Pay it Forward - An ROI Approach to Higher Ed Marketing
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Lipman Hearne President and CEO Rob Moore's presentation with Terry Flannery of American University at the 2013 AMA Symposium for the Marketing of Higher Education
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Pay it Forward - An ROI Approach to Higher Ed Marketing
- 1. Higher Ed ROI: Making It Work for You Rob Moore Terry Flannery November, 2013
- 2. Today’s agenda The business context Bottom-line essentials Calculating ROI Getting the data The virtuous cycle Measurement A more ambitious model A final thought Q&A Lipman Hearne | AMA Higher Ed Symposium 2
- 4. Where the money comes from Public R/D Private Research Private BA Net Tuition Net Tuition Net Tuition State/local State/Local State/Local Federal Federal Federal Auxilary Auxilary Auxilary Phil/End Phil/End Phil/End American Institutes for Research 2012 Lipman Hearne | AMA Higher Ed Symposium 4
- 5. Step one: build your own pie chart Mid-tier Private Tuition/Fees Gifts Fed/State Auxilary Endowment Income Lipman Hearne | AMA Higher Ed Symposium 5
- 6. Step one: build your own pie chart Why would you construct such a chart? With whom would you share it? Mid-tier private Tuition/Fees Gifts Fed/State What is the point you’re trying to make? What is the goal of this discussion? Auxilary Funds Endowment Income Lipman Hearne | AMA Higher Ed Symposium 6
- 7. Step two: the investment argument Revenue Expenditures Instruction Tuition/Fees Acad Support Gifts Student Serv Fed/State Inst. Support Auxilary Marketing Endowment Income Auxilary Lipman Hearne | AMA Higher Ed Symposium 7
- 8. The big takeaway Shift the discussion from cost (expense) to revenue (return) Gain clarity on the business goals of the institution, and where marketing investment links to those goals Make sure goals are trackable and achievable Commit to achievable, priority goals Start planning Execute the plan and track results Lipman Hearne | AMA Higher Ed Symposium 8
- 10. A strong brand that differentiates
- 11. A strong brand that clarifies Lipman Hearne | Esalen Institute 11
- 12. A strong brand that creates loyalty
- 13. Assessing value Overarching consideration To increase value, either enhance experience or decrease cost. Which makes more sense for your institution? Lipman Hearne | AMA Higher Ed Symposium 13
- 14. Understand the business realities What is the optimum “carrying capacity” of your institution? • Traditional students • Nontraditional students What •revenue increase can you Graduate/professional students • Continuing education promise with a larger investment? What is the gap between this carrying capacity and your current enrollment? What is the relationship between key revenue factors? • # of students vs. discount rate • Recruitment vs. retention What is your current marketing investment? Lipman Hearne | AMA Higher Ed Symposium 14
- 15. Calculating ROI
- 16. Return On Investment Formula Basic fact: to determine any formulaic relationship, you need both a numerator and a denominator • Numerator (top): Revenue generated • Denominator (bottom): Cost of investment Liberal arts institutions—relatively straightforward MA institutions—a bit more complicated R/D institutions—a major headache Capture what you can and estimate the rest • Research/validate/confirm with your CFO Lipman Hearne | AMA Higher Ed Symposium 16
- 17. Cost/investment elements to consider Advertising Print publications Web development/hosting Mobile/digital/social Market research Outsourced services Staff salaries/benefits Etc. Lipman Hearne | AMA Higher Ed Symposium 17
- 18. Classic ROI Numerator: All revenue linked to marketing activities Denominator: All marketing costs Issue: For complex institutions, very hard to get accurate data on both sides of the equation Lipman Hearne | AMA Higher Ed Symposium 18
- 19. Special focus Assumption: overall marketing budget/activities continue as in previous years Specific target identified for special investment • Numerator: revenue linked to targeted activities • Denominator: marketing costs related to targeted activities Formula the same, but data more easily gathered and tracked Lipman Hearne | AMA Higher Ed Symposium 19
