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Transcript of Presentation Outline Introductions Why are “price sensitivity” and “value” important? ...
Presentation Outline
Introductions
Why are “price sensitivity” and “value” important?
Strategic pricing & value enhancement framework
From research to action
Questions
2
Introductions
3
About Maguire Associates A 25 year-old, research-based consultancy
Served over 350 educational institutions and consortia
Staffed by a team of market researchers and higher education and marketing practitioners
Core service areas include:
4
Pricing Optimization & Value Enhancement
Strategic Financial Aid Modeling
Student Recruitment Optimization
Enrollment Management Consulting
Student Satisfaction & Retention
Strategic Planning Advancement & Alumni
Engagement Branding & Image
Development Integrated Marketing
Why are “Price Sensitivity” and
“Value” Important?
5
Rising Cost of a College Education In the U.S., college tuition has for many years outpaced
family income and the cost of living. Today, some private colleges and universities have even
surpassed $50,000 in the total cost of tuition plus room and board.
$0
$10,000
$20,000
$30,000
1978 1988 1998 2008
Average Published Tuition and Feesin Constant (2008) Dollars
Private Four-Year
Public Four-Year
Source: Trends in College Pricing (College Board, 2008).6
7
Students’ High Expectations
$15,000 $18,000 $20,000
$25,000
$10,000$2,000
$0
$10,000
$20,000
$30,000
$40,000
University 1 University 2 University 3
Financial Assistance
Net Cost
Impact of Differing Discount Rates
8
Differences between the “sticker prices” of institutions can be wiped out by differing discount rates.
Why should a student enroll here?
Sticker Price = $40,000 $28,000 $22,000
Students are strongly value-oriented.
They seek quality that far exceeds the costs they incur for an education.
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Students’ Willingness to Pay
9%15%
29% 29%
19%
0%
10%
20%
30%
40%
1 = Strongly Disagree
2 3 4 5 = Strongly Agree
“I am willing to assume debt, or deepen my financial commitment, for a higher quality education.”
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College is often seen as an investment and many will invest more in a higher quality education.
Enrolling Students’ Net Cost
SC's cost was lower, 34%
Second choice
school's cost was lower,
31%
They were about the
same, 34%
Not reported, 1%
How Did SC’s Net Cost* Compare With the Net Cost of Your Second Choice
School
* List price minus financial aid.
Yet they enrolled at SC!
Desirable Institutional Outcomes
Optimize net revenue
Set the best financial aid and scholarship awarding amounts
Improve enrollment among target populations
Impact value perceptions in the marketplace
Inform key marketing messages
Develop a stronger financial base to support operational needs and other strategic goals
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Strategic Pricing & Value Enhancement
Framework
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Strategic Pricing & Value Enhancement Framework
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Methodology
Survey Research
Predictive Modeling
Secondary Research
The Simple Enrollment Funnel
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Two Critical Decision Points:
Inquirer Application
Accepted Enrollment
Key Question What role do costs and perceptions of the
availability of financial aid play in students’ application and enrollment decisions?
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Useful Techniques Price-point analysis Cost ladder testing* Optimal price adjustment Predictive modeling*
4.21 3.86
3.38
2.70
1.96
1.60 1.41 1.29
1
2
3
4
5
$15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000
Scale: 1 = Very unlikely to enroll to 5 = Very likely to enroll
Market Reaction to Costs
Likelihood of Enrolling among Likely Applicants at Particular First-year Costs
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Expensive ~ $29,000
Expect to Pay ~ $22,000
Predictive Modeling
Application Status
Quality measure/
Exam ScoreGPA Score
Early Decision
Application
GenderCost of
Attendance
Financial Aid
Applicant
Financial Need
Institutional Aid per Student
Academic Institutional
RatingHome State Ethnicity
Legacy Status
Commuter/ Resident Status
Academic Interest
Other
Typical Input Data
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Build the Model
Direction Variable
+ Scholarship Amount+ In-State- SAT- High School GPA--
MaleMinority
--
Applying to Arts and ScienceApplying to Business Program
Enrollment Predictors
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0
300
600
900
Actual Nothing Max NTR Free-Ride
450
250
700
1250
Enrolled Students
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
Actual Nothing Max NTR Free-Ride
$12,460,000$11,482,200
$13,070,000
$0
Net Total Revenue
0
1
2
3
4
Actual Nothing Max NTR Free-Ride
3.4 3.43.6 3.4
Average GPA
0%
10%
20%
30%
40%
Actual Nothing Max NTR Free-Ride
34.1%37.1% 35.8% 35.9%
Percentage Male
Sample College Price Boundaries1250 / 250= 5 to 1
Price Elasticity
Low – Financial aid does not have much of an effect on students’ enrollment decisions.
