07/13/2016 04:39 pm ET | Updated Jul 13, 2016

How to Reset a Market's Expectations Through Premium Differentiation

Whenever an entrepreneur innovates an industry, there will be resistance to the status quo. Such opposition can come in the form of preconceived notions of market pricing, salaries, expectations of performance and results, historically low industry margins, and numerous other variables. Nevertheless, when an entrepreneur identifies an underserved or inefficiently utilized segment of a market, the question then becomes how can he break down the barriers of conventionality to recalibrate both the supply and demand side of the equation? While there are several tactics that can be applied, this article will focus on the importance of having premium talent and proven operational procedures to reset an entire market's expectations.

If I offered you the opportunity to start a tutoring and test prep company today, what would be your innate response? Most would say that the market is oversaturated and wouldn't want to launch a business in this sea of competition -- after all, just walk into a bookstore and see the shelves filled with study guides or simply search tutoring companies online and you will be inundated by the numerous options. So how could a company rise above the pack?

Photo: Arun Alagappan, President and Founder of Advantage Testing, Inc.
Credit: Fred Marcus

Arun Alagappan, the founder of Advantage Testing, has completely disrupted the supply side (tutor acquisition model) while raising the compensation metrics for premium tutors on the demand side. Arun is a magna cum laude, Phi Beta Kappa graduate of Princeton University and a graduate of Harvard Law School. In 1986, his career opportunities were endless, but he was so confident in his business model and so committed to improving the educational environment that he decided to pursue his love of teaching in an entrepreneurial venture. By turning down the conventional corporate paths available to him, he instead wound up disrupting the U.S. tutoring industry.

Arun wanted tutors in America to command the same professional respect that they did in other parts of the world. Imagine a company with a talent pool of specialists who were SAT Math tutors from MIT & Caltech, prospective law students being taught the LSAT by Harvard Law graduates, business school students being coached the GMAT by Wharton graduates. That is the quality of talent that Arun has built up on the supply side, and I don't know of any other company that commands such a Dream Team of talent. Today, Advantage Testing has taught approximately 100,000 students and is still going strong.

"Preparing for standardized tests was once regarded as something of a fringe activity. I think that, today, students, parents and teachers alike have come to appreciate that long-term, focused preparation for standardized tests can be extremely beneficial not only in achieving one's academic goals but also in developing lifelong skills and work habits" -- Arun Alagappan

Arun started rebuilding this education equation by attracting Ivy League and other top-notch tutors who scored above the 99.5th percentile on any test that they tutored. At Advantage Testing, the selection process to become an Advantage Testing tutor is rigorous. However, one who makes the cut can come to command the same market compensation as some corporate attorneys and finance professionals. Differentiation through talent acquisition and successful operational procedures allows an entrepreneur not only to run a company effectively but to reset the market's perceptions as well.

While he was attracting an All Star team of tutors, Arun also developed teaching principles through decades of iterations based on methodical deconstructions of the content of the tests. All of this led to significant, tangible increased score results for students. In today's age of gimmicks, Advantage's fundamental approach of going back to the education basics through numerous repetitions allows tutors to identify and correct weaknesses in the student's knowledge base. That is why it is so important to have a process in place that proves results -- otherwise the supply or demand side could unravel and quickly damage a company's brand equity.

Furthermore, whereas an entrepreneur might have a tough time figuring out which side of an equation to start with first -- the classic chicken (demand) or egg (supply) scenario -- the lessons of differentiation through premium talent recruitment and proven results should allow a company to command market pricing premiums. It is unfortunate that American society still does not respect the teaching profession to the same degree that other cultures do; however, it is admirable that Arun has been able to recalibrate the market's expectations for teachers with Advantage Testing.

Please enjoy my inspirational interview below when I spoke with Arun about how he was able to go against the grain and recalibrate a market.


What drove you to found Advantage Testing?

In 1986, I founded Advantage Testing in New York because I felt there had been a missing voice in standardized test preparation. At the time, most people believed that admissions tests were aptitude tests and that there was no point in preparing for them because score improvements would be meager. There were two kinds of tutoring available. One was a form of remediation, to help students who were struggling academically to scrape by on admissions exams. The other was presented as a bag of tricks and gimmicks that could help students "beat the tests," as though you could fool the College Board and other official testing agencies into awarding higher scores than you merited.

My experience growing up was very different. As a high school student, I recognized the importance of these tests in college admissions and I worked hard to learn everything I needed to know in order to excel on them. In the process, while developing a body of knowledge that I would draw upon for the rest of my life, I was able to achieve scores that helped me realize my academic goals. So when I began tutoring professionally, I wanted my students to approach the SAT as I had, as an opportunity to learn and to achieve.