- 20. Enrollment example Median Public U invests $250,000 to recruit 50 additional students (data based on average national tuition/fees income for public university) ROI = 3.375 • For each “exceptional” $1 invested, the institution nets $3.375 Lipman Hearne | AMA Higher Ed Symposium 20
- 21. Getting the data
- 23. Job #1: Getting The Data Marketing function decentralized—total spend unknown? Revenue data: tuition rates, credit hours, FTEs or ? CMO: authority/responsibility to gather data on expenditures, enrollment and revenue Work with CFO, Provost or both to: • Gather centralized data on marketing expenditures • Change policies on how marketing expenditures are budgeted and coded • Identify consistent definitions for revenue calculations Work with schools/colleges/admissions/development to : • Reduce the inherent threat • Understand marketing investments • Create template for compiling data American University
- 24. Job #2: Frame Your Measures Developing a basis of comparison is critical • Measure against your own institution over time • Establish formulas and apply consistently over time • Measure against your competition where possible Use data shared through formal and informal groups Use publicly available data (ex: IPEDS) Many measures may have less relevance until you have been tracking your ROI for three years You will have to make some tough decisions about how the metrics are calculated in the first year and then use the same calculations year after year American University
- 25. Strategic and Tactical Marketing Cost per Student Student Acquisition Cost Revenue contribution Cost per lead Market Share Advertising to Sales Ratio Lifetime value of a student Response Rate American University
- 27. Ex: Marketing Cost Per Student How much does it cost to market to one student? Total Expenses Marketing Cost Per Student = ______________ Calculate : • MCPS=total marketing expense ◦ ◦ ◦ ◦ With and without salaries included For all students vs. For new students By type of student By school or college at grad level MCPS declines as product matures; significantly higher for a newly launched program Total Students Enrolled Adapted for ROI for annual fund; how much does it cost to market to one donor to the annual fund? Adapted from CASE District II ROI presentation Flannery and Scarborough, February 2009 American University
- 29. The virtuous cycle Recruitment Retention Advancement Lipman Hearne | AMA Higher Ed Symposium 29
- 30. The virtuous cycle • A marketer’s job doesn’t end when the class arrives on campus. • The cheapest student to “recruit” is the one you already won. • Happy alumni provide multiple benefits. Recruitment Retention Advancement Lipman Hearne | AMA Higher Ed Symposium 30
- 31. Impacts of retention • U.S. News reporting • Confirmation of recruitment of “right fit” students • Reality-check on the authenticity of the promise you made • Financial stability/predictability • Less need to “re-recruit” to fill in for shrinkage • Class stays robust through to graduation • Cost of recruitment for first-year students amortized • Private <$500 • Public <$120 • “2% increase at Private College X means an additional $750,000…at Public University Y more than $2.5 million.” Lipman Hearne | AMA Higher Ed Symposium 31
- 32. Factors that affect retention • Is the student the “right fit” for the institution? • First-choice vs. fall-back • Academic ability/preparation • Authenticity of brand promise • Did you make a promise you can fulfill? • Does the institution understand the promise you made? • Financial aid follow-through • Orientation, advising, and intervention Lipman Hearne | AMA Higher Ed Symposium 32
- 33. Factors you can do something about • Understand the issues • Incoming student survey • NSSE • Stop-out/transfer tracking • Exit interview/research • Ethnographic intake • Enhance brand awareness • Faculty/staff workshops • Messaging • Reinforcement • Orientation Lipman Hearne | AMA Higher Ed Symposium 33
- 34. What do alumni want? Graduation A job Self-guided connectivity Low debt load Pride of accomplishment 10 years Continued degree relevance Pride in institutional progress Networking Selective connectivity 20 years Institutional pride Selective networking Legacy consideration 30+ years Recognition Achievement validations Impact opportunities Lipman Hearne | AMA Higher Ed Symposium 34
