October 26, 2020
It can be surprising how much verbiage and baggage surrounds the issue of college cost. In fact, when discussing cost, you may not be aware that you are also addressing issues of value, affordability, and ROI. With this in mind, let’s take a quick look at how these four terms are related.
Cost is a non-relational, objective variable. It is easily demonstrated and understood. The one complexity is net cost vs gross cost. Too often, students focus on gross cost and have a tendency to eliminate colleges from their choice set because the institutions are perceived as too expensive. It is important that students understand very early on the difference between what you charge and what they will likely pay.
From my perspective, cost is best used when you are the least expensive and your students are commodity (cost and convenience) oriented.
Value, however, is a highly relational term because students and parents ultimately define value. Thus it is almost always influenced by prior knowledge of an institution.
The term value, however, has less resonance with 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 characteristics do not differentiate, they actually undermine their value proposition value rather than enhancing it.
The third term is “affordability.” When a college describes itself as affordable, 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 be challenging.
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. It is, after all, based on a simple cost-benefit analysis. For them, the question is an easy one: “Is the college worth the money?”
Ultimately, ROI is a simple cost vs. benefits equation.
First, on the one side of the scale, you can outline both gross and net costs.
On the other side of the scale, however, you can stack benefits. Rather than listing benefits, you need to translate them into words, images, outcomes, etc. your prospective students understand. Small class sizes, for example, means the chance to work directly with professors.
Other benefits include the chance to play on a team, graduate on time, jobs, grad school, and others.
Moving forward, I suggest stressing ROI. While this might involve investing in gathering and synthesizing outcomes data, you will discover that ROI data is the most compelling data of all.
One final reminder: Don’t forget that students define benefits and not you.
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