Unacademy-Allen’s tussle over teacher poaching will hurt unit economics: Career Launcher’s Nikhil Mahajan

Yatti Soni | Updated on: Jul 10, 2022
Nikhil Mahajan, Executive Director of Career Launcher’s parent CL Educate Ltd

Nikhil Mahajan, Executive Director of Career Launcher’s parent CL Educate Ltd

Says this is not a sustainable growth strategy

Bengaluru, July 10

As Unacademy and Allen battle out in the kota market over poaching of popular teachers, the executive director of Career Launcher’s parent CL Educate, Nikhil Mahajan, said this tussle will only end up hurting the unit economics of both players as it is not a sustainable growth strategy.

Unacademy is reportedly paying 2-3 times salary hikes to educators in an attempt to poach them from competitors such as Allen. These educators’ annual salaries are reportedly running in the range of ₹1 crore to ₹10 crore. In the test-prep segment, teachers tend to have a loyal student following, who often change institutes in order to attend a particular teachers’ class.

Customer acquisition cost has been a major challenge for edtech companies especially in K12 and test-prep segment. In some cases, companies spend ₹300-500 to earn ₹100. Saturation in the traditional acquisition channels has further led to the increase in customer acquisition costs (CAC) of many edtech companies. Industry experts estimate the lead costs to have increased by a factor of at least two-to-three times after the pandemic, pushing companies to find new go-to-market strategies and customer acquisition channels such as offline forays. 

“Thinking that companies can change their pricing from unsustainable -20 to +20 does not work. To bring down CAC from ₹300 to ₹99 and become ₹1 CAC positive — warrants a change in the bone marrow of a business,” said Mahajan.

Career Launcher, which has been operating in the test-prep segment for the last 25 years, said its customer acquisition cost has always stayed around 15 per cent. Mahajan believes that if a Career Launcher center doesn’t become cashflow positive within 12 months, it means that something is wrong either in that location, team, franchise partner or the way they are attacking the particular market.

Further talking about the attrition of teachers in test-prep segment, he said that Career Launcher has gone through 3-4 such cycles of teacher attrition in past 25 years, which are usually motivated by the entry of a new players like Unacademy.  “I am not denying that we have lost people. That threat of teacher attrition is always there, but over a period of time, students come to career launcher because of the brand and the legacy of the brand rather than any individual teacher,” he added. 

The company believes in hiring raw talent and then training them through their inhouse teacher training porgram. It might be a more painful and time consuming process, but Mahajan thinks it is more sustainable.

Career Launcher offers both offline and online courses to its students and expects the education to become hybrid in the post-pandemic world. As Career Launcher’s offline centers opened in the middle of January, the company saw strong demand of students wanting to do offline classes. 

“I am not saying that test-prep is going to be purely online or purely offline. I think needle will settle somewhere in between whether it will be 70-30 or 60-40, depends on the customer sets. Maybe students in 10,11, 12 will have a higher preference for classroom component. Whereas in MBA, GRE, and GMAT, aspirants - It might be larger online component,” said Mahajan. 

The company has around 210 centers across 25 odd cities. In the next three years, Career Launcher plans to open centers in 500 locations out of which 95 per cent will be partner centers or franchise centers and company might setup 5-7 flagship centers at critical locations.

Published on July 10, 2022
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