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

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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.

9

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

15

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

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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

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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

tscholder@maguireassoc.com978-371-1775, Ext. 241

www.maguireassoc.com

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$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