And so I developed content-based approaches that allowed students to engage tests constructively. Advantage Testing students leverage their preparation as a means of developing the habits, skills, and intellectual confidence necessary to meet the challenges of high school, college, graduate and professional schools, and demanding professional careers. I soon realized that this rigorous approach -- combined with focused one-on-one tutoring -- would yield outstanding results for any test or academic subject, and we gradually expanded our services.

You are a magna cum laude, Phi Beta Kappa graduate of Princeton University and a graduate of Harvard Law School. With a background like yours, you must have had the opportunity to pursue a lucrative career in a number of fields. What did your family & friends think when you told them you didn't want to follow conventional career paths and planned to launch your own tutoring company?

My late father was a deeply spiritual man who built a fulfilling career in the United Nations adhering to his principles of humanitarianism. A lifelong student with five academic degrees including a law degree and a PhD, he was also my role model. He encouraged all his children to find their true calling in some service or another, convinced that if we were inspired by our own passions, then our careers would take care of themselves.

So my family has always been tremendously supportive of my commitment to teaching -- an activity that to this day, I truly love. My brother Vairam operates a thriving Advantage Testing office in Long Island. I routinely consult my wife Fran and three daughters -- the best focus group I can imagine -- on matters of judgment. I am truly grateful that my family have been such willing partners in supporting Advantage Testing's growth; I've always felt that the best way to undertake a successful entrepreneurial venture is with the emotional and moral support of one's family.

How many students has Advantage tutored over the lifespan of the company?

We have worked with around 100,000 students.

Photo: Arun Alagappan congratulates a contestant at the Advantage Testing Foundation's Math Prize for Girls awards ceremony at the Massachusetts Institute of Technology; Credit: Casey Henry

There are a lot of tutoring companies for standardized tests. One could say it is a saturated market. What differentiates Advantage Testing from the pack?

What differentiates us most is our tutors, who I believe are the most accomplished and effective group of private instructors in the nation. In addition to being an outstanding teacher, each of our tutors has scored above the 99.5th percentile on any test he or she tutors. Further, though we do not publicize internal data, our score increases, which have been described as "stunning" in the New York Times Magazine, are substantially higher than those advertised or "guaranteed" by any other tutoring group we've seen. Likewise, on student evaluations, our tutors score on average 9.5 and above out of 10, making them almost certainly the most highly evaluated teaching corps in the country.

Another key differentiator of Advantage Testing is our commitment to elevating the profession of tutoring. We offer aspiring tutors a fulfilling and lucrative career opportunity, not just a means of income on the path to some other end. Most of our tutors are full-time, though many also appreciate the flexible hours to sustain extracurricular interests in academics, the arts, and public service.

Photo: Arun with the Trials Class of 2011 at Harvard Law School; Credit: Charles Loxton

To that end, we have developed an infrastructure that allows tutors to fully leverage their teaching ability and to appreciate being part of an expert, results-driven organization. Nearly all of our senior instructors maintain offices so that their teaching schedules are not compromised by travel time and they have an appropriate dedicated space in which to conduct lessons. We have also committed to providing them with best-in-class curricula, allocating a seven-figure annual budget to developing new teaching materials. In the last year, for example, we have developed an entirely new set of worksheets, exercises, outlines, and practice tests in response to recent changes to the SAT and the MCAT.

Though Advantage Testing is strictly a word-of-mouth organization (we don't advertise or directly market our services), our business in terms of revenues and number of students has grown every year for 29 consecutive years. Because of our reputation for academic excellence, intellectual rigor, and uncompromising standards, we have earned the partnerships of leading universities such as Harvard, Princeton, MIT, and NYU in our public service efforts.

With Advantage Testing, you have been able to recalibrate the market compensation norm for teaching. How have you been able to do this since historically teachers have been under-compensated in the U.S.?

Compensation for teachers as a fraction of GNP is lower in the United States than it is in just about any other major industrialized nation. At Advantage Testing, however, our number one expense is our teachers' salaries. The rates we charge are comparable to, but certainly not higher than, the fees of leading professionals in fields such as law, accounting, public relations, finance, and medicine. The notion that highly qualified individuals providing a highly valued service should expect to make less because their chosen field is education has always struck me as misguided. Of course, in order to ethically charge what we do, we must commit to the highest possible standards in all respects. And we do.

Photo: Arun speaks before a group of LEDA Scholars and Trials students at a reception at NYU School of Law; Credit: Charles Loxton

You might say that Advantage Testing is the premium tutoring company out there, in terms of both talent and pricing. What do you say to those who don't think Advantage should be charging so much for tutoring?

Advantage Testing's fees reflect the qualifications of our tutors, the quality of our services, the strength of our curriculum, and our belief that teachers should be compensated at a rate commensurate with the rates of other leading professionals who offer highly valued services.

