Overcoming price sensitivity ... Means marketing affordability, and it's what every IHE needs to do.

For the first time in the storied history of American higher education, both sectors (public and private) need to convince the college-going market that they are affordable. Both have always had to convince students and families of their value. And private institutions have had to talk affordability for over 25 years. But, there's now a whole new challenge for public higher education, where double-digit tuition increases abound. This spring, state legislatures from New York to Texas were the scenes of heated debates among colleagues--as well as the target of protests From constituents-regarding the challenge of keeping state-supported IHEs affordable. In all, public institutions in 16 states raised tuition by more than 10 percent last year. Chances are, more will this year,

Unfortunately, the financial aid award letter itself, although a critical component of communicating affordability, comes too late in the process to influence anything but yield on admitted students--significant, certainty, but in many instances, not sufficient. Consequently, institutions need to look for ways to market their financial aid programs before students apply for aid, and even before they apply for admission, if they are going to remain competitive regardless of sticker price. There are many ways to address this issue: Some Ivy League institutions with deep pockets have addressed it by out-and-out changing what families have to pay. Princeton (NJ), for example, announced a few years back that it would altogether eliminate student loans from financial aid packages. Williams College (MA) froze tuition. Still, for institutions that can't afford to radically reduce the net tuition revenue they generate, what options exist? Following are four effective approaches we've seen at private institutions; three are possible strategies for both private and public sectors:

1--LET THE FAMILY FIND ITSELF IN YOUR STUDENT BODY

The fact is that all IHEs have students from families representing the entire spectrum of incomes, from very low to very high. In New York State, for example, the three sectors of higher education show the following Adjusted Gross Income (AGI) distributions (source: Commission on Independent Colleges and Universities):

The same story can be told in every state and at every institution. Many schools publish the socio-economic profile of their student body, using bar charts to show the range of incomes and percent receiving aid within each, and pie charts to describe the components of the typical financial aid package for freshmen. Some institutions create a sampling of case studies describing actual families (anonymous, of course) that represent socio-economic "clusters" on their campus (e.g., single parent, low income; dual earners, middle income; high income with multiple children in college; etc.). One best practice IHE in this regard is Ithaca College (NY), a comprehensive institution with a $30,000 price tag. Larry Metzger, dean of Enrollment Planning, reports:

"We begin with pricing that is moderate relative to our competitors, then tackle the affordability issue head-on by: addressing [sticker] shock through concrete examples of how students from disparate socio-economic backgrounds have financed an Ithaca education; assuring a guaranteed level of support to every student with need; and acknowledging that Ithaca College values academic performance and rewards it with additional aid opportunities. As a result, Ithaca College has greatly increased the socio-economic diversity of its student population. Whereas in the past the College had a bimodal distribution across income levels, catering primarily to the most needy and most welt-to-do, our classrooms today are filled with a much more varied mix of backgrounds."

In the past, the focus of financial aid/financing brochures was to spell out the process of applying, including forms and deadlines.

Wells College chopped $5,000 off the tuition sticker and welcomed a class 50 percent larger than the previous year, with a 41 percent increase in net tuition revenue. Today, aggressively promoting affordability, with facts and figures, is as commonplace as is the use of statistics about average SAT scores.

2--SLASH YOUR STICKER PRICE

Five years ago, Susan Sloan, director of Admissions, and Lisa Ryerson, president of Wells College (a small liberal arts women's college in upstate New York) faced a very real dilemma: Financial aid costs were rising faster than tuition, and new student enrollments were chronically anemic. Average net tuition revenue was dropping with each entering freshman class. The women analyzed the tuition situation and struck out on a bold course, chopping $5,000 off the sticker.

"In the fall of 1999," says Sloan, "we enrolled our first class under the new pricing model--a class that was 50 percent larger than the previous year's class--with a 41 percent increase in net tuition revenue. Five years later, we continue to benefit from this decision. In addition to increased enrollment and net tuition revenue, we are seeing an increase in the academic quality and geographic diversity of our entering classes. Reducing tuition was definitely the right decision for Wells College."

This high risk/high return strategy has been tried by only a handful of institutions, and granted, the conditions have to be right. First, almost everyone on campus needs to be receiving institutional aid at or exceeding the amount being cut. Second, other less radical strategies need to have been tried and failed. Third, the amount of enrollment increase necessary to "break even" must be reasonable. And finally, merit- and need-based aid programs need to be adjusted to reflect the new pricing structure. In other words, you have to carefully perform the cost/benefit analysis and have confidence in the assumptions.

3--SPEND YOUR FINANCIAL AID DOLLAR TWICE

An increasingly common strategy finds institutions advertising guaranteed awards based on clearly defined criteria (e.g., SAT or ACT and GPA). By promising awards "up front" before a student even applies, the institution gets to communicate "net price" based on a dollar amount that was already committed in financial aid but wouldn't have been known to the recipient until after she had applied for admissions and been accepted. This strategy allows schools to "get on the short list" when applications are filed because the net price now puts them in a competitive cost position. Stated differently, this strategy has the potential to build demand (applications) as well as increase yield (enrollees). Wilkes University (PA) successfully employed this strategy in 1999. Michael Frantz, vice president for Enrollment and architect of the plan, notes:

"In the private college sector, we recognize that sticker shock is a real obstacle regarding the perceived affordability of our institutions. We created a Web site 'Scholarship Calculator' that allows students to enter their academic information and immediately receive a response regarding the amount of the merit award, given their inputted information. This Web form also serves as another source for inquiries as we also gather other contact information as part of the calculator. The moral of the story is, if you are doing merit awards, don't make them a secret. Bake it easy to understand and promote them, every chance you get. Doing so is attractive to both the needy and low- or no-need student."

The only caution with this approach is that institutions need to state in bold letters that the scholarship guarantee isn't the only aid available; that need-based aid is also possible once the appropriate forms have been submitted.

4--PROVIDE EXCELLENT SERVICE

What could be more helpful to incoming students (and their families) than assigning a financial adviser to each admitted individual? That's what St. Edward's University (TX) does, and there's simply no better way to put a face and a name to the affordability message. The adviser works with each student throughout his time at the school.

ENDNOTE: SELLING AFFORDABILITY

Regardless of the strategy your institution chooses to use to help overcome the very real problem of price sensitivity, it's essential today to remember that selling affordability can be as important as selling the academic program. Let the two sales efforts work in tandem, and you'll see a double win.

Kathy Kurz and Jim Scannell are partners in the enrollment management consulting firm Scannell & Kurz, Inc. (www.scannellkurz.com).

ADJUSTED GROSS INCOME DISTRIBUTIONS

           Independent   State University   City University
                           of New York        of New York
                              (SUNY)            (CUNY)

< 20k          16%             13%                25%
20-40k         17%             14%                19%
40-60k         11%             11%                 6%
60-80k          9%             10%                 3%
> 80k          47%             52%                46%