Pricing Optimization and Value Enhancement
EMPROVE: Pricing Optimization and Value Enhancement
What is the optimal price for an education at your school? This may seem to be a straightforward question, but many college and university presidents, enrollment management officers, and other administrators acknowledge its true complexity. The best answers can be found in understanding the intricate relationships between price and value, especially the distinct value perceptions held by prospective students and their families.
Considering pricing strategies for your institution raises many additional questions:
- How price-sensitive is your unique market?
- How do you know which market segments are the most and least price-sensitive?
- How can you raise revenue and still meet student enrollment goals?
- How will price increases affect your discount rate?
- How does your price shape your school’s image in the marketplace?
- How do you build and sustain brand value that supports a given level of pricing?
College and university officials certainly understand the urgency associated with these issues. Administrators are under intense scrutiny as educational costs soar and economic conditions fluctuate. When setting prices, however, many college and university administrators struggle to arrive at their pricing decisions systematically. Many continue to rely heavily on immediate budgetary concerns, intuition, or what their competitors are charging. Maguire Associates offers an integrated research and consulting service to assist colleges and universities address price and value issues. With EMPROVE, our Pricing Optimization and Value Enhancement service, we work with you to achieve a variety of essential objectives, including:
- Increased net revenue;
- Higher enrollment among target populations (e.g., higher ability students, minorities, and students outside primary geographic markets); and
- Enhanced value perceptions in the marketplace.
Our approach is completely customized for each institution we serve and ensures that you can achieve your objectives while staying true to your unique institutional vision, mission, values, and culture.
With EMPROVE, you will gain a comprehensive understanding of:
- Optimal pricing based on attitudinal and behavioral market data;
- Market sensitivity to potential price increases;
- Price sensitivity benchmarking against comparable schools;
- Perceived value relative to key competitors;
- Key drivers of perceived value;
- Strategies for improving net revenue and student enrollment composition;
- Competitive tuition, cost, and discount-rate benchmarking; and
- Short- and long-term options for monitoring price sensitivity and improving perceived value.
To achieve these outcomes, we offer your institution an unrivaled combination of market research, financial aid modeling, and consulting techniques. EMPROVE is not an out-of-the-box product that we apply to each institution we serve. This service is customized for your institution and designed to accommodate your institution’s unique needs and goals. The Maguire Associates approach incorporates 25 years of experience in working with colleges and universities across the full spectrum of enrollment size, financial health, program offerings, institutional culture, geography, and other dimensions.
Strategic Pricing Research Framework
The information collected through our strategic pricing research framework creates a customized pricing strategy that guides decision making about gross institutional price (i.e., sticker price), discount rate, key marketing messages, student enrollment goals, and financial aid and scholarship awarding decisions.
We have learned over the years that it is the combination of market research, predictive modeling and practical experience that best answers pricing and value questions. Indeed, the overall outcome with EMPROVE is not just a short-term strategy to suggest the best price for your institution. Rather, we want to help you build a long-term, highly customized strategy for pricing optimization and value enhancement that will strengthen your institution for many years.
Modeling Price Sensitivity
In addition to the valuable information you will receive through in-depth survey research on price and value, the EMPROVE service also offers you powerful information through predictive modeling on your current data, including:
- A comprehensive audit of your recent admitted and enrolled populations;
- Sophisticated matrices that uniquely display segmented and comprehensive information on your pool of admitted students;
- A customized model for your institution that identifies the variables that have a statistically significant relationship to the likelihood of a student choosing to enroll at your institution;
- A display of your institution’s unique price sensitivity ratio; and
- Trade-off scenarios that demonstrate the effect of changes to various drivers of enrollment.
Ultimately, you want to arrive at an optimal price for your institution that resonates with your market and also affords your institution additional revenue. In the statistical modeling portion of the EMPROVE service, we accomplish this through several powerful analyses that will allow you to understand your institution’s price sensitivity – that is, how sensitive your particular market is to the price you set and how key cohort groups in your market may be influenced by net cost.
In the first analysis, we will incorporate your own institutional data into our predictive model to create a “thought experiment.” This exercise will allow you to ask the following questions:
- What would your incoming class and revenue look like if you offered no institutional grant aid at all?
- What would your class and revenue look like if you offered full scholarships to everyone?
- What would your class and revenue look like if you awarded institutional grant aid based on what the model recommends?
- What is your institution’s price sensitivity as displayed by a ratio?
Through this exercise, you will see what institutional aid (net cost) means to your market. It is important to understand these extreme scenarios, because an understanding of your institution’s price sensitivity allows us to transition to simulations designed to project future classes through trade-off analyses.
In the second analysis, we use our proprietary predictive model to create “what-if” scenarios for your class. The possibilities are limited only by your imagination. For example, we can show you:
- What would happen if you increased your class by 100, 500, or even 1,000 students.
- What would happen if you dropped your discount rate by 5 or 10 percentage points.
- What would happen if you decreased the current levels of “gap” between net cost and financial need.
- What would happen if you raised your minority representation by 5 percentage points.
- What would happen if you did any combination of the above.
In addition to the statistical model and analyses described above, we produce a set of sophisticated matrices that uniquely display segmented and comprehensive information on your admitted students. The matrices display the institutional awards offered to students who enroll and those who do not, organized by both academic quality and demonstrated financial need. This exercise also provides a yield analysis and a better understanding of where the current return on the investment of institutional aid is strongest, while identifying opportunities for improvement.
Together, the thought-experiment exercises, trade-off analyses, and matrices described above, coupled with our state-of-the-art research, provide you with the most timely and sophisticated information available from which to make decisions about pricing, financial aid, and value perceptions.
Pricing Optimization and Value Enhancement Market Research
In addition to financial aid modeling of institutional data, we use customized market research to inform pricing and value decisions. Financial issues can serve as a barrier to positive consideration of a college in at least two ways – assessment of affordability and willingness to pay. The willingness-to-pay issue is more closely associated with image than pricing and more relevant to perceptions of investment value than actual cost. As such, any assessment of price sensitivity must consider not only price, but also evaluations of quality. Students and families assess institutional quality on a wide variety of academic and non-academic dimensions that we measure through research.
Our pricing optimization and value enhancement research typically includes surveys administered to prospective students or inquirers as well as parents of prospective students and admitted students. Feedback can thus be collected at the beginning of the search process when inquiring students and parents are considering initial “sticker prices,” as well as at the end of the cycle when families are assessing net cost.
While the surveys are customized to the needs and interests of each specific client, we have developed a number of research techniques to assess price sensitivity among prospective students and parents, including:
These techniques consistently enable us to provide clients with insights that far exceed a cursory look at the data and help your institution build a customized, long-term strategy for pricing and value enhancement.
- Testing different price points among random sets of students and parents;
- Exposing students and parents to a series of costs of attendance to assess tipping points;
- Soliciting the prices at which the costs of attendance are “too expensive,” “expensive,” “inexpensive” and “too inexpensive;” and
- Gauging preferences for a series of tradeoff options, which include different pricing scenarios.
In addition, we analyze market perceptions of pricing and institutional quality to determine key drivers of educational value and application or enrollment. Multivariate techniques, such as regression analysis, factor analysis, cluster analysis, and conjoint analysis are employed to understand the “below the surface” forces that influence the opinions, decisions, and actions of families.