University pricing is a complex undertaking for university administrators, students and parents alike. With the increasing reliance on grants and other discounts to draw students, the full-tuition paying student is practically an endangered species.
As we looked at the situation, we thought we might review some of the parallels between student enrollment to airline travel. Yes, we said airline travel.
An airline seat is a perishable good. When the plane takes off with an empty seat, you have lost the revenue for good, but you have incurred the flight expense. And if you oversell a seat you'll have unhappy customers.
So, do you see the parallels now? University seats are perishable goods similar to airline seats. If admissions deans make a mistake in their selection for an academic year, yield falls short as the semester takes off and seats go empty. Tuition revenue may be lost for the next four years.
If you oversell the semester and encounter insufficient capacity to handle students, i.e., not enough seats available for Accounting 101, you'll have unhappy students, faculty and facility management. Every seat has value and yet, there is no perfect formula to predict your university pricing and your exact yield.
The reality is, an airline can have anyone fill any seat. University pricing has a few more complicating factors taking into account each "customer's" academic levels, gender, geography, racial diversity, etc. So we can see that while there are instructive parallels concerning the value of a seat and the loss of revenue when seats go unfilled, university pricing is actually far more complex than airline pricing.
Let's see what we can learn when we compare university pricing between some leading competitors.
Tableausoftware publishes a handy tool to look at the discount rates accross regions and institutions using the IPED data from the National Center for Education Statistics. Graph 1 compares 2005 (green bar) with 2010 (blue bar) with the percentage of full pay students in the left column and the dollar amount of the institutional grants (discounts or scholarships) on the right. You can see that full pay students have declined as a percentage of the student body from about 50-60 percent to 40 percent for highly branded, elite universities. Concurrently, institutional grants have increased in dollar terms to cover the tuition discount. Those blue bars on the right go from around $25K in 2005 to $30-35K in 2010.
Graph 1
Graph 2 shows how full pay students are not just a rare species at elite universities, but across the country. For illustration purposes, we picked a handful of private, non-profit universities in the Washington, DC area. You can see that only one university (Catholic University) increased their full-tuition paying students during the past 5 years, while increasing their grants at the same time. It is important to note that this particular university started at a low percentage of full-pay students in the first place.
You might want to take a look at this tool and compare your school to regional and national competitors. That simple step might give a little insight as you plan for next year's scholarship budget, among other recruitment plans.
This overall trend explains why university administrators across the U.S. are eager to attract full-tuition paying international students. While many of us look to international student recruitment as a process to diversify perspectives on campus and provide a deeper level of global education and understanding, others are swayed by the financial realities of paying for the U.S. education system. Like it or not, there is a huge incentive to selling a 4-year seat for a higher, non-discounted price.
Try not to be too hard on the financially motivated administrators in your midst. They are looking for every avenue they can find to support the educational infrastructure that feeds the entire school. International student recruitment tools are a worthy investment with financial and, ultimately, educational returns that support every aspect of the institution.
Graph 2
