Price transparency and preparing students with skills that align with the needs of the workforce should be key areas of focus for colleges and universities.
As consumers we love discounts
I recently went shopping for Christmas gifts for family members and was happy when I came across the perfect quarter zip top for my brother. When I saw that it was on sale for 25% off my happiness increased. When I went through the checkout I was told that the top was an additional 25% off as part of a “doorbuster” sale. Although I am someone who typically does not like shopping, this was a good day. I had found the ideal gift and gotten a great deal.
A couple of days later during a time of reflection (coffee break), I started to wonder if the top was really a good deal or not. I was probably just experiencing buyer's remorse, but how could a retailer take 50% off and still make a profit? How much did that top really cost that retailer? Was the price inflated so that it could be marked down? Was it really a high-quality product?
A close friend of mine called me two nights ago to tell me that his son had just been accepted to a college that was high on his list. He was excited and proud of his son as he should be. He shared that the son had received a substantial amount of merit-based aid and as a result, the net cost of tuition if his son ultimately chose to attend this college would be 50% of the listed tuition.
Yesterday that friend called me back, he had some questions and the questions sounded very familiar. How could a college take 50% off the tuition and still make a profit? How much will it actually cost the college to educate my son? Was the price of tuition inflated so that they could provide my son with a scholarship that would entice him to attend? Was this college's education truly high-quality?
Quarter zip vs. a college education
This made me wonder. Is the purchase of the quarter zip and the purchase of a college education comparable? I believe in many ways they are. I have experience in higher education and know enough about retail to know the answers to the questions asked above and I believe most consumers know the answers as well. Many different consultants in the marketing/sales space define the consumer decision-making process as having five steps. Here is one explanation of the process, and another. Two of those five steps include evaluating alternatives and making the purchase decision. This is where markdowns come into play. These two steps drive the strategy of setting a retail price and then reducing or “discounting” that price.
However, there is the fifth step in that process and that relates to an evaluation by the consumer of whether the purchase met their expectations. I can’t speak to whether my brother will like his quarter zip (I really do think he will), but there is growing customer dissatisfaction regarding higher education. The skills gap is real and that has made it challenging for some students to find employment in their preferred area of study. The question asked in the fifth step by the graduating student is, “Did the purchase meet my needs and expectations?”. For some colleges and universities, the answer to this question is trending in the wrong direction.
A necessary "reset"
However, recently there has been a movement towards “resetting” tuition. The concept is that the tuition is set much lower, close to the true cost of the education, and the discount is reduced or eliminated. The goal is price transparency. Imagine me walking in to purchase the quarter zip and the price I ultimately pay at the register is the price on the tag when I took it off the rack, but that is the same price I paid when it was on sale. I personally hope this transparent approach to the cost of higher education takes hold. As a parent of three college-educated daughters who received their degrees before I ever worked in higher education, I know firsthand the challenging process of trying to figure out the true cost of their education. Transparency regarding the cost of higher education can only be a good thing and a differentiating factor when comparing it to other purchase decisions.
That said, resetting tuition is only the first step. Colleges and universities must also eliminate programs that no longer align with career opportunities, expand early college partnerships, and add more certificate and micro-credentialing programs. These steps will help prepare students for the modern work environment and increase their post-purchase satisfaction.
The time is right for a change
With decreasing enrollments, this is an ideal time for schools to pivot and find ways to differentiate themselves and their product from what others sell. Some colleges have already recognized the need for change and are taking meaningful steps in the right direction. Hopefully, more will follow.