In terms of overall expense, for those families who have the opportunity to pursue private education from grade school through college, the amount they spend on tutoring represents a small fraction of what they will ultimately contribute to their children's educations. Meanwhile, the majority of our students regard their work with Advantage Testing tutors to be among the most rewarding academic experiences of their lives.

What about students who simply can't afford your rates?

From our inception, Advantage Testing has upheld the proposition that critical educational services should be accessible to students of every socioeconomic background. We offer significant financial aid and pro bono tutoring to students who cannot afford our services, and we are committed to working with every motivated student who requests our services, regardless of his or her financial circumstances.

In 2007, we established the Advantage Testing Foundation to provide outstanding educational services to high-performing students of modest means hailing from backgrounds that have historically been underrepresented in fields of higher learning. The Advantage Testing Foundation is guided by the same principles as our private enterprise: dedication to academic rigor, long-term educational development, and the proposition that sound tests are powerful vehicles for learning. In each of the AT Foundation's flagship commitments, we have partnered with leading universities to provide talented students of disadvantaged and underrepresented backgrounds the opportunity to achieve their highest aspirations.

For example, our partner MIT hosts the Advantage Testing Foundation's Math Prize for Girls, the largest math prize for girls in the world. The purpose of our Math Prize is to promote gender equity in mathematics and encourage the ambition that will yield the next big breakthroughs in STEM professions.

2016-07-12-1468287008-5078344-Photo5.jpgPhoto: Arun greets a finalist at the Advantage Testing Foundation's Math Prize for Girls. Credit: Casey Henry

Then there's LEDA, the Leadership Enterprise for a Diverse America, of which we are a principal sponsor in partnership with Princeton University. LEDA students have recorded an extraordinary admission rate to the nation's most selective colleges and universities that any college access program or, for that matter, any public or private high school in the nation would be thrilled to match. Even after we expanded the program in 2015 to include 100 students, more than 40% of our students will be attending Harvard, Princeton, Yale, Stanford, or MIT.

Finally, in partnership with Harvard Law School and NYU School of Law, in 2009 the AT Foundation launched Trials, the Training and Recruitment Initiative for Admission to Leading Law Schools. Trials has helped bright, motivated students who have overcome devastating adversity in their lives to gain admission to every one of the nation's top ten law schools. The median starting LSAT score for Trials students is at the 40th percentile, but through energetic study and good cheer, Trials students have raised their median LSAT score to the 88th percentile. Thus far, approximately 30 percent of our students have been admitted to Harvard Law school.

You have been an educator for more than 30 years. What patterns have you seen transpire over the years from both tutors and students?

Preparing for standardized tests was once regarded as something of a fringe activity. I think that, today, students, parents and teachers alike have come to appreciate that long-term, focused preparation for standardized tests can be extremely beneficial not only in achieving one's academic goals but also in developing lifelong skills and work habits. The stigma that was once associated with tutoring is long gone, along with the counterintuitive notion that students shouldn't prepare for high stakes standardized tests.

Additionally, in Advantage Testing's early days, more than 90% of our work was standardized test preparation. Today, in all our locations, we are seeing a much greater demand for academic tutoring, helping students master the challenging material they encounter in their school and university curricula. As educators, we welcome this opportunity to participate in a student's larger academic journey and quest for knowledge.

"Advantage Testing's fees reflect the qualifications of our tutors, the quality of our services, the strength of our curriculum, and our belief that teachers should be compensated at a rate commensurate with the rates of other leading professionals who offer highly valued services." -- Arun Alagappan

My favorite class in college was a private reading tutorial with the Chairman of the philosophy department. In our meetings, we would together interpret the week's readings. What intellectually curious student wouldn't love the opportunity to take part in such one-on-one tutorials? Private tutoring offers the most active form of learning possible, enabling a student to focus his or her full attention on the subject at hand and sift through all of the nuances inherent in a difficult and engaging topic.

In recent years, we've seen more high-achieving students seek tutoring to assist with highly challenging classes that they might otherwise be reluctant to take. Of course, we also see students who are underperforming in high school and turn to tutoring both to understand fundamentals and to perform at a higher level.

Photo: Arun addresses LEDA Scholars at Princeton University; Credit: Charles Loxton

Every year the competition for these standardized tests is getting tougher and tougher. What habits or activities do you recommend for someone that wishes to reach peak personal performance?

In any field, sustained and focused preparation is critical to achieving one's goals. In high school, some students find they can be successful undertaking such preparation on their own, but many benefit tremendously from working with a tutor. That's why in those countries whose students consistently perform the highest on international assessments, tutoring and afterschool enrichment programs are the norm, not the exception.

