Presentation Outline  Introductions  Why are “price sensitivity” and “value” important?  Strategic pricing & value enhancement framework  From research to action  Questions 2

Introductions 3

About Maguire Associates  A 25 year-old, research-based consultancy  Served over 350 educational institutions and consortia  Staffed by a team of market researchers and higher education and marketing practitioners  Core service areas include: 4 Pricing Optimization & Value Enhancement Strategic Financial Aid Modeling Student Recruitment Optimization Enrollment Management Consulting Student Satisfaction & Retention Strategic Planning Advancement & Alumni Engagement Branding & Image Development Integrated Marketing

Why are “Price Sensitivity” and “Value” Important? 5

Rising Cost of a College Education  In the U.S., college tuition has for many years outpaced family income and the cost of living.  Today, some private colleges and universities have even surpassed $50,000 in the total cost of tuition plus room and board. Source: Trends in College Pricing (College Board, 2008). 6

7 Students’ High Expectations

Impact of Differing Discount Rates 8  Differences between the “sticker prices” of institutions can be wiped out by differing discount rates. Why should a student enroll here? Sticker Price = $40,000 $28,000 $22,000

Students are strongly value-oriented. They seek quality that far exceeds the costs they incur for an education. 9

Students’ Willingness to Pay 10  College is often seen as an investment and many will invest more in a higher quality education.

Enrolling Students’ Net Cost How Did SC’s Net Cost* Compare With the Net Cost of Your Second Choice School * List price minus financial aid. Yet they enrolled at SC!

Desirable Institutional Outcomes  Optimize net revenue  Set the best financial aid and scholarship awarding amounts  Improve enrollment among target populations  Impact value perceptions in the marketplace  Inform key marketing messages  Develop a stronger financial base to support operational needs and other strategic goals 12

Strategic Pricing & Value Enhancement Framework 13

Strategic Pricing & Value Enhancement Framework 14 Understand Cost Perceptions & Price Sensitivity Understand Competitive Position Understand Quality Perceptions & Willingness to Pay Methodology  Survey Research  Predictive Modeling  Secondary Research

The Simple Enrollment Funnel 15 Two Critical Decision Points: Inquirer  Application Accepted  Enrollment

Key Question  What role do costs and perceptions of the availability of financial aid play in students’ application and enrollment decisions? 16 Understanding Cost Perceptions & Price Sensitivity Understanding Quality Perceptions & Willingness to Pay Understanding Competitive Position Useful Techniques  Price-point analysis  Cost ladder testing*  Optimal price adjustment  Predictive modeling*

Scale: 1 = Very unlikely to enroll to 5 = Very likely to enroll Market Reaction to Costs Likelihood of Enrolling among Likely Applicants at Particular First-year Costs 17 Expensive ~ $29,000 Expect to Pay ~ $22,000

Predictive Modeling Application Status Quality measure/ Exam Score GPA Score Early Decision Application Gender Cost of Attendance Financial Aid Applicant Financial Need Institutional Aid per Student Academic Institutional Rating Home StateEthnicity Legacy Status Commuter/ Resident Status Academic Interest Other Typical Input Data 18

Build the Model Enrollment Predictors 19

Sample College Price Boundaries 1250 / 250= 5 to 1

Price Elasticity  Low – Financial aid does not have much of an effect on students’ enrollment decisions.  High – Net cost is a dominant factor in students’ enrollment decision and their decision making is very sensitive to financial aid offers.  Medium - Students admitted to these schools tend to respond to less expensive financial incentives and therefore bring in more net revenue. Greatest opportunity to use financial aid strategically to shape incoming classes. 21

22 Understanding Cost Perceptions & Price Sensitivity Understanding Quality Perceptions & Willingness to Pay Understanding Competitive Position Key Question  What educational priorities drive up students willingness to pay for a college education in general and which attributes and promises most drive application and enrollment at your school? Useful Techniques  Scatterplot analysis*  Multiple regression*  Factor analysis  Correlation analysis

Inquirers’ Quality by Importance Importance Scale: 1 = Not at all important to 5 = Extremely important Quality Scale: 1 = Very low quality to 5 = Very high quality Improve perceptions of quality on: Employment opportunities after graduation Quality of major Academic reputation Value of education Academic facilities Quality of faculty Availability of financial aid to meet need Availability of on-campus housing 23

Primary Drivers of Perceived Value 24 Value of Education Outcome Measure Scale: 1 = Very Low Quality to 5 = Very High Quality Predictive Model of Perceived Value of Education at a Sample College Quality of faculty and their teaching ß =.322 Preparation for graduate/professional school ß =.234 Career planning and placement services ß =.168 Total cost of attendance (tuition, room, board and fees) ß =.152 Availability of need-based financial aid ß =.129

Key Question  Who are your institution’s top competitors at the application and enrollment stages, and how can your institution capitalize on its advantages and position itself against different categories of competitors? 25 Understanding Cost Perceptions & Price Sensitivity Understanding Quality Perceptions & Willingness to Pay Understanding Competitive Position Useful Techniques  Scatterplot analysis*  Competitive benchmarking*

Public Other Private Value Scale: 1 = Poor Value to 5 = Very Good Value Academic Quality Scale: 1 = Very Low Quality to 5 = Very High Quality Competitive Position 26

Benchmarking 27

From Research to Action 28

Enhancing Your Institution’s Value Proposition  People – Target students and families who value what your institution offers  Product – Strengthen your educational offering to more fully satisfy the needs of students  Place – Develop delivery systems that drive value  Price – Develop pricing strategies that match the value students receive  Promotion – Develop promotional efforts that include clear and compelling messages via appropriate channels 29

Questions Tara E. Scholder Vice President for Research Operations , Ext

32 $0$10,000$20,000$30,000$40,000 Institutional Grant Amount 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of Enrollment as a Function of Average Institutional Grant Assuming a $ 35,000 COA

33 Net Revenue as a Function of Institutional Grants $0 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000 $50,000,000 $55,000,000 Net Revenue $0$7,000$14,000$21,000$28,000$35,000$42,000 Institutional Grant Amount Maximum probabilistic contribution to net total revenue. Assuming a $ 35,000 COA No Grant Aid All Revenue All Grant Aid No Revenue