Career and technologyCareer and technology
Addison Wesley Higher EdAddison Wesley Higher Ed
Addison Wesley: Addison Wesley: quantitative sciencesquantitative sciences
Benjamin Cummings:Benjamin Cummings:life and physical sciences life and physical sciences
Allyn & Bacon: Allyn & Bacon: education and social scienceseducation and social sciences
Longman: Longman: humanitieshumanities
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$0
$100
$200
$300
$400
$500
Science SocialScience
Math Humanities English Education Trades &Tech
Rest of industryPearson Education
$0
$100
$200
$300
$400
$500
Science SocialScience
Math Humanities English Education Trades &Tech
Rest of industryPearson Education
Est. 2002 retail sales, new + used, through college bookstoresEst. 2002 retail sales, new + used, through college bookstores
##11 in key disciplines in key disciplines
38% 35% 46% 30% 36% 63%54%
Source: Monument Information Resources dataSource: Monument Information Resources data
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Professors are the centre Professors are the centre of Pearson’s focusof Pearson’s focus
ProfessorCustom Competition
AWHE Pearson resourcesPearson resources
543543 repsreps4040 custom repscustom reps6161 sales specialistssales specialists
208208 marketingmarketing
Prentice Hall
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The Pearson advantageThe Pearson advantage
Drive share and improve retention Drive share and improve retention – custom, technology and value pack programscustom, technology and value pack programs
Increase sales through multi-market reachIncrease sales through multi-market reach
Drive down costs through scale advantagesDrive down costs through scale advantages
Superior organizational expertise and talentSuperior organizational expertise and talent– share best practicesshare best practices
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Custom publishingCustom publishing
AdvantagesAdvantages
Drive share gainDrive share gain
Good retentionGood retention
Low returnsLow returns
Strong marginsStrong margins
Types of customTypes of custom
Original materialOriginal material
Database customDatabase custom
Derivative custom Derivative custom blend blend
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18
35
45
62
85
1998 1999 2000 2001 2002
18
35
45
62
85
1998 1999 2000 2001 2002
Growth in custom Growth in custom Sales $mSales $m
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Value pack advantagesValue pack advantages
Integrates print and technologyIntegrates print and technology Enables course management, Enables course management,
testing, researchtesting, research Replaces used booksReplaces used books
Course CompassCourse Compass
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203
255
353
424
1999 2000 2001 2002
203
255
353
424
1999 2000 2001 2002
Growth in value packsGrowth in value packsSales $mSales $m
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Increase sales throughIncrease sales throughmulti-market reachmulti-market reach
Leading international
publisher
Leading retail
publisher
Leading advanced
placement high school publisher
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Leading in advanced placementLeading in advanced placementand High School and High School
65% of all university biology students 65% of all university biology students purchase Campbellpurchase Campbell
Over 500,000 books sold every yearOver 500,000 books sold every year
Reaching into high schools with Reaching into high schools with the leading AP textthe leading AP text
New basal High School programNew basal High School program
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Leading in professional / retailLeading in professional / retail
Harvey and Paul DeitelHarvey and Paul DeitelCo-authors of the best-selling Co-authors of the best-selling introductory programming introductory programming languages bookslanguages books
Over 2.5m copies sold worldwideOver 2.5m copies sold worldwide
Bestsellers in the professional / retail channelBestsellers in the professional / retail channel
Translated into 11 languages Translated into 11 languages
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Leading global publisherLeading global publisher
Kotler’s Marketing Kotler’s Marketing Management has taught Management has taught generations of business generations of business students students
250,000 copies sold each year250,000 copies sold each year
Country-specific adaptationsCountry-specific adaptations
Translated into 23 languages Translated into 23 languages
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Driving down costsDriving down costs
Use of shared services to improve marginsUse of shared services to improve margins
Apply purchasing power to gain savings Apply purchasing power to gain savings – especially in printing and paper costs– especially in printing and paper costs
Efficiencies from content management Efficiencies from content management and distributionand distribution
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OpportunitiesOpportunities
##11 in fast-growing basic skills areas (English and in fast-growing basic skills areas (English and Math)Math)
Growing share in vocational publishingGrowing share in vocational publishing
Delivering more value through content, Delivering more value through content, technology technology and customizationand customization
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SummarySummary
Good demographicsGood demographics
Predictable growth; defensible positionPredictable growth; defensible position
Outperform the industry in sales growthOutperform the industry in sales growth
Grow profits at a higher rate than sales Grow profits at a higher rate than sales due to scale economiesdue to scale economies
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Higher Education seminarHigher Education seminar