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Ohio Assoc IS 5 Drivers of Ind School Demand

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Jeffery T. Wack Ph.D. presentation to Ohio Assoc of Ind Schools Oct 2008

Jeffery T. Wack Ph.D. presentation to Ohio Assoc of Ind Schools Oct 2008

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  • 1. Independent School Demand: What Can’t be Managed, What Can? Ohio Association of Independent Schools 2008 Jeffery T. Wack, Ph.D.
  • 2.
    • What drives demand for private schools?
    What is demand?
  • 3.
    • Where we were.
    • Where we are.
    An Historical Overview
  • 4. Remember the Late 1980s?
    • Whip Inflation Now (WIN)
    • Several years of recession
    • Mortgage Rates: 11%
    • “ Black Monday” October 1987
    • Post-Boomer birth-dearth
  • 5. Independent School Enrollment has Grown 20+% since the early ’90s Mostly due to new schools coming on line 24% Number of U.S. students is down; international up 20 Years of Recovery
  • 6. Increases in Indices of Demand Source : NAIS StatsOnline
  • 7. But N.A.I.S. Enrollment Growth Varies by Region (1993-2003) NAIS Statistics 1998, Vol 1.
  • 8. OAIS Trends in Admissions – Slippage (Indicators, per enrolled student) Source: NAIS StatsOnline
  • 9. What Has Driven Demand for Independent Schools? This Devil’s Advocate’s View: Affordability is not the Answer
  • 10. Key Drivers of Market Demand
    • Government Policy
    • Demographics
    • Social Forces & Attitudes
    • Competition
    • Economics
    External, Uncontrollable
  • 11. Government Policies The worse the public options, the better for private schools.
  • 12. How much respect and confidence do you have in the Public schools? Gallup Organization
  • 13. And what have been governments’ responses to concerns about public education?
  • 14. Public and Parents Are Divided on No Child Left Behind Q.13 45% 38% 43% 41% 41% 43% 2005 2007 Adults who took survey in Spanish 48% 40% Attitudes toward No Child Left Behind 2006 K-12 parents 67% 24% General public Very favorable Somewhat favorable Very unfavorable Somewhat unfavorable
  • 15. Teachers and Administrators Are Firmly Opposed to NCLB Q.13 20% 77% 33% 63% Attitudes toward No Child Left Behind Public school teachers Public school administrators Very favorable Somewhat favorable Very unfavorable Somewhat unfavorable
  • 16. Grades for the Nation’s Schools Remain at ‘C’ Q.10 A B C D F GPA 2001 2% 18% 51% 16% 3% 2.0 2003 2% 29% 47% 13% 2% 2.2 - - - - - - - - - - - - - - - - General Public - - - - - - - - - - - - - - - The Nation’s Schools Spring 2007 2005 3% 23% 46% 15% 4% 2.1 2006 5% 26% 44% 15% 5% 2.1 2002 2% 14% 50% 21% 4% 1.9 2004 2% 20% 47% 15% 4% 2.0 2007 4% 23% 44% 16% 5% 2.0
  • 17. Grades for the Nation’s Schools Remain at ‘C’ Q.10 A B C D F GPA 2004 2% 20% 48% 14% 3% 2.0 2001 8% 35% 33% 13% 4% 2.3 - - - - - - - K-12 Parents - - - - - - Public school teachers Education Stakeholders’ Report Card The Nation’s Schools Spring 2007 2006 5% 26% 45% 14% 4% 2.1 2005 4% 27% 46% 12% 2% 2.2 2007 4% 25% 43% 16% 4% 2.1 2007 4% 33% 41% 10% 1% 2.3 2007 1% 41% 42% 4% 0% 2.4 Public school administrators
  • 18. Grades for One’s Own School: Better – But Still Not Great Q.6, 8, 9 Public School Stakeholders’ Report Card My Children’s School/My School(s) Spring 2007 A B C D F GPA Public school teachers 27% 52% 17% 2% 1% 3.0 Public school administrators 32% 57% 8% 1% 0% 3.2 Public school parents 26% 41% 21% 8% 3% 2.8
  • 19. Public School Problems and Their Solutions Lack of/need more parental involvement Lack of/need more classroom discipline Lack of funding/ increase funding Large class sizes/ reduce class sizes Low standards & expectations for students/raise standards & expectations Unmotivated teachers/ incentives to motivate teachers Too few/need more qualified teachers Lack of/need more challenging/ interesting schoolwork Lack of consistent measures of student learning/increase testing Q.11a,b General Public
  • 20.
    • Variability
    • Still Large  Not individualized
    • Bureaucratic
    • Safety
    • The “Good Kids in the Middle”
    • Buildings vs Program
    In Short, Dissatisfaction Persists What portion of apps to your school reflects affirmative choice vs. lack of viable public options? Q:
  • 21. Kid Demographics If they aren’t there, they can’t apply.
  • 22. Projected Population Growth by State
  • 23. U.S. Births by Year Graduating high school 2009 Entering elementary
  • 24.  
