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Winners

Benesse Corporation Education Business Group,

2005 5th Porter Prize Winner Education
Educational support not only in preparation for entrance examinations but also in everyday study at home for children and students in a broad age range from 6 months old to high school seniors, achieving high customer satisfaction via individually-tailored correspondence course services while offering reasonable prices. As a result, Benesse has gained remarkable customer support.

Executive Summary

Benesse offers 19 correspondence courses in total, with the brands "Kodomo Challenge" (Kids Challenge) for infants from age six months to pre-school age, and "Shinken Zemi" (Advance Study Seminar) for students from elementary school through senior high school.

The educational services industry has been facing a greatly changed business environment due to the decline in child population and changes and diversification in the educational curriculum in the past several years. The Education Business Group in Benesse Corporation (Benesse hereafter) has been successful in offering individualized education services at reasonable prices by specializing in correspondence courses and devising and building unique activity systems. Benesse's approach transcends the traditional tradeoff between standardized mass education in a classroom setting and individualized instruction for a few students at high prices. The total number of students in correspondence courses offered by Benesse is approximately 4,010,000 (as of April 2005, up 4.7% from a year earlier), which represent one fifth of Japan's total pre-college age population (from newborn infants through 18 years olds). Benesse also enjoys a very high re-signing rate of students, both when students move up a grade (e.g., from first grade to second grade in the elementary school) and when students move from one school level to the next (e.g., from elementary school to junior high school).

Unique Value Proposition

The value Benesse offers derives from supporting students at home with everyday study. As opposed to a focus on preparation for entrance examinations, Benesse provides continuous support to children from six months of age through graduation from senior high school.

Benesse provides information for students to assess which high schools and colleges to apply for, but it does not stop there. Benesse tries to raise awareness about future careers beyond education in schools by offering career information and counseling opportunities for students of every age from elementary school, junior high school and senior high school. Beyond offering teaching materials in every subject, Benesse provides information to assess and choose schools and conducts nationwide scholastic aptitude tests. Benesse offers students a package of services to think about their future and set goals, to study and gain capabilities and to assess their level of achievement. In other words, the company supports processes for students to become self-sufficient in considering and planning their future based on their goals, to improve their knowledge and capabilities, to objectively assess their achievement and to make further efforts to grow their capabilities or adjust their future course.

Although Benesse's study support is based on the common learning needs at each grade level, it customizes support for each individual student. Contents of the teaching materials sent monthly to each student are organized and adjusted based on the textbook used in the school, progress of what is taught at the school, and development level of each individual student. When a student sends back answer sheets to Benesse, the "aka-pen sensei" (literally "red-pen teachers") writes individualized feedback in red on the sheets which are returned to students. This feedback is not limited to indication of correct or wrong answers and scores but also gives advice about effective study methods when students write about their concerns regarding study methods, or a conflict between study and sports activities, etc.

Capitalizing on its sheer size with one in every five students enrolled and the consequent extensive national network of students, Benesse provides excellent information both in quality and quantity to member students. Its communication includes not only aptitude score diagnosis and projection on passing entrance examinations but also extensive school information (both senior high schools and colleges/universities) as graduates of Benesse's "Shinken Zemi" program introduce life at different schools, describe their experience in preparing for entrance examinations, and give specific advice gained from experience.

Furthermore, Benesse's services are offered at reasonable prices, which is a prerequisite to be a continuous supporter of everyday study (if price settings were high, most students would only be able to enroll for the short period of time limited to preparation for entrance examinations). The monthly fee for "Kodomo Challenge" is only 1,487 yen per month, "Shogaku Koza" or Elementary Studies costs in the range of 2,431 yen to 4,472 yen (depending on the grade), "Chugaku Koza" or Junior High School Studies costs 4,982 yen, and fees for "Koko Koza" or Senior High School Studies are 7,211 yen per month (as of 2005).

Unique Value Chain

Teaching material development, scoring, and preparing feedback
Benesse's study support is customized to the individual needs of each student. This is made possible by combining Benesse's abundant teaching materials with its IT system technology. Benesse has numerous teaching materials developed and accumulated over the years. Taking an example for freshmen in high school, there are 2,000 different lessons for English and 1,400 for mathematics to choose from. Benesse has an automated system to select the best combination of teaching materials for a student based on the textbook used at school, progress in classroom teaching, and schools targeted for application by the student in the future. Teaching materials selected based on these criteria are processed for automated printing and sent to the student on a monthly basis.
The number of copies to be printed for each teaching material can be predicted with high precision based on the fact that the membership continuance rate is very high, and also new customer acquisition can be accurately estimated based on analysis of accumulated past data for responses to TV commercials and direct mailings.

