Higher education institutions are creating strategies that provide exceptional experiences for students while reducing their ever-increasing operational costs. To increase student enrollment, many colleges have evolved from learning facilities into all-inclusive resorts. Long gone are the days where you would enter a dining facility to wait in a buffet line for a lukewarm burger and overdone pasta. Colleges and their dining services are now employing top chefs to serve gourmet dishes.
For example, I recently visited a dining hall and enjoyed restaurant-quality sushi prepared by a chef from Japan. Colleges are investing significant capital, whether fundraised or debt-issued, in campus amenities. Students can now expect top-notch dining facilities, living accommodations, modern technology, upscale athletic equipment and facilities, multi-service counseling, as well as personalized attention from the administration and faculty.
How can colleges offset the rising costs that come with delighting students? While many colleges have attempted to reduce costs by re-allocating staff, issuing competitive RFP’s for expensive projects, or transforming the physical classroom into the virtual classroom, others have adopted a more revenue-focused strategy.
The bread and butter of nearly all higher education institutions consists of revenue from tuition, room, and board. The National Center for Education Statistics estimates that revenue from tuition, room, and board is approximately 75-90% of the total revenue source for private for-profit and not-for-profit colleges. Public institutions tend to vary greatly depending on state and federal funding. In this analysis, we will focus on private institutions.
Maintaining that tuition revenue source entails a very delicate mix of enrollment management, room capacity, dining space and vendors, as well as the almighty financial aid discount rate.
Want to learn how colleges can model enrollment and revenue to ensure sound financial management and planning?
Colleges must develop clear strategies and policies for enrollment management and revenue modeling. According to Peter Bryant, an enrollment manager for over 40 years, there are nine strategies for successful enrollment management:
Set realistic enrollment goals and not projections.
It is imperative that realistic enrollment goals are set, particularly at high-tuition schools. Missing a target by ten students, with a tuition rate of $50,000, could result in a half-million-dollar shortfall. On the flipside, setting your target too low could waterfall into room, dining, and academic classroom capacity issues.
Identify and secure sufficient resources to meet enrollment objectives.
Each institution must understand the costs associated with recruiting in their particular market as well as the demographic of their ideal student.
Develop an annual marketing and recruitment plan as well as a three-to-five-year strategic enrollment and revenue plan.
Even though marketing is essential to finding your desired students, marketing must be managed as a percentage of total tuition dollars.
Devote as much attention to student retention as you do to recruitment.
It’s just as important, if not more, to retain students as it is to recruit new students. At your traditional four-year college, continuing students comprise of approximately 75% of your tuition dollars every year. Since a higher churn rate can be indicative of low student satisfaction, institutions need to track student churn and implement programs and policies to minimize that churn.
The programs should be less costly than recruiting new students. By implementing a word-of-mouth or grassroots marketing strategy, your continuing student base can help you reduce marketing spend.
Build your recruitment database and inquiry pool by design, not by chance.
With the right recruitment software, you can identify the specific type of student who will thrive at your college rather than using a blanket strategy.
Track your marketing and recruitment activities.
It is imperative you track your “lead” generation and expenses to evaluate your cost per lead. Cost per lead is a wonderful metric to compare with other schools and evaluate the efficiency of marketing vendors. Take it to the next step and calculate your student acquisition cost.
Qualify and grade prospective students precisely.
In addition to the recruitment database, have a metric system in place to qualify the student you want to attract by identifying certain qualities or qualifications of each applicant. This will ensure you are enrolling a diverse student body that will enrich the learning environment.
Implement a strategic communications flow.
Communication is key between the Enrollment, Financial Aid, Academic Affairs, and Finance offices. These four departments must be in sync when developing an enrollment strategy. This ensures there are no potential pitfalls, such as too much financial aid awarded, insufficient academic space, or enacting policy that allows students to graduate at faster rates for less money. It’s important to understand the financial ramifications before making decisions.
Award financial aid so students get what they need and expect to enroll.
For enrollment management, this is one of the more delicate pieces of the puzzle. Financial aid is an effective tool to attracting better academic and athletic candidates. However, awarding too much financial aid to applicants can put the institution at financial risk if there is a higher yield than historical averages.
Enrollment Modeling Strategies
There are several different enrollment modeling strategies to implement once you have determined your retention goals and enrollment strategy for incoming students. Here are a couple methods.
Managing total enrollment by semester
This is a simplistic model that first requires an incoming enrollment target, inclusive of transfers.
Continuing students will be combined regardless of class year, and retention will be based on a three-year historical average with attrition rates. The attrition rates will include graduation rates, leaves of absence, academic/disciplinary suspensions, withdrawals, and readmits.
However, this model has limitations as it does not consider whether any specific class year is an outlier that acts differently than others. For example, a new policy is enacted with no additional charges for full-time students taking more than 18 credits. Students who take advantage of this policy could graduate in one to three semesters earlier than anticipated, skewing the three-year retention average.
The cohort-based model follows each cohort from semester to semester, determining each incoming cohort. It applies a retention average of as many years and cohorts as you set.
You can individualize retention rates for each cohort if new initiatives are implemented. You can also track retention for your traditional cohort base versus transfers. Transfers tend to retain much better than your typical incoming fall students, so it is more accurate to track them separately.
Lastly, it’s also important to have a well-developed model for students who live on campus. This includes tracking commuter, online, study abroad, and on-campus students. Colleges can implement study abroad programs to increase enrollment and help students expand their academic horizons.
Technology Considerations: Employing a Business Planning Cloud Solution
The ability to effectively and accurately model enrollment, and align it with institutional strategy, is strongly correlated with technology. Historically, institutions have relied on complex, linked spreadsheets. Any professional in finance who has done this knows it is a time-consuming and error-prone process. When spreadsheets are exchanged between departmental stakeholders, there’s the possibility for a version control and consolidation fiasco. There’s also the risk of significant errors that can compromise the validity of the model.
To create effective financial strategies that boost enrollment rates, it is recommended that colleges leverage a cloud-based business planning solution. As a former higher education budget manager, I recommend Adaptive Insights. This cloud solution provides financial insights to all stakeholders, thus facilitating collaboration and highly-efficient workflows.
Adaptive Insights enables you to skillfully implement these steps, develop integrated plans, and make the best business decisions that lead to better financial outcomes for higher education.
It’s back-to-school season! On September 20th at 2pm, learn how to create enrollment strategies that lead to better financial outcomes by tuning into our upcoming webinar: Enrollment and Financial Aid Modeling Strategies for Higher Education. John McGrath, Senior Associate, will reveal how you can manage all aspects of student enrollment with a business planning cloud solution.