How the GRE Is Trying to Win the Standardized Test Wars

The GRE’s administrator wants to tap into the lucrative MBA market

People visit the booth of Education Testing Service to get information about TOEFL (Test of English as a Foreign Language) and GRE (Graduate Record Examination) during the 2014 China International Education Exhibition in Shanghai, China, on Nov. 1, 2014.

Photographer: Imaginechina/AP Images

Once upon a time, the only way for prospective MBAs to have a shot at a business degree was to take the Graduate Management Admission Test, or GMAT. It didn’t matter which business school you wound up in: To get there you had to, among other requirements, pay the test fee to the Graduate Management Admission Council (GMAC), which owns the exam, and answer quantitative questions like “If r•s≠0, then what is the value of r/s + s/r?”

Then, nine years ago, business school applicants around the world started taking the Graduate Record Examinations, a test traditionally used for nonprofessional graduate degree programs—such as a master of arts or international affairs—and administered by the Educational Testing Service. From 1954 to 2006, ETS was also under contract to run the GMAT. In 2006, after the contract came up for renewal, GMAC turned the test over to Pearson, an educational publisher, and ACT, which runs a standardized test for high school students applying to college.

The GMATs had been a lucrative enterprise: News reports at the time said the Pearson-ACT contract was worth $200 million over seven years. In 2013, GMAC took in about $80.5 million in test fees from roughly 200,000 test takers, according to IRS filings.

After losing the contract, ETS started marketing the GREs, which it has administered since 1949, to business schools as a more flexible, accessible, and less expensive alternative to the GMATs. The GRE costs $195, compared with the $250 GMAT. It’s offered both as a paper-based exam and on a computer; the GMAT is taken only on a computer. The GRE is appealing to people who want to apply to MBA programs and other graduate programs, says David Payne, vice president and chief operating officer for global education at ETS.

ETS’s efforts seem to be paying off: 29 of 30 top U.S. business schools ranked by Bloomberg Businessweek, including Harvard, Stanford, and Columbia, now accept the GRE. In 2014 the number of GRE test takers globally rose 3 percent from the year before and 12 percent from five years earlier, according to ETS. The growth is largely attributable to the number of foreign applicants, especially from Asia, hoping to study at U.S. business schools, the test service says. From 2009 to 2013 the number of people taking the exam increased 124 percent in India and 44 percent in China, according to ETS data. “We’re seeing massive growth in the middle class in India and China, and more people who have the financial means to support graduate education,” says Payne.

The test also is making gains in Europe, where ETS has sent outreach teams to try to persuade more business schools to accept it. According to Christine Betaneli, senior director of public relations at ETS, 92 MBA programs in Europe now accept the GRE.

Still, only 1 in 10 applicants at U.S. business schools submits the GRE instead of the GMAT, according to a survey of U.S. admissions officers conducted by Kaplan Test Prep. The number of GREs administered in the U.S. fell from 445,135 in 2009 to 422,668 in 2013, a drop of 5 percent.

GMAC officials say the market for the GMAT remains strong. “For those who are serious about seeking a business career that starts with a business education, the GMAT is still the gold standard,” says Rich D’Amato, vice president for global communications at GMAC.

Business schools aren’t pushing one test over the other. “We’ve said for a while now that not only do we accept both tests, but we are agnostic about our preference,” Dee Leopold, managing director for MBA admissions at Harvard Business School, said last fall.

ETS officials are optimistic about the GRE’s future among budding MBAs. “We’ve been having great success in positioning the GRE for applications to business school programs, particularly MBA programs,” says Payne. The company continues to push its marketing efforts, especially abroad. “The need for advanced degrees is only going to continue to grow,” Payne says, “both in the U.S. and the rest of the world.”

The bottom line: The GRE is drawing a growing number of business school prospects in Asia who want to study in the U.S. 

    Before it's here, it's on the Bloomberg Terminal.