  • 25. Note the Dramatic Change in Rate of Growth = 1.5%/year = 0.3%/year
  • 26. But Trends Depend on Where you Are The Warmer, the Better
  • 27.  
  • 28. Percentage Change in the Population of Children in Ohio
  • 29. Table A. Projected percent increases in public elementary and secondary school enrollment, by state: 2001 to 2013 Alaska 17.0   Virginia 4.3 Hawaii 16.1   South Dakota 2.6 California 15.7   New Jersey 2.5 Idaho 15.1   Michigan 2.4 New Mexico 14.9   Tennessee 2.4 Nevada 13.8   Nebraska 2.0 Wyoming 13.1   Rhode Island 1.9 Utah 12.7   Delaware 1.8 Arizona 12.0   Maryland 1.7 Texas 11.2   Kansas 1.4 Colorado 8.8   Illinois 1.2 Georgia 6.8   South Carolina 0.9 Washington 5.7   Missouri 0.5 Oregon 5.4   Indiana 0.4 Florida 5.4       Montana 4.6       SOURCE: U.S. Dept. of Education, NCES: Common Core of Data surveys and State Public Elementary and Secondary Enrollment Model. (See reference table 5 .) Table B. Projected percent decreases in public elementary and secondary school enrollment, by state: 2001 to 2013 New Hampshire -0.2 North Carolina -0.9 Wisconsin -1.1 Minnesota -1.2 Iowa -1.6 Alabama -1.7 Oklahoma -1.7 Pennsylvania -1.9 Massachusetts -2.4 Maine -2.4 Mississippi -2.4 District of Columbia -2.8 Connecticut -2.8 Arkansas -2.9 Ohio -3.2 Vermont -3.2 New York -3.5 North Dakota -4.5 Kentucky -5.5 West Virginia -6.1
  • 30. Percentage Change from 2000 to 2009
  • 31. Ohio Kid Demo Projections Included as Handout
    • Ohio Overall: Downward
      • 0-4: +.5%
      • 5-9: -7.1%
      • 10-14: -.7%
      • 15-17: -1.4%
    • But some counties are “hot” e.g.
      • Delaware
      • Warren
      • Union
  • 32.  
  • 33. Good News: Schools’ Alumni “Markets” are Growing Year
  • 34. Competition The choices used to be few.
  • 35. Public Assigned 76%
    • Now
    • Home Schooling
    • Public Charters
    • Public Magnets
    • Soon: Proprietaries
    Public Choice 14% Then Private Religious 8% Independent 2% Public, Parochial, or Private?
  • 36.  
  • 37.  
  • 38. Ohio “Community Schools” Enrollment is Growing http://www.ode.state.oh.us/GD/Templates/Pages/ODE/ODEDetail.aspx?Page=3&TopicRelationID=662&ContentID=41601&Content=41601
  • 39. Variety of Newer Tuition-Charging Schools
    • Niche Segment Schools
      • Therapeutics
      • Nations Academy
    • Religious Schools
      • Catholic
      • Christian and other
    • Price Gap Schools
      • Proprietaries (“Southwest Airlines”)
  • 40. Ford Mustang V6 : 1975 = $3,200 2005 = $20,000 Increase = 625% Duke Tuition : 1975 = $2,780 2005 = $32,600 Increase = 1,173% Independent Schools compete with colleges for today’s share-of-dollar for education (e.g., 529 plan) My summer 1974 earnings at Holiday Inn: $4/hr * 40 hrs/week * 12 weeks = $1,920
  • 41.   Steps:   1. Student Info   2. Savings   3. Account Type   4. Results   5. Action List     4. View Your Results            College Shortfall According to the information you provided and the tool's assumptions, you could have a college surplus of: $503       Other Savings Initial Contribution: $ Annual Contributions: $ Account Type:           Additional Funding   Include additional funding such as financial aid, income from a student job and other options.   Hypothetical Growth *   Total Cost of College: $245,488 Future Dollars       Advanced Assumptions  Student Summary:    Name: bill    Age Starting College: 18    Years Attending College: 4    College Begin Year: 2019    College End Year: 2022    College: National Average    Annual Cost: $33,301    Savings Summary:  Other Savings: $0    Contributions: $15,400    Account Type: college slice/version powertools slice/version Boy is 6 years old Will attend 4 years of private college with average tuition and R&B Models says start saving $15,400/year NOW College Planner Retirement & Guidance > College Planning > Be sure to verify your information before continuing.       Account Type: 529 ® Copyright 1998-2005 FMR Corp. All rights reserved. Important Legal Information .                            
  • 42. And More Competition for Alumni Dollars * Excludes higher education. Number of registered non-profits in education* has doubled since 1995:
  • 43. Social Forces and Parent Attitudes My mom thinks we’re nuts!
  • 44.