Corrections, instructions, advice and encouragement are hand written as individualized messages by aka-pen sensei or "red-pen teachers" on the answer sheets sent in by students, providing a high-touch service. Benesse currently manages 20,000 such "aka-pen sensei". Many of these instructors are motivated by the mission of developing children's ability to learn and also by the pleasure of directly communicating with students. Benesse further tries to enhance their motivation by creating a web site for aka-pen sensei to communicate with Benesse's staff as well as one another and also to encourage sharing new ideas for planning teaching materials.

Outbound logistics
Teaching materials that come out of the automated printing system are individually packaged and addressed for shipment from Benesse's highly automated distribution center.

After-sales service
Outbound calls are periodically made to students by Benesse's call center staff to inquire if students feel the teaching materials are adequate or face any problems in studying. These efforts to proactively resolve issues faced by customers contribute to Benesse's customer satisfaction.

Benesse also provides a variety of information to member students. For example, "Zemi Reports" on life in college described by former member students of "Shinken Zemi" are highly appreciated.

Acquiring new customers
Because of the high subscription continuance rate for Benesse's education services, it is not necessary for Benesse to make a huge investment in new customer acquisition. With this situation as a backdrop, Benesse runs a very efficient customer acquisition operation through well-coordinated activities both by its "Headquarters (HQ) Marketing Division" and its "Regional Marketing and Promotion Division". The HQ Marketing Division carries out nationwide TV commercials and web marketing activities, while the Regional Marketing and Promotion Division carries out region-specific promotions. After potential customer interest is engaged by this synchronized communications mix, direct mail is sent out from the headquarters to achieve highly efficient customer acquisition. Since only these organizational units handle marketing and promotion activities, very few staff are involved.

Technology development
Correspondence courses are based on the premise that children can study on their own with the teaching material. In order to achieve this, Benesse develops easy-to-read effective teaching material, based not only on survey results of customers regarding teaching materials but also on their accumulated data regarding on what type of questions students tend to make mistakes, obtained from answer sheets sent back from students and from nationwide tests Benesse conducts. Benesse allocates more detailed explanations to areas where students may stumble and constantly improves teaching materials by use of graphics and illustrations, as well as personalizing the speech and written text patterns used by virtual "Shinken Zemi" teachers.

Since 1980, Benesse has been carrying out various surveys to understand educational issues. Some of the surveys are repeated every 4 to 5 years, and others are focused on topical issues of the time. Helping Benesse interpret the survey results is its network of scholars specialized in education, including specialists of each subject and researchers of broad academic areas including child rearing and education.

Firm infrastructure
The corporate name Benesse (an artificial word made up of "bene" meaning "well" and "esse" meaning "being" in Latin) reflects well the company's philosophy, and is shared not only by its full-time corporate staff but part-time staff such as "aka-pen sensei" and former "Shinken Zemi" members who contributes college reports. This corporate philosophy clarifies the purpose of the work each staff member carries out and contributes to enhance motivation for each to work with pride and a sense of obligation and psychological reward. As a result of continuous public relations activities, Benesse's corporate philosophy and posture have now been transmitted to and understood by customers, resulting in improved customer trust and loyalty.

Fit among Activities

Benesse's activities are aligned to achieve customized services at a very high level and low cost to customers.

Unlike entrance exam preparatory classes held in commercial classrooms, the correspondence course business does not require hiring well-known (and often very well-paid) instructors. Instead Benesse can hire "aka-pen sensei" from Japan's large pool of well-educated housewives as part-time staff. As a result, Benesse is able to provide high-touch and high-quality individualized services at a lower cost than in the case of hiring full-time staff. Furthermore, Benesse as a correspondence course provider does not pay classroom rent which is a major expense item for the preparatory class business.

Utilizing its vast accumulated data, Benesse has automated the process of selecting teaching materials fit to each student and the process from printing through packaging and shipment of those materials. Because of the annual subscription system and high continuance rate, there is little risk of building excessive inventory of printed materials.

At its headquarters and regional division, Benesse concentrates on the two key functions of teaching material development and marketing. No marketing staff is allocated in regional offices. Furthermore, due to high continuance rate, Benesse does not spend much on marketing for new customer acquisition. The high continuance rate also contributes to accumulation of information about each customer that enables even more efficient customization. (Please refer to "Activity System Map" attached for more detailed accounts of relationship among these activities.)

Innovations that Enabled Strategy

  • Strategic concept of continuous study support from newborn infant through age 18.
  • Benesse designed and developed a system to utilize housewives as "aka-pen sensei" to deliver high quality individualized services to customers at low cost.
  • Benesse built database containing customer information and numerous teaching materials and an automated system for printing and shipping customized teaching materials.

