Higher Ed ROI:Making It Work for You

Rob MooreTerry FlanneryNovember, 2013

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Today’s agendaThe business contextBottom-line essentialsCalculating ROIGetting the dataThe virtuous cycleMeasurementA more ambitious modelA final thoughtQ&A

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The business context

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Where the money comes from

Public R/D

Net TuitionState/localFederalAuxilaryPhil/End

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Private Research

Net TuitionState/LocalFederalAuxilaryPhil/End

Private BA

Net TuitionState/LocalFederalAuxilaryPhil/End

American Institutes for Research 2012

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Step one: build your own pie chartMid-tier Private

Tuition/FeesGiftsFed/StateAuxilaryEndowment Income

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Step one: build your own pie chartMid-tier private

Tuition/FeesGiftsFed/StateAuxilary FundsEndowment Income

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Why would you construct such a chart?

With whom would you share it?

What is the point you’re trying to make?

What is the goal of this discussion?

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Step two: the investment argument

Revenue

Tuition/FeesGiftsFed/StateAuxilaryEndowment Income

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Expenditures

InstructionAcad SupportStudent ServInst. SupportMarketingAuxilary

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The big takeaway

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1 Shift the discussion from cost (expense) to revenue (return)

2 Gain clarity on the business goals of the institution, and where marketing investment links to those goals

3 Make sure goals are trackable and achievable

4 Commit to achievable, priority goals

5 Start planning

6 Execute the plan and track results

Bottom-line essentials

differentiatesA strong brand that

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clarifiesA strong brand that

creates loyaltyA strong brand that

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Assessing valueOverarching consideration

To increase value, either enhance experience or decrease cost.

Which makes more sense for your institution?

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Value ExperienceCost

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Understand the business realitiesWhat is the optimum “carrying capacity” of your institution?

• Traditional students• Nontraditional students• Graduate/professional students• Continuing education

What is the gap between this carrying capacity and your current enrollment?What is the relationship between key revenue factors?

• # of students vs. discount rate• Recruitment vs. retention

What is your current marketing investment?

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What revenue increase can you promise with a larger investment?

Calculating ROI

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Return On Investment FormulaBasic fact: to determine any formulaic relationship, you need both a numerator and a denominator• Numerator (top): Revenue generated• Denominator (bottom): Cost of investment

Liberal arts institutions—relatively straightforwardMA institutions—a bit more complicatedR/D institutions—a major headacheCapture what you can and estimate the rest

• Research/validate/confirm with your CFO

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Cost/investment elements to consider

AdvertisingPrint publicationsWeb development/hostingMobile/digital/socialMarket researchOutsourced servicesStaff salaries/benefitsEtc.

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Denominator

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Classic ROINumerator: All revenue linked to marketing activitiesDenominator: All marketing costs

Issue: For complex institutions, very hard to get accurate data on both sides of the equation

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ROI(Gain from Investment -

Cost of Investment)

Cost of Investment

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Special focusAssumption: overall marketing budget/activities continue as

in previous years Specific target identified for special investment• Numerator: revenue linked to targeted activities• Denominator: marketing costs related to targeted

activities

Formula the same, but data more easily gathered and tracked

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ROI(Gain from Investment -

Cost of Investment)

Cost of Investment

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Enrollment example

Median Public U invests $250,000 to recruit 50 additional students (data based on average national tuition/fees income for public university)

ROI = 3.375• For each “exceptional” $1 invested, the institution nets

$3.375

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3.375 ($1,072,350 - $250,000)

$250,000

Getting the data

Job #1: Getting The DataMarketing function decentralized—total spend unknown?

Revenue data: tuition rates, credit hours, FTEs or ?

CMO: authority/responsibility to gather data on expenditures, enrollment and revenue

Work with CFO, Provost or both to:• Gather centralized data on marketing expenditures• Change policies on how marketing expenditures are budgeted and coded• Identify consistent definitions for revenue calculations

Work with schools/colleges/admissions/development to :• Reduce the inherent threat• Understand marketing investments• Create template for compiling data

American University

Job #2: Frame Your MeasuresDeveloping a basis of comparison is critical• Measure against your own institution over time• Establish formulas and apply consistently over time• Measure against your competition where possible

Use data shared through formal and informal groups

Use publicly available data (ex: IPEDS)

Many measures may have less relevance until you have been tracking your ROI for three years

You will have to make some tough decisions about how the metrics are calculated in the first year and then use the same calculations year after year

American University

Strategic and TacticalMarketing Cost per Student

Revenue contribution

Market Share

Lifetime value of a student

Student Acquisition Cost

Cost per lead

Advertising to Sales Ratio

Response Rate

American University

American University

Ex: Marketing Cost Per Student

How much does it cost to market to one student?Calculate :• MCPS=total marketing expense ◦ With and without salaries included◦ For all students vs. For new students◦ By type of student◦ By school or college at grad levelMCPS declines as product matures; significantly higher for a newly launched programAdapted for ROI for annual fund; how much does it cost to market to one donor to the annual fund?

Marketing Cost Per Student

Total Expenses

= ______________

Total Students Enrolled

Adapted from CASE District II ROI presentation Flannery and Scarborough, February 2009

American University

The virtuous cycle

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The virtuous cycle

Recruitment

Retention

Advancement

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The virtuous cycle

Recruitment

Retention

Advancement

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• A marketer’s job doesn’t end when the class arrives on campus.

