Commercial Test Preparation Industry Research Paper Starter

Commercial Test Preparation Industry

This article examines the growth of the test-preparation market since the enactment of the No Child Left Behind Act in 2002. The article starts with a summary of the theoretical premise of NCLB, and then describes the circumstances surrounding test-preparation companies at the beginning of the enactment of NCLB. The research then chronicles the market and business growth of test-preparation companies from 2002 up to present. The most prominent studies that have investigated the effectiveness of test-preparation companies are examined and a brief overview of some of the controversies over the theoretical and practical applications of outcome-based testing is given. The paper finishes by looking at the current technology and market trends that will likely fuel test-preparation companies in the next several years.

Keywords Accountability; ACT; American Statistical Association (ASA); Control Group; International English Language Testing System (IELTS); No Child Left Behind Act of 2001 (NCLB); Professional Development; SAT; Standardized Testing; Standards-Based Education


The New Need for Standardized Tests

On January 8, 2002, the No Child Left Behind Act (NCLB) was signed into law. The theoretical foundation of NCLB is that of "standards-based education," formerly known as "outcome-based education," which has ultimately had the effect of greatly strengthening and increasing the nation's reliance upon standardized testing. The most fundamental ideology behind this reliance on standardized testing is that educational progress, and perhaps student intelligence, can be objectively measured through various standardized tests (most often multiple choice tests) issued to every student. Our educational system operates on the assumption that student education can be measured in this way, and that schools should be held accountable for their students' performances on those standardized tests. The nation has consequently developed an intricate national testing system that has grown until it now includes testing even at the elementary grade levels. Michael Apple (2007) notes that the NCLB has redefined "accountability" as something "…reducible to scores on standardized achievement" (p. 110), so that NCLB enforces the position that "only that which is measurable is important," and this has in turn caused what Apple refers to as an "audit culture" (Apple, 2007, p. 112), meaning we increasingly audit the students as well as the public educational system through standardized testing.

Standardized testing and its attendant system of accountability (which is mainly enforced through federal funding cuts for schools who produce poor results on standardized tests) is firmly in place, and is not likely to change anytime soon. However, the evidence suggests that standardized testing and the preparation of students for those tests is less and less in the hands of educators, and increasingly in the hands of private business. In February of 2002, an article in Time Magazine noted that state high-stakes exams had become "…a fact of life in the American classroom," and that there was "a growing presence and power of firms like Kaplan [owned by Washington Post Co.] that teach students and their teachers how to master them [high-stakes exams]" (Morse & Cray, 2002, ¶ 4). In recent years, federal concentration on performance-based and standards-based education has created an excellent business climate for test-preparation companies, and the growing trend of educational outsourcing to these companies ought to be recognized and examined more thoroughly.

The market for K-12 test-preparation services for state exams, which was "almost insignificant" in 1999, had become a $50 million industry by 2002 (Morse & Cray, 2002, ¶ 5), but that sum has been entirely dwarfed in comparison with the industry of today. Already in 2002, hundreds of small startup companies had joined the test-preparation industry, which led Morse and Cray to predict that, "The demand will only grow with the law signed by President Bush on Jan. 8 that requires annual testing in reading and math in Grades 3 through 8 by 2005" (¶ 5).

It seems that some test-preparation companies were well aware that their market was about to witness the largest economic boom in its entire history, and they got ready for it - though at times this preparation seemed ethically questionable. In 2002, the Wall Street Journal reported on a survey issued by the National Research Center for College and University Admissions (a non-profit membership organization); teachers and counselors across the nation annually collect these distributed surveys from about two million high school students, but neither they nor the students were aware that the entire database was sold to a marketing company and thereafter sold to the private sector - including test-preparation companies (Angelo, 2002, p. 9). Under the NCLB directives that took effect that same year, test-preparation companies' marketing and advertising efforts saw a very big payoff, and in the five years since the NCLB Act was signed into law, the test-preparation business has been tremendous for all of the major market players. Examining the phenomenon first from a business perspective gives important insights into our current educational system.