Of course, students can and should strive to improve their performance with their own habits. I always tell students: take advantage of all the academic resources your school provides. Take rigorous academic courses, ask questions, seek out teachers willing to provide extra help with material you don't understand, and study hard. This old-fashioned work ethic goes a long way in helping to improve scores.

Photo: Arun Alagappan is also the Founder and President of the Board of Trustees of the Advantage Testing Foundation; Credit: Fred Marcus

When preparing for a standardized test, take all the official tests and other preparation materials the test writers have released. Take these tests with a friend, parent, teacher, or counselor proctoring and keeping time, to make sure you are practicing in the conditions in which you will sit for the actual test. Afterwards, review all the questions you got wrong, and seek assistance from a teacher or a friend to help explain the concepts you don't understand.

The best thing a student can do to improve overall reading ability is to read as much as possible at an advanced level (high-quality periodicals, serious literary works, etc.), to concentrate on reading briskly with full comprehension, and afterwards to look up and memorize the definitions to words the student does not already know. The intellectual benefit of such extracurricular reading increases dramatically when parents read the same articles and discuss them with their children, because the questions informing such discussions are the same questions posed on the tests:

  • What was the main point of the article?
  • Why did the author include certain information?
  • How does the author make her case?

Again, one can't overstate the impact of familial support.

In today's digital age, a significant number of your competitors have their course work online. Yet, Advantage has stuck with the "old school" pen and paper core fundamentals. Despite this, Advantage has had phenomenal testing results. Why do you think that is?

Well, we do offer computer-adaptive testing for tests that are administered in this way, such as the GMAT. We have also authored our own digital and online course materials. But we strongly believe that there is no more valuable preparation material than that authored by the test writers themselves. So in the case of the GMAT or the GRE, there are just a few official computerized tests released for practice, whereas there are hundreds of pages of paper materials written by the test writers. We feel it is crucially important for students to refine their skills on questions that have actually been tested, even if those questions are presented in test booklets.

I will also note that recent studies have shown that students absorb and retain information better when they take notes by hand, as opposed to on a laptop. We feel that this benefit extends to how a student reinforces his or her academic skills.

All that said, we recognize the value of technology and certainly incorporate it where we see clear benefits.

Where is Advantage currently located? Are you looking to expand to other locations? If so where?

Advantage Testing maintains 16 locations nationwide: New York City, Westchester County, Long Island, Houston, Los Angeles, Silicon Valley, Boston, Chicago, Washington D.C., South Florida, Northern New Jersey, Princeton, Austin, Philadelphia, Portland, and Westport, CT. Abroad, we are currently growing a location in the United Kingdom and maintain an office in Paris, France.

In terms of new regions, we could certainly increase our footprint in the American South and the Midwest, but we are wary of expanding for expansion's sake. We first need to ensure that we have the appropriate personnel in place to maintain our uncompromising standards. Our explicit mission is to provide the preeminent private tutoring in any location in which we operate -- we're not interested in doing anything less.

Additionally, in recent years, we have relied increasingly upon online tutoring platforms and distance learning to work with hundreds of international students and students who reside in regions where we do not currently have an Advantage Testing office.

I read that in New York alone, Advantage receives nearly a thousand applications a year from tutors who wish to join your team, yet you accept only 5-10 each year. What do you specifically look for when hiring someone?

It is true that given such a deep talent pool, most of our instructors have remarkable credentials including advanced degrees from leading universities. But what we look for most is extraordinary teaching ability. We actively recruit dedicated educators who want to pursue a rewarding professional career as teachers.

So our tutors are possessed of a set of personal characteristics that make them uniquely suited to be effective instructors in a one-on-one environment. They are all exceptional communicators. They can understand and explain complex academic material. They are smart but approachable. They appreciate that being a great teacher entails listening as well as talking. They are creative, empathetic, and inspiring; many are funny and entertaining. They have sustained records of outstanding academic achievement, but more importantly, they are profoundly committed to their students' success.

What do you think the most rewarding part of your job is?

Without question, the opportunity to teach students of every background and to watch their rapid progress as they work for and achieve their goals. Few jobs I can think of are more emotionally resonant.

What advice do you have for an aspiring entrepreneur?

We touched on it earlier: before you become involved in any business venture, make sure you are inspired by the product and the work. Otherwise, sooner or later, the demands and challenges of running a business are bound to wear on your soul.

The German philosopher Friedrich Nietzsche once suggested that the purpose of every man's life is to regain the seriousness he had as a child at play. What this means, I think, is that every person should find his or her calling and pursue it passionately. Only by engaging in work that captivates us can we become fully realized. And when you make such work your life's pursuit, those ancillary benefits -- generating an income, serving your community, making the world a better place -- will follow naturally.

Thanks for your time.

Thank you. It's been a pleasure.