60 Years Later: A GMAT Test With Profit Margins Better Than Apple

GMAC’s new headquarters features a testing center (above) and a cafe

‘THEY DIDN’T EXPECT US TO PULL IT OFF. THEY THOUGHT IT WAS TOO COMPLEX’

GMAC put the business up for grabs, inviting competitors to a shoot out in downtown D.C. ETS fought it out with three other rivals and lost its big contract. The emerging winner was Pearson VUE, a part of Pearson plc, the largest commercial testing company and education publisher in the world. “Of the two proposals (ETS and Pearson), one was far better than the other and the performance has been far better than we had seen,” says Wilson. “It’s pretty safe to say that they didn’t expect Pearson VUE or GMAC to pull it off. They thought it was too complex. But we did.”

Wilson also had to contract with ACT (American College Testing) based in Iowa for the development of the test, while Pearson would take over the administration and distribution of the exam. Those new partnerships for GMAC because as crucial to its future as the decision to ditch the Educational Testing Service and would have been made far more difficult if Wilson’s predecessor had not smartly secured the intellectual property rights to the exam years earlier.

The break with ETS led to a substantial increase in staff for GMAC. Today, the organization has in-house capability to do test design, research, marketing, and technology support–functions that had virtually no staff at all before Wilson joined the organization. “We had to start managing our own research to build our own test questions so we added a psychometric group,” explains Wilson. “We built a more efficient algorithm for choosing the questions. What we don’t get into is the manufacturing side. We are not a mass production shop. We can craft questions but we are not in the business of bundling questions and getting them out to a quarter of a million test takers every year.”

GMAC ALSO ASSUMED A MAJOR ADVOCACY ROLE FOR GRADUATE BUSINESS EDUCATION

Wilson also significantly boosted the organization’s advocacy role for business schools and graduate business degrees. The five major surveys it does annually, along with research on the profile of GMAT test takers, is part of the marketing effort. “This year we will be over three billion media impressions,” he boasts. “That is a very deliberate strategy. I don’t think you can convince anyone to buy anything. On the other hand, to the extent we can talk about the value of the degree, the ROI, and how a degree can help to change a person’s life, that’s helpful.”

He also successfully fended off an aggressive effort by ETS to grab market share away when it began in 2011 to promote the Graduate Record Examination (GRE) as an alternative to the GMAT. But many admission consultants continue to encourage their clients to take the GMAT because they believe schools quietly prefer it. ETS conceded recently that only 2% of surveyed respondents sat for its exam with the objective of applying to an MBA program. Instead, Wilson plowed ahead, launching in 2012 a next-generation GMAT exam with a new section called Integrated Reasoning which measures a candidate’s ability to evaluate information. In an R&D effort lasting more than three years and involving dozens of business school deans, admissions officials, faculty and corporate recruiters, GMAC spent $11 million to get the section into the test and to put on a media blitz including the filming of 11 promotional videos.

All these changes occurred while GMAC became far more candid than ETS ever was about a test taker’s ability to improve on the test. Reminded that ETS used to tell prospective students that they couldn’t really study for the exam, Wilson lets out a laugh. “There’s no question that you can do better on the test if you study for it. That’s a good thing. It’s like any sport or any skill. You get rusty if you don’t use it. If you haven’t done simultaneous equations for eight or nine years and get asked to solve one, it’s going to take you awhile.” GMAC’s own research shows that 60 to 100 hours of study can improve a person’s score by an average of 30 points. “There are some who jump by 100 points because they hadn’t prepped at all,” adds Wilson, who was succeeded as CEO on Jan. 1 by Sangeet Chowfla, a former Hewlett-Packard executive.