Current market conditions are leading colleges to be more aggressive in discounting tuition to compete for students who believe that there are only small differences in majors among colleges. Stevens Strategy Senior Consultant Michael Townsley’s blog discusses these market condition and outlines several themes that colleges might consider to sharpen their price discount marketing campaigns.
Typically, when market demand shrinks or supply greatly exceeds demand for a product or service, fierce price competition comes into play among competitors. The ongoing decline in student demand for enrollment is already showing considerable evidence that price competition (net tuition) is escalating. As is evident from the following chart published by the National Association of Colleges and University Business Officials. Between 2011-12 and 2020-21, tuition discounts for first-time undergraduates increased 9.6%. Increases in tuition discounts reduces the cash flowing from tuition which reduces the cash available to pay for operational expenses. Another way of seeing the effect of larger tuition discounts by 2020-21 is that every $10,000 of tuition revenue from new students will reduce cash flowing from tuition by $960. If a college enrolls 100 new students, the total loss in cash flow in 20-21 would be $96,000 or the capacity to support two instructional positions.
Based upon the preceding table, it is not unreasonable to assume that based upon the basic supply-demand relationships that prices are falling in reaction to increased competition for a shrinking pool of potential students. The following table shows that since 2000 the number births bounced up and down with dramatic declines after 2006 and 2014. Forecasts by the Department of Education and others suggest that declining births will continue forward throughout the 2020s.
Many private colleges, as they design marketing campaigns, must account for prospective students who believe that there are only small differences in majors among colleges. So, how does a college respond to shrinking markets and student perception that differences between colleges are meaningless? If the preceding conditions lead to colleges becoming more aggressive in discounting tuition, colleges must sharpen how they present price discounts to prospective students. Below are several themes that private colleges might consider:
- Quality Education at a Reasonable Price
- Reduce Out-of-Pocket Costs with College XYZ New Financial Aid Packages
- Cut Your Tuition Debt with College XYZ’s New Tuition Charges
- XYZ College Offer an Affordable Degree with Our New Tuition Aid Packages
- Contact XYZ College about Our New Lower Tuition Rates
- Don’t Pay More for A Quality Degree, Contact XYZ College, Now