Why a Tuition Pricing Strategy Is More Important Than Ever

Patrick Stark

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On May 9th, the National Association of College and University Business Officers (NACUBO) stated that tuition discount rates have hit a record high of more than 50 percent for first-time full-time students. These findings from a national study of tuition pricing reflect exactly what we’re seeing in the field and why having a tuition pricing strategy is more important than ever. But let’s not get ahead of ourselves.

Pricing strategy is more than setting a high discount rate—it’s about analyzing a complex set of data that examines the combined effect of your current market price and brand value compared to your competitors. That’s why tuition pricing elasticity and brand value studies are indispensable. They look at a combination of data-driven factors that inform pricing strategy.

Pricing studies are always directed at inquiring students, applicants, and parents of these students, with the end goal of reaching your future prospective students and parents. Depending on institutional needs, these student groups can be segmented.

For example, you might direct a study at general inquiries and applicants, STEM students, athletes, or even students from different socioeconomic and geographic backgrounds. In many cases, public institutions cannot adjust tuition without approval from an authorizing board. However, many public institutions are free to make decisions about fee structures.

A pricing study offers considerable insight into how fees might be adjusted and communicated. Private institutions tend to have more freedom to adjust published price and net cost, and a pricing study can produce results that can immediately inform or confirm these strategies.

Without a doubt, justification is a prudent and necessary measure that data driven pricing models can produce.

Accurate Pricing Strategies

Using choice-based modeling (often referred to as choice-based conjoint) rather than simply looking at historical data, pricing studies allow you, with great precision, to:

  • Determine the price point (both publish and net cost) that will attract the most students (including whether significant pricing adjustments are required, such as a tuition reset)
  • Identify the price point that will generate the most revenue
  • Calculate the number of students you will gain (or lose) at different price points
  • Determine the impact financial aid and discounting will have on enrollment
  • Understand how students of different abilities (think GPA and ACT/SAT scores), geographies, and backgrounds (such as household income) value your institutional brand

Understand Your Brand

Beyond pricing strategy, a tuition pricing elasticity and brand value study will allow you to:

  • Determine how different student segments compare you to your competitors
  • Understand how students who list you as “first choice” compare and contrast with students who list you at a “second” and “third” choice, or “never attend”
  • Identify the college characteristics and choice attributes that are of most value to students and parents so you can build your brand and customized communication strategies
  • Identify both the general messages and the specific messages that create interest and drive value
  • Create baseline brand metrics or compare existing metrics

Timing Your Pricing Study

As you might guess, it is especially useful to conduct a pricing study ahead of any changes in tuition or when building revenue models. For most schools, this means starting to conduct the study in Fall (though TPES studies can run through the next year).

Timing is especially important, because it needs to coincide with student knowledge and decision making. By fall, inquiring students and applicants begin to have a greater awareness of which colleges they are interested in, pricing, and what factors are unique about each college they are considering.

No matter the time of year, there’s never a wrong time to start thinking about your tuition pricing strategies. If you have any questions about how a pricing study might help you, please contact me for more information.

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