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The business of higher education

September 25, 2018

Higher Education is knee-deep in an admissions cycle, trying to fill the Class of 2023. America is in a booming economy, and the richest Americans are still bathing in the Trump tax cut, which was big for people with a lot of money. More rich people can pay for the looming $70K per year.

A school is a business. It needs revenue to pay the expenses of educating people. Salaries, lights, IT staff, deans, dining halls, speakers, these all cost money.

Though it makes no money, and most are non-profits, there is a rising cost to the run the business that needs funding. Since schools don’t make anything to sell, they rely on fixed revenue sources. In the private category, a school with an endowment of around one billion, the numbers are something like this: around 25% of the budget is from the endowment, 10% from annual giving, and the remaining 65% from full-pay applicants. Public schools have different math, but still use gifts, tax money, and full-pay applicants. The math depends on many factors, and full-pay includes many people getting private and public loans, but this is the business.

This Inside higher Education article talks about issues with the business:

“College admissions directors, as in recent years, continue to report a great deal of concern about meeting their enrollment goals.”

There are a number of reasons for this: some are rising costs, a lack of a marketing strategy, both with social media, and an overall marketing strategy. Having worked in a school, I can attest to the lack of an overall strategy. I was struck by the one-size-fits-all aspect of marketing.

A school needs a certain percentage of full-pay students, so the admissions staff makes private school visits throughout the process. This is the marketing strategy — go into a private school, especially one that has drawn students in the past, and hand out a view book. The students will get view books from all the schools, and they will all be about the same. Each one will focus on the school visit, all believing that getting someone on campus means they will be converted. In reality, a friend or family member went there, so the kid will too.

The rest of the applications will come from marketing, or making people aware of the school. This is where social can impact the decisions process. Sadly though, most social is either advancement-related, or via the dean of the college. Higher education isn’t awesome at thinking about this as a decisions cycle. Schools should be planning the 2024 class right now, using social marketing to generate awareness of the school to current juniors.

Some are. Though most wait until the spring, when they are also trying to yield the current class, to get attention about the next class.

Right now, in high schools across the world, juniors are thinking about college. They know the deadline to apply. They are planning summer trips, around summer camps, to some of the schools on their list. They are probably Google searching your school, and probably not clicking on your website, because, lets face it, your website is a hot mess of confusion for a junior. They don’t know who you are talking to, or why your website features a lecture right now.

Plus, as I’ve noted on this blog, Google has taken over the differentiating part of digital, and offered stats and stories to help (if you fancy, you can read about it a few posts ago.)

What should marketing be?

Since we know there are different people coming to the school, maybe there should be separate marketing to full-pay students.

Speaking of full-pays, there’s also a good take on legacies in the piece.

Generally, college leaders defend these preferences as a way to keep alumni engaged (and giving money), and to create a multigenerational spirit about an institution, while critics decry what they see as “silver spoon” admissions. While college leaders regularly defend affirmative action in public statements, relatively few speak out about legacy admissions.

The author is right, legacies are more about donations. From a business perspective, a recent graduate of a donor alum is more likely to start out life as a consistent donor. A full-pay graduate with wealthy patents starts off in a better financial situation than a student who needs to take out loans. That reality turns them into a higher giving donor faster.

That previous paragraph might be frustrating, but it is true. Rich people are the people who give to schools. Their kids are more likely to grow into the kind of person who gives to schools because they started with an advantage.

This is about the business of higher education. It isn’t about the lofty goals or mission statements.

At any school, there will be a certain percentage of full-pays. Within that population will be the people who need loans to be full pays, and the ones who don’t need loans.

Then there will be the percentage of people who are not full-pays. In this population will be some people who get aid, but need a loan to close the gap, and [people who get a full ride. This ride doesn’t include incidental costs like textbooks and spending money, so some of these people will also get a loan. In short, the only ones not getting a loan will be the real full-pays, the ones who received a 2.6 tax break on income. If they made 100 million, that is about 2.5 million, more than enough to give to a school on top of the tuition.

(There are some people who pay more each year than the sticker price — they get front row seats at events, first choice in housing, and dinners with the President.)

What is the point?

The point is, higher education doesn’t talk about their target markets that well. They go in talking about the school in the same way to all [people. Even though all people come for different reasons. They also start too late. So they are under increased pressure, with decreased help.

As the price tag at private schools hit 70K, it is more and more time to start thinking about admissions marketing as a business. With proper marketing tactics tied to business objectives.

What do you think? Are there any schools that are doing it well?

Matt Hames is on Twitter. You should yell at him there. Matt is also on LinkedIn, connect and  agree.

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