Resource Room Header Image


What Is Your Value Proposition?
You Have One, Right?

Rising tuition costs and perceptions of value are forefront in higher education these days.  It is no surprise, therefore, that many of our clients and colleagues want to know just how sensitive their prospective students are to the cost of their institution, both in terms of sticker price and net cost. 

Admissions and enrollment management officials want to understand at ever-increasing levels of precision what students and parents are actually willing to pay – and why.   And they want to know how to influence those perceptions and decisions by making the best possible value argument for their school.

This need to convey the relative value of one college over another has grown tremendously in recent years.  It joins a long list of challenges faced by admissions and enrollment management professionals these days.  (See related article, Enrollment Officer Survey: Work Is Challenging But Satisfying.) Institutions – especially private ones – have long had to build an argument to justify the cost of attending their institution over others.  Yet as tuition has risen well past the inflation rate, the need to articulate and convey “returned value” to prospective students and their families has increased correspondingly. So what is your institution’s value proposition?  You have one, right? 

To help our clients better understand this issue, Maguire Associates will offer a series of articles in The Maguire Network examining higher education value.  In this first article, we consider the importance of value in college choice, setting the groundwork for future articles.

Click here to learn more about our pricing and value service,
EMPROVE: Pricing Optimization & Value Enhancement

Defining Value

So, what is “value” within the context of higher education?  At its core, value is simply a relationship.  In higher education, value can be thought of globally; for example, the value of having a college-educated workforce or the value of higher education in promoting democracy.  For the purpose of this discussion, however, value is defined as the relationship between student and parent perceptions of a college or university and the amount they are willing to pay for an education at that institution.  To be considered a “good value,” a college or university must meet the needs and expectations of students and their families at a cost that is perceived to be reasonable and justifiable. 

As one would expect, there is a strong relationship between student perceptions of value and the likelihood of applying and enrolling at a particular institution.  Our research has consistently shown that application and enrollment decisions increase with rises in the perceived value of education at an institution.  For example, the following chart illustrates this relationship, showing the average likelihood of applying to a particular institution rising as students’ perception of its value of education rises from ‘1’ (Poor value) to ‘5’ (Excellent Value).


The Cost/Quality Relationship

Any assessment of higher education value must consider two core components:  cost and quality.  We will explore each in turn.

Value = (Net) Cost + Quality

Cost.  It is notable that the value equation above includes “cost” and not “price.”  It is important to distinguish between the two concepts.  Price is generally more institution-centric, while cost is more student-centric.  The price is the listed total expenditure of attending an institution including tuition, room and board, and other fees.  It is published and generally readily available to students and families during the college search process.  While total price may steer some students away from private institutions, we find in our research with prospective families that the majority of students expect to receive some form of financial assistance from the institutions to which they apply, and as a result, often do not see the listed price as a deterrent to applying to a college or university.

Instead, students and families tend to focus on net cost – the cost of an institution after financial assistance from all sources has been determined – in their college selection process and considerations of the value of education at an institution.  In addition, other costs such as distance from home or the makeup of the overall financial aid package (particularly in terms of the amount of grant awards relative to loans, work study, and self-help awards) are important considerations in students’ final college decision.

The net cost of an institution is not known until a student is admitted and often varies widely from student to student.  What is “just about right” for one student is “overpriced” for another, and vice versa.  In other words, each student will have his or her own optimal net cost for attending an institution – that is, the net cost that will make him or her most likely to enroll.  This price sensitivity can offer institutions opportunities in the form of financial aid leveraging.  Specifically, the more price sensitive a prospective student body is, the more an institution may be able to use institutionally funded aid strategically to encourage and support enrollment and to shape incoming classes.

Yes, it is important to gain a better understanding of the strength of an institution’s position in the market at its current sticker price.  However, it is also critical to know whether an institution’s value is associated more with cost or with other assessments of quality and fit with students’ needs.

Quality.  Perceived institutional quality is the other core element of the value equation.  It is multifaceted and defined by the preferences, priorities, and opinions of students and their families.  Perceptions of quality are relative and not definite; they vary not only from institution to institution, but also from student to student.

Institutional quality is assessed on a variety of dimensions – academic, social as well as educational outcomes – as students and families assess how the positive attributes and promises of various colleges and universities align with their own needs and preferences.  Students and families view higher education as an investment in the future and are often focused on outcomes, looking to college as an opportunity for students to acquire the credentials and skills necessary to secure a job, to prepare them for graduate or professional study, or more generally, to refine and develop their intellectual abilities.  In addition, various process-related and non-academic variables are factored into school selections.

Cost/Quality within Institutional Context

Even if students and their parents have similar perceptions of an institution, the weight placed on each dimension in their application and enrollment decision making varies from student to student and parent to parent.  For this reason, it is necessary to emphasize the need to consider subgroups when attempting to understand perceptions of value.  In addition, multivariate and predictive modeling techniques provide insight into the features and priorities that are most closely correlated with willingness to pay for an education at a particular institution.

Assessment of both price sensitivity and perceptions of value requires careful study of not only the psyche of prospective students and families, but also of an institution’s competition set, which can be very different at the various decision points in the admissions funnel.  Perceptions of an institution’s value vary in relation to different sets of competitors, too (e.g., publics vs. privates, liberal arts colleges vs. comprehensive universities).  Not surprisingly, students and families are willing to pay more to attend a college or university that they perceive to be more prestigious or higher in quality.  Therefore, it is important to learn how prospective students view an institution in the context of its competitors – for example, how it ranks on costs and overall academic quality.

In summary, there can be no doubt that students and families are increasingly price sensitive and strongly value-oriented.  They are often willing to pay greatly different costs to attend one particular institution over another.  However, both the fact that net cost cannot be known until a student has been admitted and that it can be different for each student makes consideration of cost in any assessment of the perceived value of an institution a complex undertaking. The benefit of such an endeavor, however, is very tangible and can be immediately used to improve an institution’s position in an increasingly competitive landscape.

Subsequent articles in this series will examine the components of the relationship between cost and value.  These articles will address specific methods for assessing how prospective students and families weigh costs and specific features of an institution in shaping their value perceptions.

Back to The Maguire Network