The Rise of the Informed Consumer

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A college degree is one of the largest purchases of your life…

Was your degree a good value? Do you feel like you got what you paid for? Anyone want a refund???

This presentation digs into consumerism and Student Return on Investment (SROI), and what it means for institutions.

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The Rise of the Informed Consumer

  1. 1. The Rise of the Informed Consumer and Student Return on Investment June 3, 2014 Ryan N. Carroll, MBA Director Hobsons
  2. 2. Welcome & Overview !  The Higher Education Marketplace !  Overview of Students’ College Attendance Decisions !  A Closer Look at Choices and Choice Process !  A Closer Look at Information !  Student Return on Investment Framework 2
  3. 3. !  The Higher Education Marketplace
  4. 4. Macro Factors Demography Fewer high school graduates nationally Demographic shifts having different impacts in different parts of the country Greater racial and ethnic diversity 4 McGee, Jon, (2012). Disruptive Adaptation: The New Market for Higher Education. Eden Prairie, MN: Lawlor Perspective. Unemployment Affected all types of families during recession Continues to influence economic behavior and choices Family Income Median income now similar to 1996 Real income declined for all family types Home Values Source of financial risk for many families An anchor to mobility Family Debt & Savings Families change in habits during recession (saved more) Behaviors are changing, however
  5. 5. Student Demographics 5 National Center for Education Statistics. (2013). Projections of Education Statistics to 2021. Washington DC: National Center for Education Statistics.
  6. 6. 6 21.6 million undergrads in U.S. higher ed today. 38% enroll part-time 20% work full-time 38% graduate from 4 year institutions in 4 years Who are your students? National Center for Education Statistics. (2013). Projections of Education Statistics to 2021. Washington DC: National Center for Education Statistics. U.S. Census Bureau. (2012). School Enrollment and Work Status: 2011. Washington, DC: Census Bureau. National Center for Education Statistics. (2012). Digest of Education Statistics 2011. Washington, DC: National Center for Education Statistics. National Center for Education Statistics. (2013). Projections of Education Statistics to 2021. Washington DC: National Center for Education Statistics.
  7. 7. Factors that Impact the Higher Education Marketplace What other macro factors do you believe are shaping the conversation around the value of college? How? Partner, Discuss, Share 7
  8. 8. !  Overview of Students’ College Attendance Decisions
  9. 9. 9 “A consumer is making a choice to maximize expected utility or minimize expected cost.” Hal R. Varian, UC Berkeley Economist people.ischool.berkeley.edu/~hal/Papers/sigir/sigir.html When making economic decisions…
  10. 10. College Attendance Decisions Other important factors in a student’s decision to enroll, such as: 10 The decisions of peersFamily expectations theop.princeton.edu/reports/wp/Fletcher%20THEOP.pdf
  11. 11. College Attendance Decisions 11 http://www.gallup.com/poll/163268/americans-say-graduates- jobs-status-key-college-choice.aspx 41% 16% 37% 32% 22% 40% 43% 14% 40% 51% 13% 33% 0% 10% 20% 30% 40% 50% 60% % grads able to get a good job % students who graduate Price of college/university All respondents <$3,000/mo. $3,000-$7,499/mo. >$7,500/mo. In your opinion, which of the following is the MOST important factor in choosing which college or university to attend? (general population response)
  12. 12. 12 College Attendance Decisions Generally speaking, the higher the tuition at a college or university, the better the quality of the education. 5 4 3 2 1 Strongly agree Strongly disagree 10% 13% 29% 20% 25% http://www.gallup.com/poll/163268/americans-say-graduates- jobs-status-key-college-choice.aspx
  13. 13. Fed’s College Ratings System 13 “We have not even begun to develop the college ratings system yet, and we are only in the beginning stages of soliciting input from a wide range of stakeholders about the metrics that should or should not be used in the ratings system… No later than December of 2014, we’ll use the feedback we receive to finalize the college ratings system.” September 20, 2013, Secretary of Education, Arnie Duncan
  14. 14. Fed’s College Ratings System 14 Timeline: !  November 2013: 4 OPEN FORUMS !  December 2014: Final version !  2015: Implementation !  2018: Results tied to federal aid (about $150B) Hobsons analysis and sharing opportunity
  15. 15. 15 What have we learned from forums? 15 “We're talking about policy decisions that can really shape higher education for years, if not decades, to come.” —Angel Cabrera, George Mason University “It's not fair or reasonable really to rate institutions on their performance without consideration of the nature of their student body.” —Peter McPherson, APLGU “Unless students are given the counseling . . . to use this data in a way that best meets their needs, their abilities, their orientations, the best data in the world is going to be of little to no use.” —David Baime, AACC “”The most critical information for students or prospective students and for policy makers is simple: how likely it is that the student will succeed and how much will it cost?” —David Longanecker, WICHE http://www2.ed.gov/documents/college-completion/11-13-13-gmu-forum.pdf and http://www.insidehighered.com/news/2014/02/07/colleges-and-analysts-respond- obama-ratings-proposal
  16. 16. Fed’s College Ratings System 16 Big Issues: !  Purpose – Accountability? Consumer information? !  What should be measured? !  What should be considered successful outcomes? !  How can the system drive change and innovation?
