Aug 19, 2017

Financial Solution #3 > Diversifying Our Pricing Model


The age old question facing private colleges, universities, and schools has always been “when are we going to hit the wall on price?”  Or, better yet, “when will we completely price ourselves out of the market?”  As part of our current blog series “Financial Forces and Their Impact on Indy Schools”, let’s focus on how our approach to pricing might just need to change in the future.

The soaring cost of independent education has been the achilles heal of our industry sector for a long time.  If the issue of pricing has been with us for awhile, why have we failed to address it?  We have seen evidence of it everywhere, from widespread adoption of tuition discounting, tuition payment plans, declining demand, and decreasing selectivity among some of our finest and most established schools and colleges.  I don’t think we need more evidence.

Our business model has long been a high price/low volume enterprise.  And, by that very definition, independent education at the preschool, elementary, and secondary level has historically been a luxury item, available only to a very small percentage of consumers.  The very nature of independent education has been one of selection, in both the genres of consumers that have sought it out, and the decisions that the admissions committees have made toward their enrollment.  

Oddly enough, however, the intrinsic educational values of independent schools are not in sync with their business models.  Most independent schools and colleges wish to be more diverse, inclusive, and accessible, yet their pricing and delivery models offer far to many hurdles to really make good on these goals, unless they have a large endowment to fully fund financial aid.  And, while we are speaking of endowments, it is important to note that they are extremely difficult to grow in this time and age. 

Time is catching up to the industry.  Just like every other industry, we are seeing lower cost yet high quality versions of our enterprise ramping up. Online learning, hybrid programs, flex scheduling, and micro schools often get the most attention, but there are sure to be others.  In a very short period of time, I would expect that we will continue to see growth in those very segments while independent education – as the business model stands today – stagnates or declines in demand.

The card in the industry deck to play is to begin diversifying the pricing model.  Independent schools can continue to offer full-time, high cost/low volume programs but should not expect them to drive their finances.  They have to find new delivery options that drive new revenue streams.  Just like their college counterparts which cannot drive revenue through high priced, undergraduate, residential education, independent schools will need to offer programs that promote different access points and delivery mechanisms, further diversifying their enrollment and revenue stream.

Most indicators tell us that the future of independent education will closely mirror the challenges in other industry sectors, such as retail, transportation, and entertainment.  These include public demand for alternative delivery models, lower cost yet high quality alternatives, and hybrid approaches to teaching and learning using an evolving classroom model. The schools that are in current leadership roles – with healthy enrollment, strong fiscal management, deep demand, and high public respect – may be the ones that actually possess the brand, capacity, and competency to initially meet and win share of the changing needs of the marketplace.  Others will compete in specific ways, but they will need to differentiate by specializing in a distinct offering, program, or service.

The market and the consumer are both changing quickly.  The expectation among consumers will continue to favor flexibility, lower cost, and high quality.  The market opportunity lies with the independent schools that can be flexible enough to deliver it.  

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