Test Prep is Big Business

In 2006, Eduventure's report, K-12 Solutions Learning Markets & Opportunities, pointed out that assessment, tutoring and test prep markets were experiencing the biggest revenue acceleration for the entire education market; just those sectors had become a $22 billion market for the 2004-05 fiscal year ("NCLB Drives Shift," 2006, p. 24). The test-preparation sector, in particular, has generated the most profit for companies involved in the educational market. The test-preparation market also extends across several areas of sales for these companies. The largest companies are diversified in their market offerings, and they offer test-preparation manuals, classes, personal tutors, school or district consultants, multimedia packages, many online services, electronic devices, and various combinations thereof- all of which focus on preparing students for taking standardized tests. Test-preparation companies also received a major boost in 2004 when students began taking a new version of the Scholastic Assessment Test (SAT). It was a great boon for the test-prep market, and Kaplan saw its SAT-related sales jump by 50% in the latter half of 2004 (Burt & Sager, 2005, ¶ 2).

The colossal growth and tremendous financial gains of these test-preparation companies can be seen by monitoring the last three years of economic statistics from two leading industry magazines, the Electronic Education Report (EER), and Educational Marketer. EER noted at the beginning of 2005 that the financial outlook for education technology companies for that year would be quite strong thanks to "stepped-up demands of No Child Left Behind," and they noted that this would make technology products an increasingly attractive option for schools. The report made an estimate that overall sales of electronic materials had increased to $1.68 billion in 2004, and they projected this to rise to $1.82 billion for 2005 ("Strong 2005 K-12," 2005, p. 1). The report also projected that new opportunities would emerge from President Bush's proposals for change under No Child Left Behind. Melinda George, executive director of the State Educational Technology Directors Association, forecasted to EER that the sales of technology products would increase for assessment, remediation, test preparation, tutoring and professional development ("Strong 2005 K-12," 2005, p. 6).

In May 2006, the Educational Marketer reported that for test-preparation company Princeton Review, "No Child Left Behind-related Supplementary Educational Services revenue almost doubled compared to the first quarter in 2005, which helped drive the company's revenue growth of 9.4% to $25 million in the company's Test Prep segment" ("Sales of Test Prep," May 2006, p. 1). The article also noted that Haights Cross Communications saw first-quarter revenue for its test preparations segment increase by 30.7%, to $17.8 million. The article reported that the main reason for such phenomenal growth was "because of NCLB testing requirements" ("Sales of Test Prep," 2006, p. 6). Also, revenue in the Test Preparation and Assessment segment for Peoples Education Company increased 11.7% in that same quarter, while sales of that company's "focused-instruction product, workbooks and assessments customized by state for elementary and middle-school students in reading and math, jumped more than 200%" ("Sales of Test Prep," 2006, p. 6). Though not directly stated in the article, it seems quite clear that the additional NCLB testing requirements that went into effect in 2005 were the cause for the incredible 200% increase in sales.

In November 2006, Educational Marketer reported on the company Haights Cross Communications; the company saw only a "modest 1.8 percent increase to 84.4 million in the first nine months of 2006;" ("Test Prep Drives," 2006, p. 1) the report then explains that the reason the company saw any growth at all was thanks to its test-preparation products. Its test-preparation business "grew revenue 21.8% in the third quarter, the fifth consecutive quarter they produced revenue growth of at least 20%" ("Test Prep Drives," 2006, p. 1). NCLB and Test-preparation materials seem to have saved some companies from economic stagnation. It is also interesting to note that the same report quotes Haights Cross chairman and CEO, Peter Quandt, who said he expects the demand for test-prep materials to continue to be high because "states are under increasing pressure to make their tests more effective and are changing their testing programs more rapidly than was customary in the past" (p. 1). He then explained that this consequently shortens the life of test-prep materials, making them require continual revision. Thus, test-preparation companies also seem to be assured of a solid and safe business model that is strikingly similar to the market concept of "planned obsolescence." Quandt finishes his market analysis on an upbeat note; he informs the Educational Marketer that "the implementation of No Child Left Behind-mandated science tests next year offers opportunities for both the test-prep and intervention businesses" ("Test Prep Drives," 2006, p. 2).

The most recent financial report from 2007 continues to record the rise of the test-preparation market. The May 2007 Electronic Education Report begins by noting that Princeton Review saw in its first quarter of 2007 a revenue increase of 19.5% to $40.2 million, versus first-quarter 2006; the report states that the incredible growth was "driven by gains in K-12 Services and Test Preparation Services" ("Princeton Review, Educate," 2007, p. 4). Thus, in 2002 the entire industry was worth $50 million, whereas by 2007 a single company was able to generate a similar amount of revenue within only its first fiscal quarter. Although the specifics are not stated, it may be that Princeton Review's double-digit increase for K-12 services is related to the No Child Left Behind-mandated science tests that Quand mentioned were about to be implemented. This seems likely, since the...

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