University Business - January 2011 - (Page 25)

money m at t e r s Setting Price in the New Economic Climate Considerations beyond the institution’s competitive market position By Kathy Kurz e have Written before about the importance of considering your institution’s market position relative to competitors when planning future price increases. When sticker price position is higher than “prestige” position (based on publicly available measures like test scores, U.S. News rank, and selectivity) institutions often see declining demand. While these benchmarking comparisons are still important, the new economic climate, along with the new requirement that all institutions have a net price calculator on their website by next fall, make it increasingly important to consider other factors, as well. Net Price PositioN First, it is no longer enough to know your sticker price position. You also need to understand your net price position. Using iPeDS data, you can enter the name of any institution and view their tuition and fee history (2006-07 though 200910) as well as 2008-09 data on the number of freshmen receiving institutional grants or scholarships and the average amount received. From this information, it is possible to calculate a freshman discount rate for the institution, albeit the rate will be a couple of years old. For example: 2008-09 tuition and fees = $25,596. • % of first time students receiving institutional grants = 87% • Average institutional grant received = $10,376 • Discount rate = (0.87 * $10,376)/ $25,596 = 35.3% applying this discount rate to the curuniversitybusiness.com W Recent pricing trends of competitors may help in projecting their likely increases for the coming year. rent tuition and fee charges of the institution (usually available via their web sites) will give you an estimate of their average discount and therefore net tuition and fee price for freshmen. For example: 2010-11 tuition and fees = $27,740 • Average discount = $27,740 * 35.3% = $9,792 • Average net tuition and fees = $27,740 - $9,792 = $17,948 Note: the iPeDS site also provides “net price” information, but this is based on just students receiving government aid and is using total expenses, rather than just tuition and fee charges. Therefore, it is not as helpful as the approach described above. Of course this “average” figure will likely be very different for different subpopulations—academically strong students versus marginal admits; high-need versus low-need students; etc. however, it does provide some general informa- tion to understand how both your sticker price and your net price compare to that of your competitors. to learn more about how your net price might differ from that of your competitors for different subpopulations, you can also check institutional websites to see if they have posted information about merit eligibility criteria or have already implemented a net price calculator. as noted above, all institutions will have to post such calculators by fall. comPetitors’ iNcreases Pay attention, also, to how the annual increases of your competitors may be changing. Scannell & Kurz has seen smaller tuition increases among private institutions and higher tuition increases among public institutions in the last two years. Looking at recent trends of competitors may help in projecting their likely increases for the coming year. all of this information will help the institution understand if the tuition increases needed from a budget perspective are likely to have a negative impact on recruitment results. For example, if your sticker and net price position are already high relative to primary competitors with similar “prestige” profiles, increasing tuition more aggressively than they are likely to (based on their recent increase trends) could result in a drop-off in demand for your institution. at a minimum, an institution in this position should expect that an increase in the discount rate Kathy Kurz is vice president of the enrollment management consulting firm Scannell & Kurz, Inc. She can be reached via the firm’s website, www.scannellkurz.com. January 2011 | 23 http://www.scannellkurz.com http://www.universitybusiness.com

Table of Contents for the Digital Edition of University Business - January 2011

University Business - January 2011
Contents
Editor’s Note
College Index
Company Index
Advisory Board
Behind the News
Sense of Place
Viewpoint
Money Matters
Guide to Financial Services
Human Resources
Community Colleges
Take Ii Tablets
Pilots Taking Off
Today’s Admission Office Budget
What’s New
End Note

University Business - January 2011