• The cheapest student to “recruit” is the one you already won.

• Happy alumni provide multiple benefits.

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Impacts of retention• U.S. News reporting • Confirmation of recruitment of “right fit” students• Reality-check on the authenticity of the promise you made • Financial stability/predictability• Less need to “re-recruit” to fill in for shrinkage• Class stays robust through to graduation• Cost of recruitment for first-year students amortized• Private <$500• Public <$120

• “2% increase at Private College X means an additional $750,000…at Public University Y more than $2.5 million.”

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Factors that affect retention• Is the student the “right fit” for the institution?• First-choice vs. fall-back

• Academic ability/preparation• Authenticity of brand promise• Did you make a promise you can fulfill?• Does the institution understand the promise you

made?• Financial aid follow-through• Orientation, advising, and intervention

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Factors you can do something about• Understand the issues• Incoming student survey• NSSE• Stop-out/transfer tracking• Exit interview/research• Ethnographic intake

• Enhance brand awareness• Faculty/staff workshops• Messaging• Reinforcement

• Orientation

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What do alumni want?

A jobSelf-guided connectivity Low debt loadPride of accomplishment

Continued degree relevancePride in institutional progressNetworkingSelective connectivity

Institutional prideSelective networkingLegacy consideration

RecognitionAchievement validationsImpact opportunities

10 years 20 yearsGraduation 30+ years

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Alumni “solicitation effectiveness”

1995 2000 2005 20100

0.05

0.1

0.15

0.2

0.25

0.3

0.35

LAPriv RDPub RDPriv MAPub MA

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Engage them where they’re at

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ROI• University invests $900,000 for sophisticated integrated

annual fund campaign that raises an additional $5.2 million

4.7 = ($5,200,000 — $900,000)$900,000

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Philanthropic impact of individualsIn 2012, higher education received $41.3BB in philanthropic support• Estimated $10.1BB came from alumni/ae• Approximately 25% of total

Additional $8.26BB came from parents & non-alumni individuals

• Approximately 20% of totalFoundations/corporations/other orgs counted for the rest

• Question: who runs foundations/corps/other orgs?• Answer: people

Recommendation: Participate in/subscribe to VSE

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Capital campaignUniversity spends 5-15% of goal on a campaign; materials and events 20-30% of that total; mar/comm 30% of that

ROI: 165/1

 

Source: http://www.phildev.iupui.edu/TheFundRaisingSchool/PrecourseReadings/precourse_capitalcampaignspierpont.aspx

 

$1B$6M

$20M$100M+

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Measurement

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Things that can’t be definitively measuredCorporate definition of brand value:

Brand value in academe is harder to measureOne evaluation system lists HE brands among the highest value in the world

• Harvard, Stanford, MIT in top 10 (w/Coca Cola, American Express, Nike)

• Berkeley, Cambridge, Oxford in top 15Brand value has impact on selectivity, retention, alumni pride/engagement, faculty recruitment, corporate and foundation investments

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Brand Value Market capitalization Assets

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Things that can be measuredTraditional advertising w/specific CTAOpen house invites w/tracking infoCoupons, swag giveawayProgram outreach w/distinct URLAnything digitalGoogle analyticsSocial media

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E1

E2

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E7E6

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A more ambitious model

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Retained value of each student recruited

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Sally BillyInstitution Median Public U Average Private U

Total revenue $67,626 $168,896Cost to recruit $457 $2,185Cost ratio 148:1 77:1

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Scaling up: Investment/return per class

Assumptions: 3,000 matriculants, 80% first-year retention, 50% live on-campus first two years, 60% graduation rate, 10% alumni giving rate (x40), average gift $1,000

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Median Public UYear 1 $52,969,500Year 2 $42,375,600Year 3 $29,375,600Year 4 $24,950,800Alumni Giving $7,200,000Capital commitment $25,000,000Total revenue/class $181,614,500

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Scaling up: Investment/return per class

Assumptions: 1,000 matriculants, 90% first-year retention, 40% discount rate, 50% live on-campus four years, 50% live on campus two years, 70% graduation rate, 20% alumni giving rate (x40), average gift $2,000

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Average Private UYear 1 $29,346,400Year 2 $26,411,760Year 3 $19,477,120Year 4 $16,958,480Alumni Giving $11,200,000Capital commitment $40,000,000Total revenue/class $143,393,760

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Acquisition cost ratioMedian Public U

Average Private U

How important is revenue to your institution?How should you “scale” marketing investment relative to the importance of revenue?How integrated are your recruitment, student affairs, and advancement divisions?

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132:1$81,614,500

$1,371,000

65:1 $143,393,760

$2,185,000

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Enrollment exampleMedian Public U invests $250,000 to recruit 50 additional students

What happens when we factor in lifetime value?

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3.375 ($1,072,350 - $250,000)

$250,000

9.1 ($2,531,090 - $250,000)

$250,000

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Enrollment exampleAverage Private U invests $250,000 to recruit 25 (full pay) additional students

And lifetime value?

With 40% discount rate?

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3.39 ($1,055,600 - $250,000)

$250,000

11.7 ($3,176,816 - $250,000)

$250,000

7.37 ($2,094,056 - $250,000)$250,000

A final thought…

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Convince the powers-that-be to invest more in marketing

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Convince the powers-that-be to invest more in marketing

then deliver on the promise you make!

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Questions?

Copyright 2013

Thank you.