1. Beware Deterrent Pricing:the Hot New College Amenity –Affordability
Speakingatthe AmericanCouncil of Educationthisweek,MitchDaniels(the governor-turned-university-
president) offeredthisassessmentof educators’mindset:"there still isadegree of denial thatanything
ismateriallydifferent.”
Usingpricingpolicyas a barometer,myownresearchsupportsthat.
Evenin an eraof publicoutcryaboutprice and cost (synonymsinthe dictionarybutIwill explainthe
difference inthe higheredmarket),concernsaboutthe value of the collegiateexperience,andseeming
to contradictits ownimperative toincrease access,collegescontinue toraise price.
Price tag “lift-off” =Deterrent Pricing
Here is a questionworthasking:doesanyone benefit?
Do collegessee more revenue?betterretention?improvedquality?amore diverse studentpopulation?
Doesthisincrease studentsatisfactionandalumni loyalty?
Are familieshappiermore satisfied? IShigheredreceivingaccoladesfor…anything?orbrickbats?
In individual conversationswithcollege presidentsIdetecta “thisisgoingto hurt me more than you”
tone whenwe discussprice orthe inevitabilityof price increases. Presidentscorrectlycite the increased
cost of doingbusiness,in general,andthe special value of the educational experience ontheircampus,
inparticular.
Presidentshave tobe positivecheerleadersandadvocates. Buttheyalsohave to be stewards,informed
leaderswhocanadvocate for a realisticapproachto sustainability.
Now – more than everbefore –collegesare ina market-drivenenvironment. MitchDanielswarnsus
that not acceptingthatis perilous,andcommonsense suggeststhatacknowledgingrealityisalwaysa
good,smart, efficientapproach.
No institutionneedstoconformto“the market”or panderto “customer”whims. Mark Burstein,the
presidentof Lawrence University,wroteaverygoodpiece recentlywherehe said:

2. A primary goalof the service industry is to delight thecustomer….But should academicofferings
alwaysprovidedelight?In my experiencein college and graduateschool,learning happened
through challenging academicinteractions;thoseexperienceswerenotalwaysdelightful.When
I graduated,however,Ifeltextraordinarily gratefulforthelearning thattookplace through the
rigorousacademicjourney Ihad completed.
In thisregard – curricular- andco-
curricularcontentand pedagogy – itis
true that “teacherdoesknow best.” But
whenhigheredleadersdismissor
downplaythe pressure andpowerof
external forceslikegovernment
regulationandconsumerpreferences
theyreallydoso at theirperil. Fundingis
beingreducedandfamiliesare “voting
withtheirfeet.” More and more families
these dayswillingtopasson a first-choice
college onthe basisof cost.
Enrollmentis,like TV’sNielsonRatings,a
lensthroughwhichaninstitution’s
viabilitycanbe measured. Loyola,St
Mary’s, andSweetBriarare a few of the
highest-profile examplesof this.
A friend,whoisavice presidentata wealthyandhighly-rankedprivate university,made anobservation
that has onlygrowninsignificance forme. Referringtopassion andpride,he said“the same qualitythat
makesour gradsgreat alumni makesthembadtrustees.” Boosterismandadvocacyare good,to a point,
but if theymorphintoa tunnel-visionhubris,the important360° conversationswon'toccur.
The belief thatprice isa proxyfor qualityisrootedinanera that endedaround2008. Pricingto a peer
groupbecause “youare knownbyyour associations”won'timpressafamilyastheymake the decision
where tosendtheirchildtocollege.
Look to the market,notin the mirrorwhenmakingstrategicdecisions. Itwon'tdo to say“it won't
happenhere”or to thinksolutionswillcome by“stealingmarketshare.”
Studentsare the raison d'être for highered(okay,butrightupthere). Besidesbeingthe largest
constituencyoncampusanda significantportionof mission-fulfillment,studentsalsopaythe bills:the
vast majorityof collegesanduniversitiesare highlydependentuponstudentfeerevenue.
Annoyinglyclearbutworthstating:Withoutstudentsyouhave noreasonto existandwithouttheir
moneyyoudon’texist.

