Our revenue in higher education is made up of three key drivers: quantity, quality, and price. Each of them plays an important role and can influence the other components.
Price
Let’s start with price. Price has been the easiest piece in higher education until now. In the past, we have increased the price each year by some inflation factor. But now there is more pressure on price, and we can no longer increase this as rapidly as we need to keep pace with inflation. We must examine price the way for-profit industries look at price, through an examination of competitors. When your customer compares you to your competitors, are your prices the same or are you more expensive? What is the value for them if they pay more for tuition and room & board at your institution? To get started, we need to examine who our competitor group is and that can be a challenge.
Of course, we all know discounts play a large role in this. I will not delve into that here other than to say that price should include both sticker price and net tuition.
Quantity
Quantity relates to the number of students enrolled, especially new freshmen and transfer students. Until recent years, we saw a steady or perhaps increasing number of students. We have even implemented strategies requiring students to live on campus to increase revenue from room and board. Now that we are looking at a demographic cliff along with a change in consumer expectation for education, we cannot rely on quantity as a revenue strategy unless our quality (selectivity) is extremely high.
Quality
This brings me to quality which is becoming the most important revenue driver. Quality is all about attracting and retaining the right students and ensuring success after graduation. This has been something separate and apart from our pure revenue strategy. But given the near-term outlook on price and quantity, this is quickly becoming the most important component of our revenue strategy. It focuses deeply on retaining all students once they arrive on campus to ensure that quantity remains steady or increases. It also focuses on the growing expectations of families for career success after graduation. It can also attract more students since the higher the quality the higher the price families are willing to pay.
In this new future of higher education, we should make all decisions and investments with an eye toward increasing quality. Read about retention as a team sport and lifelong learning and trade school secrets to success.
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