First Published on Stevens Strategy Blog
Typically, when market demand shrinks or supply greatly exceeds demand for a product or service, fierce price competition comes into play among competitors. The ongoing decline in student demand for enrollment is already showing considerable evidence that price competition (net tuition) is escalating. As is evident from the following chart published by the National Association of Colleges and University Business Officials, between 2011-12 and 2020-11 tuition discounts for first-time undergraduates increased 9.6%. Increases in tuition discounts reduced the cash flowing from tuition which reduced the cash available to pay for operational expenses. Another way of seeing the effect of larger tuition discounts by 2020-21 is that for every $10,000 of tuition revenue from new students cash flow from tuition will reduce by $960. If a college enrolls 100 new students, the total loss in cash flow in 20-21 would be $96,000, which equates to the capacity to support two instructional positions.
Based upon the preceding table, it is not unreasonable to assume that, in response to the basic supply- demand relationship, prices are falling in reaction to increased competition for a shrinking pool of potential students. The following table shows that since 2000 the number of births bounced up and down with dramatic declines after 2006 and 2014. Forecasts by the Department of Education and others suggest that declining births will continue forward throughout the 2020s.
Many private colleges, when designing marketing campaigns, must account for prospective students who believe that there are only small differences in majors among prospective institutions. So, how does a college respond to shrinking markets and student perception that differences between colleges are meaningless? If given the preceding conditions lead to colleges becoming more aggressive in discounting tuition, colleges must sharpen how they present price discounts to prospective students. Below are several themes that private colleges might consider:
Quality Education at a Reasonable Price
Reduce Out-of-Pocket Costs with College XYZ New Financial Aid Packages
Cut Your Tuition Debt with College XYZ’s New Tuition Charges
XYZ College Offer an Affordable Degree with Our New Tuition Aid Packages
Contact XYZ College about Our New Lower Tuition Rates
Don’t Pay More for A Quality Degree, Contact XYZ College, Now