3. Back to my conversationswithcollegepresidentsandtheirleadershipteams. Good,committedpeople
whocome to workeachday – andstay awake manynights – to dothe verybesttheycan fortheir
studentsandtheirinstitutions.
Balancingcompeting–sometimesmutually-exclusive–imperativesisnotonlynoteasyit isoften,by
definition,impossible. Butwhatthe headknowsthe heart maynot accept.
Perception andreality of affordability,adriverlike never before:
The situation:the “cost of doingbusiness”keepsgoingup,driven,paradoxicallyIam told,inpart by
expense of addingamenitiesthatstudentswant. The pipeline of college-readykidsfromcollege-
educatedhouseholdswhoare able andwillingtopayisdecreasing.Competitionisbecomingmore
intense. Yourcollege needsmore money.Doyoubalance raisingprice withreducingfinancial aid
“expenses?”ortake anotherrevenue-side approach?
Two Case Studies:
College #1:Price tag, up;discount,restrained;revenueand enrollmentdown.
Afteryearsof steadygrowth,enrollmentbeganadecline thathascontinued
 In 2010, theyhad 2267 studentspayinganaverage of $19,414
 By 2012, there were 2224 students (a1.9% drop) paying$19,638 on average (+1%)
 Duringthisperiod tuitionchargesrose $1790 (5%) to $37,280

4. o Alarmingly, enteringnewstudents cost (whattheywere paying) actuallydecreasedby
$687 (a 4% drop) to $17,745, discountedat52.4% (a 14% increase inthree years)
 The increasein per-studentrevenue was notnear enoughto offsetthe dropin enrollment,yet
theycontinuedtoincrease price 1) “because we needthe money,”2) because “we don’twant
to appearin trouble,”and3) because “we wantto be inline withourpeergroup.”
College #2:Price tag, flat; discount,up;revenue,wayupasenrollmentincreased.
For years,as enrollmentdeclined,theyincreasedprice and restrained financialaid because they
“neededthe money”
 As price rose and discountstayedflat,enrollmentplummeted
 In 2008 they (1) froze tuition, (2) promisednottoincrease it,and(3) adoptedamore family-
friendlydiscountpolicy(toenable enrollmentandretention)
Results
 Undergraduate applicationsup37%
 Increasedenrollmentby25%
 Increasedrevenue fromstudentfees by$11,560,870
More studentsapplied,enrolled,andstayed. Thiscollege learnedthat,forfamiliesthatvaluedits
educational experience,findingthe rightprice – and findingthe rightper-familydiscounting–attracted
record numbersof applicationswhichtranslatedtoenrollmentgrowth
Rational Price/discountpolicyEnablesEnrollmentandOptimizesRevenue
 If stickerprice goesup but revenue doesn’t,whyincrease the price tag?
 If stickerprice is a deterrenttoprospective families,whyincreaseit?WHYSCARE THEM AWAY?
Smart business? Price UP, revenue…FLAT.

5. Collegesmustfocusonrevenue and rightprice:the economicsand psychology of pricing. DiscountRate
isan unspendablederivativethathas playedafar too important – and detrimental–role inpricing. It is
an internal metric,detachedfrommarketrealities,whatfamiliesare able andwillingtopay.
Put aside whatpeersmaythink.Keepdiscountrate incontext.Considerthatprice does,tosome,
representprestigebutthisshouldnotbe a determiningfactorina successful pricingpolicy. Think
insteadof relative balance,prosperity,sustainability. Lookcarefullyandstrategicallyatthe cost-driver
side as well asrevenue side. Poll stakeholdersandcreate a prioritizedlistof thingsyoudothatcost
money. Identifyall realisticsourcesof revenue. Startatthe topof the listof prioritiesandworkyour
waydownuntil yourun out of money. Share the resultswiththose stakeholdersandtake itfrom there,
as befitsyourcampusculture,marketposition,andresources.
We are not hostagesof collegiality,thoughwe doshare governance andownership(sometimesif only
emotionally) withmanyconstituents. Sharinggoals,values,processes,andconstraintsisasvaluable
and educationtacticas itis a good businessapproach. Highereducationisnota businessbut….what
businesswouldadoptconsistentprice increasesasrevenue holdsflatorshrinks?
Everyplace is different.Middlebury College maybe able toabsorbthe PR misfire of backingoff the “CPI
+ 1” policy itannouncedin2011 and theymaybe able to realize increasedrevenuewithaprice
increase. Buttheyare forgettingthe savvyinsightthatledthemtopromise toreign-inprice…fearof
push-backfromthe non-aided. Deterrentpricingaffectsthe wealthytoo.
Veryfewplaceshave the BrandEquity – and endowment –that Middleburyhas. Inadditionto
scrupulouslyclose looksatcost-driversthatbegrevenueincreases,the marketrealityof familyability
and willingnesstopayhas to be takenintoaccount so collegescanbe seenas worthit,sympathetic,and
affordable. Forthe vastmajorityof college-boundfamiliesaffordabilityhasbecome the hottestnew
college amenity. Collegesdenythatrealityatseriousrisk.