And the Greatest Among Them is Pricing—The Story of Tuition Elasticity


Stamats 2020

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I first ran into the four Ps in a graduate course on university administration at The University of Akron in the early ’70s. It was there that I was introduced to a foreign concept in higher education at the time. The idea of treating education with words normally reserved for the business environment was revolutionary.

To the credit of one enlightened professor there, I was exposed to ideas that many in higher education were not—the idea that you could approach the transactions in the higher education model with some nomenclature adjustments to what was happening in the business world. Astounding stuff in the 1970s!

Nearly 40-plus years later and with the rise of the internet and the new transactional concepts of social media, e-commerce, and digital marketing, does any of this still make sense? Are the four Ps relevant? My answer is yes indeed.

While brand control has migrated from the university marketing office to the prospective students and donors, alumni and community members, the four Ps still are the framework. And among them, pricing is the greatest.

Why do I say that? I say it because we are being consumed by the concept of price. A recent report from The New America Foundation examines the impact of financial concerns in choosing a college. In the study, 88 percent of respondents identified cost as a concern in the college selection process. When they were pressed to list the single most important factor, 63 percent of respondents reported they were most concerned with how much a specific college costs.

The presidential primary battles have often been a battleground for “price and affordability.” There is a resonating power in concepts like “free college” and “debt free education.” Much of Bernie Sanders’ success in the Democratic primary had a lot to do with “pricing.” Now it appears that the concept of pricing accountability will be written into the Democratic platform. The stage is being set.

If you have ever sat in on the decision making that goes into setting future tuition and fees, I can only describe it as a process fraught with some angst. There just aren’t many things that can affect the university’s bottom line more directly. As a university marketing professional, questions like these will no doubt come to mind.

  • How much are today’s university and college shoppers willing to pay for an education?
  • How will we look compared to our peers?
  • Are we pricing ourselves out of the market?
  • How do we balance financial aid with actual cost of attending?
  • How about that discount rate the trustees keep asking about?
  • Should we really be looking at net revenue as a primary marker of success?

So, the reality of college finances today, with all of its complexities, is challenging and frustrating. Indeed, pricing is important. And as a marketing practitioner, understanding the nuances of setting tuition ergo pricing is one of your major tasks.

So what options are out there for you? Tuition elasticity modeling can help you assess the responsiveness of students’ enrollment decisions to changes in a college’s tuition. Completing such a study and modeling tuition scenarios give the university some certainty about setting tuition and give the marketing practitioner a base from which to position the institution in the coming enrollment cycles. In this dynamic recruiting environment, we need all the certainty we can muster. So for all that matters in today’s market, price is the greatest among them all, the “P” most feared and valued.

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