The Many Dimensions of College Cost- Stamats Higher Education Marketing Blog

Oct 2nd 09 Posted by Bob Sevier in Featured Articles, Leadership

The Many Dimensions of College Cost

At the recent NACAC meeting, I was fortunate to be one of the speakers at the iThink hosted by Brian Niles and Target X. For the 100+ enrollment and admissions officers who attended, the conversation was lively and heartfelt.

Not surprisingly, the discussion centered around college cost. We talked about cost, value, affordability, and ROI. Because understanding these terms is so important, I wanted to take a minute to establish some working definitions.

Cost is a non-relational, objective variable. It is easily demonstrated and understood. From my perspective, cost is best used when you are the least expensive and your students are commodity (cost and convenience) oriented.

At the same time, “value” is a highly relational term because students and parents ultimately define value. Unfortunately, our research indicates that the term “value” has almost no resonance with today’s students and families for two reasons. First, when colleges say “value,” families hear “this is how we justify our high cost.”

The value issue is further complicated because when colleges describe their value, they almost always do so in terms that are nondifferentiating. They talk about the value of great faculty and of small classes and of libraries with tens of thousands of books. Because these evidences do not differentiate, they actually undermine value rather than demonstrate it.

The third term is “affordability.” When a college describes itself as affordable, however, students often respond with the question, “For whom?” When families don’t have the money, even the most reasonably priced college is not affordable. Because it is so relational and situational, affordability must always be proved on a case-by-case basis. This can get difficult.

The final entrant into the discussion is a cousin to value, ROI. ROI means, simply, return on investment. Most students and families intuitively recognize the significance of ROI because it is, after all, based on a simple cost-benefit analysis. “Is the college,” the student asks, “worth the money?”

The reason why ROI is so compelling is because you have the opportunity to make your case in two ways. You can address cost/affordability issues on the one hand—net cost, financial aid, payment options—and benefit issues on the other—college experience, graduate rates, jobs, grad school. Moving forward, I hope that schools will seek to establish ROI in ways that differentiate them from one another and are of clear value to prospective students.

If this brief conversation on cost has piqued your interest please let me know.

Bob will be speaking about money, brand and other marketing topics at Stamats’ upcoming SIM Tech Conference and Stamats Integrated Marketing Graduate Student Conference, both November 10-12, 2009 in Boston. We hope to see you there!

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Scott Searcy

You advocate that schools should differentiate themselves through ROI but, in the end, the student/parent are measuring their return based upon their own prejudicial and narrow view of “return”. I believe all schools will respond to the student/parent view and deliver largely similar pitches on ROI. Unless we can broaden the perspective of students and parents to enable them to discern a broadly defined ROI based upon personal values and characteristics, it is unlikely we will be able to differentiate our institutions.
Sevier

Scott. Thank you for your response. I understand your perspective. However, I think it is futile and perhaps dangerous for colleges to think they can broaden the perspectives of students and families. We market to these students by promising to be personal and student centered. How can we then ask them to use our (the institution’s) definition of ROI. I remind folks that any of the 3,600 or so colleges can be successful but not all of them will be. The key, I think, is meaningful differentiation. Of course, students and parents ultimately decide what is meaningful.
Scott Searcy

I am not intending to impose our definition of ROI, but I am skeptical that the student/parent definition is so limited that we will all be constrained to make similar pitches and thereby short circuit the differentiation you are advocating. Not all parents and students are as limited in their approach to ROI and I think institutions can be successful in reaching out to those who enjoy a broader perspective but I remain skeptical that this approach will meet with broad success. I wholeheartedly agree with your desire to see differentiation among the colleges. Without differentiation, education will become a commodity based solely on convenience and price. Thanks for the though provoking article.
Mike McCarthy

Interesting post and comments. I think an underlying issue that’s implied in both the post and the comments (so far) is the notion of market segmentation based on heterogenous preferences (i.e., different types of people are looking for different things). In both the posts, the idea of moving the market towards understanding ROI the way the university would define it is portrayed as at the very least misguided. In that, I would agree. However, to Bob’s point, there are many ways to define ROI and the marketplace will have multiple groups that define it, for themselves, in other ways.

So, at the end of the day, all a school needs to do (I realize that this “all” is no small feat) is decide how it best delivers ROI, compared to some set of “competitive schools” and then clearly frame their messages to reflect that ROI model. While there is some small chance that a student/parent will be moved to that model by the school’s messaging, the far more likely outcome is that the segment of people looking for that particular type of ROI will recognize that school as the one for them and/or their student.

Hope this helps the discussion along.
Bob Sevier

Mike. I think you are on the right track. I think that an ideal situation would be for a school to develop a ROI strategy that is based on their strengths, the interests of prospective students/parents, and not be something offered by competitors. That is the heart of differentiation. And as you said, no small thing.
Ed Johnson

Bob,

Thanks once again to being one of the few public intellectuals on topics such as this in higher education.

I couldn’t help but relate your discussion to marketing guru Seth Godin’s blog today on cable news thinking, especially substituting the word “staff” for “board” in his concluding statement and adding “cost” to the narrative. Just search for “Seth Godin” and “blog.”

Keep up the great work.
Bob Sevier

Ed. Thank you for your kind words. Bob