Four Strategies for a Difficult Economy
Today’s economic conditions are monopolizing discussions among leadership teams and boards of trustees at many colleges and universities. It is a nerve-wracking time, to say the least. Financial stresses now loom very large in pending decisions about enrollment, tuition increases, net revenue, financial aid policies, and discount rates.
In our first edition of Insights for a Challenging Economy (October 16th), we emphasized the importance of managing fear and building evidence during times of turbulence. In response, many of you asked what specific actions should be considered right now to manage these challenges in ways that do not compromise your long-term strategy and sustainability.
Here are four immediate strategies to consider:
- Remember the continuing students. A common mistake is to focus so totally on the incoming class that existing students may be short-changed. Consider both first year and returning students when setting price increases for tuition, fees, room and board. Decisions made now about list price tuition and room and board increases, net cost increases, and discount rate will directly shape your ability to retain returning students – especially sophomores.
Retention strategies often focus on those at risk academically. Yet today’s circumstances mean that institutions should also identify and proactively focus on students who might be at risk economically. Colleges and universities that do not adjust their institutional aid for continuing students in conjunction with cost increases may risk encountering increased attrition rates. Indeed, families of students who matriculated only two months ago may not look kindly at next year’s increase in net cost, shying away from even heavier loan burdens and considering educational options elsewhere. It is far less expensive to keep a current student than to find a new one, so it is important to set aside funds to help students who risk leaving for financial reasons.
- Communicate value early and often. Value is an essential message to share and frequently repeat with students and parents (click here to read our series on pricing and value). Value is the relationship between cost and quality, so both of these dimensions should be communicated. In economically challenging times, families need more than ever to understand why their money is best spent at one institution as opposed to another. Offer convincing arguments about the return on their educational investment at your institution, both in cost and quality terms. Encourage your president to send a letter to prospective and current students and parents acknowledging today’s difficulties, underscoring what is being done to address them, and reinforcing your value proposition. Develop other such creative ways to reach your audience and communicate identifiable institutional value and values.
Here is where building a culture of evidence really helps. Career and employment outcomes, internships and experiential learning, and professional networking opportunities are at the top of the list of family priorities that shape their value perceptions. Also, make sure that every prospective student and parent is aware that families are not necessarily asked to pay the listed tuition price if they cannot afford it. In this spirit, tough times require recognizing students and parents as true consumers and investors.
- Focus on enrollment over rankings. Given this year’s circumstances, it is more important to enroll a class than to ratchet up institutional prestige. Focusing on actions that ensure a robust incoming class and limit continuing student attrition may require some short-term concessions. In the long run, an institution benefits more from the revenue and positive environment that accompany a healthy enrollment than from small improvements in statistical performance metrics.
- Review financial aid plans. Financial aid should focus on the price sensitivity of admitted students. Identifying specific ranges of net cost that have historically yielded the optimal number and mix of students is a key part of succeeding in an uncertain season. Some institutions carefully monitor and restrict their discount rate – both for incoming classes and total enrollment – and are hesitant to raise it. Experience shows that when aid is deployed strategically and discount rates approached flexibly, however, a modest increase in the discount rate can actually result in significantly greater net revenue (read The Net or The Noose for greater detail).
Given that knowledge, this might not be the time to restrict your financial aid budget and discount rate for first-year and returning students. Controlling costs for families in this climate will encourage new students to enroll and continuing students to stay.
Anticipation Over Anxiety
Anticipating future scenarios is central to effective decision making in difficult times. This coming spring provides a case in point. Families may well wait until the very final hours before making enrollment decisions, with more of them than ever focusing on net cost. Well-prepared colleges and universities will have spent the prior six months – and that means now – analyzing, adjusting, and articulating their value proposition in the ways presented in this and future Bulletins.
Institutions that excel during tough times also use present dangers to collapse organizational “silos” that limit collaboration within management teams. Maguire Associates believes that enrollment management represents a lifelong relationship with students across a continuum of administrative functions including Admissions, Academics, Career/Life Preparation, Student Life, Alumni Affairs, and Institutional Advancement. Students and parents do not care how your institution is organized. However, they do care about the value and accountability the entire institution delivers to them as consumers and investors. There is no better way to deliver that message and ensure that performance than through improved communication and cooperation across departments. Without good communication and collaboration, too much time and money are lost in ways that most institutions can ill afford these days.
More on these leadership and organizational development issues in a future edition of Insights for a Challenging Economy.