Consistency of Strategy Over Time

The core of Benesse's education business is "Shinken Zemi" which was started in 1969 with a service format that is still kept today, with correspondence courses for members enrolled as subscribers (to ensure continuity) and individualized feedback. However, the main target at the time was students studying for entrance examinations.

In 1980, Benesse expanded its target from "students who are studying for entrance exams" to "all children enrolled in the education system", and consequently their services were also expanded from entrance exam preparations to providing broad information in areas including future academic course selection and various issues children encounter in all aspects of life. This shift formed the basis for the current strategy.

Furthermore, this change in strategy led to Benesse's review of its total corporate philosophy in 1990. To support everyday study of children is in line with the corporate philosophy announced in 1990 as "Benesse" (a word coined by Benesse by combining words in Latin: "bene" meaning "well" and "esse" meaning "being or to live". According to Benesse Corporation, Benesse means "to live well" or "a life style where one fully enjoys life with positive and forward-looking posture". Under this corporate philosophy, Benesse declared that the company "is determined to become a corporation that assists and supports each individual to explore and find a path for his or her life, throughout the areas of 'education, language, life, and welfare'", and furthermore it sets out to "support problem solving and motivation enhancement for infants through senior citizens in their entire life span" as Benesse's corporate mission.

In 2000, Benesse advanced its policy of individual customization one step further by changing its teaching material system from more standardized teaching materials being used for the same grade to an individually tailored selection to be made from thousands of different prepared lessons.

The "Kodomo Challenge" program for pre-school age children also implements the same strategy as "Shinken Zemi" strategy for high school students. For example, "Kodomo Challenge" focuses on continuity, is priced reasonably, is a correspondence course that does not require a classroom setting, uses picture books and videotape as teaching materials developed to meet specific needs captured by the membership system, and uses high-touch communication (with mothers of the infants). The main difference is that no individualized feedback is given since pre-school children do not need to solve complex problems. Due to the different needs of school age children and pre-school children, the level of customization required in "Kodomo Challenge" is a lot less than for "Shinken Zemi".

Benesse recently faced two major changes in its business environment. The first change was the decline in child population, and the second was the revision in the school education policy in Japan. The new teaching guidelines announced in 2002 focused on a policy direction of "creating slack in education" that led to a major reduction of overall classroom hours for traditional teaching in elementary schools and increased hours spent outside the classroom to encourage broader experiences for children. As a result, concerns were raised from a wide spectrum of society, including children and parents, and teaching contents became very much diversified among schools.

In response to this change, Benesse was required to provide even better individualized services with higher effectiveness and reliability, and Benesse made efforts to perfect its existing strategy. Benesse enhanced customization by introducing a new course selection system by level of achievement and progress of each student and broadened the selection by adding new courses to specifically prepare for entrance examinations of several top-notch universities. Benesse also expanded its call center capacity and started to make outgoing calls to students to reinforce high-touch relationship building in addition to written communication by "aka-pen sensei." In order to communicate these enhancements of its individualized services, Benesse used TV commercials to create a combined effect with their ongoing direct mailing. As a result enrollments which had sharply declined after 2002 almost returned to the peak level experienced in 2000.

Trade-offs

  • Benesse does not provide education services in a classroom setting, as it would not be possible to render such service at low cost because of high rent for a classroom space in Japan.
  • Benesse does not provide face-to-face learning opportunities. (There has been a recent test of setting up small study rooms at homes of "aka-pen sensei". This test, however, is not for giving instruction by a teacher but rather is limited to providing support for elementary school children to build habits of self-study and learning. Furthermore, these study rooms are arranged in homes of "aka-pen sensei" and no rent payment is involved.)
  • Benesse does not sell textbooks and teaching materials through bookstores which involves high distribution margin as well as difficulty in forecasting for production.

Profitability

Return on invested capital of the Education Business Group, Benesse Corporation has consistently been much higher than the mean of the education service industry, and its return on sales is also better than the industry average.

Return on invested capital (ROIC)   (Unit = percentage point)
Difference from industry averag
over 5 year period
Difference from industry average, by year
2000 2001 2002 2003 2004
79.8%P 93.5%P 73.2%P 47.7%P 86.8%P 115.6%P
Return on invested capital = Operating income / Average invested capital

Return on sales (ROS)   (Unit = percentage point)
Difference from industry average
over 5 year period
Difference from industry average, by year
2000 2001 2002 2003 2004
7.5%P 9.8%P 9.3%P 4.0%P 7.5%P 8.1%P
Return on sales =Operating income / Net sales

Activity System Map

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