High – Net cost is a dominant factor in students’ enrollment decision and their decision making is very sensitive to financial aid offers.
Medium - Students admitted to these schools tend to respond to less expensive financial incentives and therefore bring in more net revenue.
Greatest opportunity to
use financial aid
strategically to shape
incoming classes.
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Key Question What educational priorities drive up students
willingness to pay for a college education in general and which attributes and promises most drive application and enrollment at your school?
Useful Techniques Scatterplot analysis* Multiple regression* Factor analysis Correlation analysis
Inquirers’ Quality by Importance
ImportanceScale: 1 = Not at all important to 5 = Extremely important
Qu
alit
yS
cale
: 1
= V
ery
low
qua
lity
to 5
= V
ery
high
qua
lity Improve perceptions of quality
on:•Employment opportunities after graduation•Quality of major•Academic reputation•Value of education•Academic facilities•Quality of faculty•Availability of financial aid to meet need•Availability of on-campus housing
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Primary Drivers of Perceived Value
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Value of Educatio
n
Outcome Measure
Scale: 1 = Very Low Quality to 5 = Very High Quality
Predictive Model of Perceived Value of Education at a Sample College
Quality of faculty and their teaching
ß = .322
Preparation for graduate/professional school
ß = .234
Career planning and placement services
ß = .168
Total cost of attendance (tuition, room, board and fees)
ß = .152
Availability of need-based financial aid
ß = .129
Key Question Who are your institution’s top competitors at the
application and enrollment stages, and how can your institution capitalize on its advantages and position itself against different categories of competitors?
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Useful Techniques Scatterplot analysis* Competitive benchmarking*
Public Other Private V
alu
eSc
ale:
1 =
Poo
r V
alue
to 5
= V
ery
Goo
d V
alue
Academic QualityScale: 1 = Very Low Quality to 5 = Very High Quality
Competitive Position
26
School Competitor
1 Competitor
2 Competitor
3 Competitor
4
Public/Private Private Private Private Public Public
Total Undergraduates 4,718 4,803 5,699 2,494 16,381
Academics
Student-to-faculty ratio 14/1 14/1 13/1 12/1 10/1
Graduation rate 66% 72% 70% 68% 76%
Admissions
Number of applicants 4,634 7,273 7,716 3,172 5,278
Acceptance rate 82% 51% 59% 82% 74%
Number of Acceptances 3,798 3,709 4,568 2,590 8,753
Yield Rate 24% 29% 29% 22% 34%
Cost
Private tuition and fees $24,920 $25,064 $25,744 $23,470 $15,512
Room/Board $9,780 $11,260 $9,456 $9,530 $5,998
Financial Aid
Students receiving need-based grants
50% 51% 49% 55% 43%
Percent of need met 72% 94% 78% 76% 62%
Average financial aid $19,440 $21,295 $18,095 $20,460 $8,466
Benchmarking
27
From Researchto Action
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Enhancing Your Institution’s Value Proposition People – Target students and families who value
what your institution offers
Product – Strengthen your educational offering to more fully satisfy the needs of students
Place – Develop delivery systems that drive value
Price – Develop pricing strategies that match the value students receive
Promotion – Develop promotional efforts that include clear and compelling messages via appropriate channels
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Questions
Tara E. ScholderVice President for Research Operations
[email protected], Ext. 241
www.maguireassoc.com
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32
$0 $10,000 $20,000 $30,000 $40,000
Institutional Grant Amount
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pro
bab
ility
of
En
rollm
en
t
Probability of Enrollmentas a Function of Average Institutional Grant
Assuming a $ 35,000 COA
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Net Revenue as a Function of Institutional Grants
$0
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
$50,000,000
$55,000,000
Ne
t R
eve
nu
e
$0 $7,000 $14,000 $21,000 $28,000 $35,000 $42,000
Institutional Grant Amount
Maximum probabilistic contribution to net total revenue.
Assuming a $ 35,000 COA
No Grant AidAll Revenue All Grant Aid
No Revenue