    • Parents Determine Primary Demand
    • Students Choose the (High) School
    The “Purchase Decision”
  • 45. “ Suppose the government would pay all tuition. Which school would you choose?” Harvard Kennedy School/ NPR/Kaiser poll 2003 Asked of Public School Parents: Q: Same school 66% Religious/ Parochial 13% Other Public 6% Don’t know 6% Non-religious Private 9% Similar question asked of parents in NAIS national public opinion polls (1999, 2007) finds that 1/3 would opt for an independent school, 1/10 a religious school, if cost and distance were non-factors
  • 46. Realities of Today’s IS Parent
    • Work environment is pay-for-performance
      • Employment has become precarious
      • Their world is already flattening
    • More knowledge shifts balance of power
      • Parents are experienced education customers
      • Professionally successful
    • Less trust
      • Cultural message of the benefits of more parent involvement
  • 47.
    • Brand conscious  less time to shop?
    • ISs fit with the luxury brands
    • Less confident that their child can achieve what they have
    • Ends-oriented  College Craziness
    Uncertainty Fear Strive for Control
  • 48. SAT Test Takers 1972-2007 Year Enroll in college right after high school: 1975=51% 2008=69% Source: National Science Board report 2008
  • 49. Number of College Applications per Student Up 30% (1997-2007) SOURCE: HERI at UCLA College Freshman Survey Average # apps filed: 1997=2.9 2007=3.7
  • 50. 1997 : 1,100,000 SAT takers x 2.9 Apps = 3.2 Million Applications 2007 : 1,520,000 SAT takers x 3.7 Apps = 5.6 Million Applications! Why Parents, Seniors (and College Counselors) Have Gone Crazy: 67% Increase in College Apps in Less than 10 Years!
  • 51. Applications to Yale There has been essentially 0% change in the number of Ivy League freshman spaces since 1985.
  • 52. Source : Yale OIR “ I went to Yale….why can’t you get my child into Yale?!” Origins of Yale Freshman Matriculants (Classes of 1981-2009)
  • 53. College Counseling is a Marketing Issue
    • Write your estimate of the acceptance rates (% of applicants offered admission) at the following universities:
    • Case Western Reserve
    • Denison
    • Northwestern
    • Ohio State
    • Wake Forest
    • Yale
  • 54. College Counseling is a Marketing Issue
    • Write your estimate of the acceptance rates (% of applicants offered admission) at the following universities:
    • Case Western Reserve = 67%
    • Denison = 39%
    • Northwestern = 30%
    • Ohio State = 68%
    • Wake Forest = 44%
    • Yale = 9%
    Per US News & WR
  • 55. Family Economics The Story as of Summer 2007
  • 56. Source : NAIS +30% +23% Pricing Context Year
  • 57. By JTWack and Company from data appearing in the Hartford Courant (1/29/06) Changes in Prices Relative to 82% Inflation (1985-2005) Products/Svcs that overshot the 82% increase in CPI Hourly Worker Pay = 81% Products/Svcs whose prices increased less than CPI Indep Sch Grade 9 = 205% CPI Increase = 82% (1985-2005)
  • 58. Median Full-pay   99%   100%   1% 780 $350,000+ 96% 99% 3% 2,900 $200,000- $350,000 93% 96% 3% 2,600 $150,000-$199,999 89% 93% 4% 3,300 $125,000-$149,999 81% 89% 8% 6,200 $100,000-$124,999 67% 81% 14% 11,100 $75,000-$99,999 44% 67% 23% 17,500 $50,000-$74,999 28% 44% 16% 12,700 $35,000-$49,999 0% 28% 28% 21,700 Less than $35,000 Percentile Cumul % % of Total Families (000s) Income Range (2005 Est Based on Census Data) US Families by Income
  • 59. The Vanishing Upper Middle Class 25% 33% 45% Median Tuition as a Percentage of Median Family Income 1990 2005 2015?!
  • 60. Federal Reserve Board Survey of Consumer Finances 2006 Income Growth
  • 61. Federal Reserve Board Survey of Consumer Finances 2006 Growth in Net Worth
  • 62. * Top 3 officers in the 50 largest U.S. companies. Source : Saks, Federal Reserve; Frydman, Harvard 2006 Top Executive* Income Median Income of Top Executives in the 50 Largest U.S. Companies Relative to the Average Worker’s Pay # of times Avg Worker’s Pay
  • 63.  
  • 64. For the top ~5% of households, independent schools have become cheaper Change in Average Tuition as a Percentage of Household Income (1995-2005)
  • 65.
    • National Retail Sales: +3-5% Annually
    • Luxury Sales: +10%-20% Annually
      • Coach Same-Store Year-over-Year Sales: +20% each of 2005 and 2006
      • Netjets , Luxury cars, Viking ranges sales records
      • Record real estate and art sales
    U.S. Luxury Sales Had Been in a Steep Climb
  • 66. But this peaked
    • Housing headed south in late 2006
    • Luxury goods sales slowed in summer of 2007
    … .and things have surely changed this year
  • 67. So, Which Way is the Wind Blowing in Ohio and Your Market?
    • Government Policy
    • Demographics
    • Social Forces & Attitudes
    • Competition
    • Economics