The global pandemic accelerated changes that were already underway towards online and hybrid learning, with educational institutions making the transition to virtual learning seemingly overnight (with mixed results). Many schools were clearly underinvested in technology support for their students which led many students to seek educational support outside of traditional channels. Enter education technology company Chegg, a global provider of education support and services to higher education students. From its origins as a textbook rental company, Chegg has expanded its learning platform to include a full suite of student-first, on-demand, adaptive, personalized resources, backed up by a network of human help, all available via subscription. “We believe that higher education must acknowledge that the internet is here and is a permanent part of learning,” Chegg CEO Dan Rosensweig explained on a recent earnings call. “As a result, educators must reimagine how they teach, what the curriculum needs to be, how students are assessed and how to best support them, and if that doesn’t happen, ultimately, it is the students that will suffer.”
Customer + Data + Content + Distribution = A Winning Equation for Education Leader Chegg
2020 was a highly disruptive moment in the history of higher education.
“Educators must reimagine how they teach, what the curriculum needs to be, how students are assessed and how to best support them, and if that doesn’t happen, ultimately, it is the students that will suffer.”
As Rosensweig summarizes, Chegg’s goal is to “enable everyone who has ambition.” Chegg realized that the best way to serve these ambitious students in the new digital reality was through subscriptions. That’s because subscriptions are about more than just a different way of paying for products and services; they are a completely different kind of relationship between a business and a customer. With subscriptions, companies are in the business of delivering value, not just products. Not that products aren’t important. But a product is only a means to an end. “Before we shifted to subscriptions, we didn’t know if the student read the textbook, we didn’t know if the student understood the textbook,” says Rosensweig. “Once we were online and in a direct relationship with our customers, we could see how they were interacting with our products and make investments into what was working — and get rid of what wasn’t.”
“Before we shifted to subscriptions, we didn't know if the student read the textbook, we didn't know if the student understood the textbook. Once we were online and in a direct relationship with our customers, we could see how they were interacting with our products and make investments into what was working—and get rid of what wasn’t. ”
The result? Customers who were satisfied with Chegg and who were getting the results they wanted from their engagement with the Chegg brand. The customer relationship is now 365 days a year. When customers tell the company through their behavior what they want more of (and what they want less of), everything gets more efficient and the products get better. And ultimately, what’s good for customers is also good for business. Chegg’s subscription model has enabled the company to stay ahead of the major platform disruption that education is currently undergoing. In other words, Chegg is redefining the category, instead of playing catch up. The numbers bear that out: in 2020, Chegg had year-over-year annual subscriber growth of 67%, representing over 6.6 million subscribers and total revenue growth of 57% to $644 million. This was driven by an almost $200 million year-over-year increase in Chegg Services revenue, which grew to $521 million. This performance reinforced Chegg’s belief that owning the subscription relationship and subscriber experience benefits the business, their shareholders, and their customers. “We own the customer, we own the data, we own the credit card, we own the channel of distribution, and we own the content. If you own all of those things you can satisfy your customer and completely disrupt the industry,” says Rosensweig.
“We own the customer, we own the data, we own the credit card, we own the channel of distribution, and we own the content. If you own all of those things you can satisfy your customer and completely disrupt the industry.”
But the power of disruption also comes with responsibility.
Chegg recognized early on that the higher education system had not sufficiently focused on the student. The industry was centered on the educational institution, the professor, and the tuition. Students, especially those from non-traditional backgrounds, had to sink or swim. Chegg serves students who don’t traditionally receive very much support. “The four year kid at Harvard has plenty of help,” explains Jug Bath, CTO of Chegg Lending Services. “We’re here for the single mom who comes back from her work day, takes care of everything else and at night is trying to study and finish the course, who needs help.” Chegg provides an alternative to services that are traditionally institution-based that may not be accessible to all students. For example, finding a tutor or going to the writing lab may not be an option because a student might need to stay home with a sick child. Chegg exists to serve those students. They want to give students control over when they interact with the services, so people with full-time jobs can receive help when it is convenient for them. Overall, Chegg seeks to build a support system with the scale, affordability, and relevance to reach the students who need it most. And, as Bath says, “You can’t do that unless you have a subscription, which allows you to form a relationship that is beyond just the transaction.”