As demographic, economic and market volatility continue to challenge higher ed’s ability to enroll a sufficient number of students able to take advantage of the educational opportunities available, understanding and advancing your institution’s value proposition should be at the top of the to-do agenda.
A value proposition can be defined simply as the intersection between net cost and the quality of the product, or benefits, students and families believe they are purchasing. It’s the perceived ratio of quality to cost. What are the critical metrics that have the potential to change an institution’s value proposition?
Willingness to pay
Distinct from ability to pay, willingness to pay is a measure of how much a family wants a particular educational experience and how much they are willing to sacrifice for it. As demand increases, unfunded student aid is reduced. That is to say, the more demand for an institution, particularly from those who have the willingness to pay, the less the draw will be on unfunded student aid.
Measuring willingness to pay involves, in large part, conversions such as:
- Rate of inquiry conversion to application
- Rate of completed applications
- Admit rate
- Percent deposit withdrawals (melt)
- Net enrollment and yield (not enrolled [after melt]/admit)
Some of these measures are more difficult to change than others, and the difficulty increases as candidates move through the admissions funnel.
For example, to generate more inquiries, colleges can purchase additional names of candidates through student search and can use sophisticated models to identify those most likely to apply. Thus, both inquiry and application volumes can be quite readily increased.
On the opposite end of the spectrum is yield—the ratio of those enrolled to those accepted. Yield is perhaps the most difficult metric to improve. It requires building a deliberate and targeted marketing, recruitment and enrollment strategy machine that will coordinate multiyear, multimedia, customized outreach campaigns.
More than any other metric, yield defines an institution’s value proposition. High yields (above 50 percent) indicate high demand because so many accepted students enroll. Conversely, yields that are barely above single digits depict institutions whose value proposition is waning because it takes six or seven admittees to produce one enrollee.
Impact of financial aid
The metrics that best define change in an institution’s value proposition will have very different impact for those who apply for financial aid versus those who do not.
At low-cost public institutions, middle- and upper-income families in many instances have the ability to pay in-state tuition and fees at two- and four-year public institutions, and therefore may not feel it is necessary to apply for financial aid. At private institutions, for the most part, only upper-income families have the ability to pay published tuition and fees.
As a consequence, when 40 percent of a private institution’s admit pool doesn’t apply for financial aid, it’s not because they are all upper-income. Rather, it’s because they have lost sufficient interest to initiate the aid process.
The bottom line of this enrollment dynamic: The same school can often have dramatically different yield rates for admits who apply for financial aid versus those who don’t. The difference can be 20 to 30 percentage points or more.
Changes in competitor overlap can be a measure of the strength of an institution’s value proposition. But does an institution have a stronger value proposition if it is at the bottom of the top tier of comparable institutions? Or does it have a stronger one if it’s at the top of the second tier of competitors?
In the former, yields would be lower as there would be more losses than wins. In the latter, yields would be higher because there would be more wins than losses. The lower yield against top-tier schools could and should be viewed as a short-term result.
When an institution competes against schools above it on the “food chain,” it could become associated with the top-tier group. This alone could contribute to a stronger value proposition. But moving from the top of tier 2 to the bottom of tier 1 can be a trying and anxiety-ridden exercise.
Finally, one of the questions institutions must ask is how to position themselves against the competition regardless of tier, and how to choose which attributes and characteristics to emphasize in enhancing their value proposition.
For example, if a public flagship happens to be very strong in STEM disciplines, should the emphasis be on low cost or strong STEM opportunities? The relative priorities given to marketing these attributes will differ as a function of the competitor set and the institution’s position within it.
Freshman-to-sophomore retention rate is a metric that contributes to an institution’s value proposition. Institutions need to monitor and track whom they lose, particularly early in the enrollment cycle (year 1 to year 2).
If your institution loses a disproportionate number of the top quarter of the class quality profile, it could be an indication that, for those top-performing candidates, the perceived value after enrolling is less than the value perceived before enrolling. This can be particularly true of students with lower need for financial aid. Not only are they at the top of the quality distribution, they also have an enhanced ability to pay.
On the other hand, a private institution losing a disproportionate number of freshmen after the first year to public, low-cost institutions should raise a red flag about net cost.
Families might have deemed the financial aid package sufficient to initially enroll, but that investment might be viewed as less worthy of the sacrifice in the upperclass years.
Unfortunately, however, whether students and families just ran out of money or concluded as a result of the freshman year experience that the institution was just not worth the net cost will not be easy to discern.
Making the case for ROI
In today’s competitive marketplace, there is probably nothing more critical to building an institution’s value proposition than the ability to make the case for return on investment of your educational opportunities. This case needs to be made in a compelling and convincing manner, including proof statements of the employment opportunities and graduate/professional schools’ outcomes, all segmented by major.
If an institution’s recent graduates are getting into top graduate/professional schools, it needs to be documented and marketed. If top firms in critical businesses and industries are seeking out your graduates, spending time on campus interviewing, providing internships for underclassmen, and annually hiring a critical mass of your graduates, then those outcomes need to be aggressively communicated.
Simply put, if an institution is struggling to get its value proposition message recognized in a crowded marketplace, return on investment is the most influential metric to help make that case.
The value proposition frames the role financial aid has to play because it defines willingness to pay. It is important in building demand and retaining students once enrolled. Among your competitor set, it defines your position on the “food chain.” And, perhaps most importantly, your value proposition is best documented by the success of your graduates.
Jim Scannell is senior consultant for enrollment management for Ruffalo Noel Levitz. He is the former president of Scannell & Kurz.