  17. 17. !  A Closer Look at Choices and the Choice Process
  18. 18. 18 Students have more choices than ever… 18 TRADE SCHOOL? FOR-PROFIT? LIBERAL ARTS? ONLINE? BLENDED LEARNING? MOOC? IN-STATE? OUT-OF-STATE? FOUR-YEAR? TWO-YEAR? PUBLIC? PRIVATE?
  19. 19. Can people have too much choice? Study #1: Jam Study !  Researchers set up two tasting booths for jam – one with 24 different flavors and one with 6 !  60% of customers went to the booth with 24 choices, and 40% went to the booth with 6 choices !  30% of the customers with 6 options bought jam, while only 3% of the customers with 24 options made a purchase 19 Iyengar, Sheena S., & Lepper, Mark R. (2000). When Choice Is Demotivating: Can One Desire Too Much of a Good Thing? Journal of Personality and Social Psychology, 79(6), 995-1006.
  20. 20. Can people have too much choice? Study #2: Essay Study !  Students in an introductory college-level course were given the option of writing an extra credit essay. !  Half the students were given a list of 30 possible topics, the other half a list of 6. !  Students with the list of 6 topics were more likely to write the essay than the group given the list of 30. !  Students given fewer choices for topics wrote higher quality essays. 20 Iyengar, Sheena S., & Lepper, Mark R. (2000). When Choice Is Demotivating: Can One Desire Too Much of a Good Thing? Journal of Personality and Social Psychology, 79(6), 995-1006.
  21. 21. Can people have too much choice? Study #3: Chocolate Study !  Customers chose chocolates either from a display of 30 or 6. !  Customers reported greater enjoyment selecting from the display of 30 chocolates. !  Later, however, customers who selected from the display of 30 chocolates were more dissatisfied and regretful of their choices than the customers who chose from the display of 6 chocolates. 21 Iyengar, Sheena S., & Lepper, Mark R. (2000). When Choice Is Demotivating: Can One Desire Too Much of a Good Thing? Journal of Personality and Social Psychology, 79(6), 995-1006.
  22. 22. Can people have too much choice? Conclusions: !  Having extensive choices in a trivial context can be de-motivating (perhaps even more so in the context of significant decisions). !  The only context in which people are more comfortable with extensive choice is when they have previous experience with some of the options. 22 Iyengar, Sheena S., & Lepper, Mark R. (2000). When Choice Is Demotivating: Can One Desire Too Much of a Good Thing? Journal of Personality and Social Psychology, 79(6), 995-1006.
  23. 23. Can people have too much choice? Information can add to the problems of choice overload: !  Too much !  Varying quality !  Too little !  Trustworthiness But high quality information can overcome the negatives of choice overload. 23 www.nytimes.com/2010/02/27/your-money/27shortcuts.html?_r=0
  24. 24. !  A Closer Look at Information
  25. 25. Where do students turn for information about college? People 25 Peers: One study showed that conversations with friends increase the probability of college enrollment. But if a student’s preferred college isn’t popular with peers, the student is less likely to enroll in that particular college. theop.princeton.edu/reports/wp/Fletcher%20THEOP.pdf School Counselors & Admission Officers: College choice can be shaped by data. In one study, providing graduation data increased enrollment by 15% in the college with the higher graduation rate. www.aei.org/papers/education/k-12/filling-in-the-blanks/
  26. 26. Where do students turn for information about college? Tools 26 Online tools: !  Financial Aid Shopping Sheet: helps students and families understand college costs !  Net Price Calculator: helps students and families estimate their out-of- pocket cost to attend college !  College Confidential: helps students and families navigate the admissions process ! Payscale: helps students and families investigate the ROI of colleges, degree programs, and professions !  Naviance: complete ILP functionality for middle and HS with college and career research, includes transcript sender !  The College Board: MyBigFuture
  27. 27. Default Rate – Not Grad Rate? 27 http://www.educationsector.org/sites/default/files/publications/Defaults_CYCT-F_JULY.pdf
  28. 28. !  Student Return on Investment Framework
  29. 29. Assessing Return on Investment 29 What information should students know when making decisions about college?
  30. 30. Assessing Return on Investment 30 What do you think? Please brainstorm in small groups: •  What are good measures of student return on investment? Consider… - Student Body Profile - Finances & Financial Aid - Learning Environment - Non-cognitive Benefits - Alumni Profile
  31. 31. Assessing Return on Investment 31 What factors are most important to the student? Please discuss in small groups: •  Prioritize the measures •  Share Top 3 Report back to whole group
  32. 32. Priority Measures 32 Discuss the following: •  The “Top 3” measures •  Feasibility of reporting the “Top 3” measures •  Cautions and concerns associated with the “Top 3” and reporting these measures to prospective students Share 1 key point with the whole group
  33. 33. Next Steps 33 How will we continue this discussion? How will we move from discussion to action? How can Hobsons help?
  34. 34. SROI 34 Are you interested in continuing this conversation? Hobsons is interested… Assembling group of interested institutions in developing an SROI index. Contact me for more information.
  35. 35. Thank You! Ryan N. Carroll Director Hobsons Ryan.Carroll@hobsons.com 513) 985-6003

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