- 35. Alumni “solicitation effectiveness” 0.35 0.3 0.25 LA Priv RD Pub RD Priv MA Pub MA 0.2 0.15 0.1 0.05 0 1995 2000 2005 2010 Lipman Hearne | AMA Higher Ed Symposium 35
- 36. Engage them where they’re at Lipman Hearne | AMA Higher Ed Symposium 36
- 37. 37
- 38. ROI • University invests $900,000 for sophisticated integrated annual fund campaign that raises an additional $5.2 million 4.7 = ($5,200,000 — $900,000) $900,000 Lipman Hearne | AMA Higher Ed Symposium 38
- 39. Philanthropic impact of individuals In 2012, higher education received $41.3BB in philanthropic support • Estimated $10.1BB came from alumni/ae • Approximately 25% of total Additional $8.26BB came from parents & non-alumni individuals • Approximately 20% of total Foundations/corporations/other orgs counted for the rest • Question: who runs foundations/corps/other orgs? • Answer: people Recommendation: Participate in/subscribe to VSE Lipman Hearne | AMA Higher Ed Symposium 39
- 40. Capital campaign University spends 5-15% of goal on a campaign; materials and events 20-30% of that total; mar/comm 30% of that ROI: 165/1 $6M $1B $100M+ $20M Source: http://www.phildev.iupui.edu/TheFundRaisingSchool/ PrecourseReadings/precourse_capitalcampaignspierpont.aspx Lipman Hearne | AMA Higher Ed Symposium 40
- 41. Measurement
- 42. Things that can’t be definitively measured Corporate definition of brand value: Brand value in academe is harder to measure One evaluation system lists HE brands among the highest value in the world • Harvard, Stanford, MIT in top 10 (w/Coca Cola, American Express, Nike) • Berkeley, Cambridge, Oxford in top 15 Brand value has impact on selectivity, retention, alumni pride/engagement, faculty recruitment, corporate and foundation investments Lipman Hearne | AMA Higher Ed Symposium 42
- 43. Things that can be measured Traditional advertising w/specific CTA 200 Open house invites w/tracking info 180 Coupons, swag giveaway 140 Program outreach w/distinct URL 100 Anything digital E3 160 120 E5 E6 80 E7 E4 60 Google analytics 40 Social media 20 E2 E1 0 9/17 9/24 10/1 10/8 10/15 10/22 10/29 11/5 11/12 11/19 Lipman Hearne | AMA Higher Ed Symposium 11/26 43
- 44. A more ambitious model
- 45. Retained value of each student recruited Sally Billy Institution Median Public U Average Private U Total revenue $67,626 $168,896 Cost to recruit $457 $2,185 Cost ratio 148:1 77:1 Lipman Hearne | AMA Higher Ed Symposium 45
- 46. Scaling up: Investment/return per class Median Public U Year 1 $52,969,500 Year 2 $42,375,600 Year 3 $29,375,600 Year 4 $24,950,800 Alumni Giving $7,200,000 Capital commitment $25,000,000 Total revenue/class $181,614,500 Assumptions: 3,000 matriculants, 80% first-year retention, 50% live on-campus first two years, 60% graduation rate, 10% alumni giving rate (x40), average gift $1,000 Lipman Hearne | AMA Higher Ed Symposium 46
- 47. Scaling up: Investment/return per class Average Private U Year 1 $29,346,400 Year 2 $26,411,760 Year 3 $19,477,120 Year 4 $16,958,480 Alumni Giving $11,200,000 Capital commitment $40,000,000 Total revenue/class $143,393,760 Assumptions: 1,000 matriculants, 90% first-year retention, 40% discount rate, 50% live on-campus four years, 50% live on campus two years, 70% graduation rate, 20% alumni giving rate (x40), average gift $2,000 Lipman Hearne | AMA Higher Ed Symposium 47
- 48. Acquisition cost ratio Median Public U Average Private U How important is revenue to your institution? How should you “scale” marketing investment relative to the importance of revenue? How integrated are your recruitment, student affairs, and advancement divisions? Lipman Hearne | AMA Higher Ed Symposium 48
- 49. Enrollment example Median Public U invests $250,000 to recruit 50 additional students What happens when we factor in lifetime value? And that’s not even counting annual fund or capital/planned giving Lipman Hearne | AMA Higher Ed Symposium 49
- 50. Enrollment example Average Private U invests $250,000 to recruit 25 (full pay) additional students And lifetime value? With 40% discount rate? Lipman Hearne | AMA Higher Ed Symposium 50
- 51. A final thought…
- 52. Convince the powers-that-be to invest more in marketing Lipman Hearne | AMA Higher Ed Symposium 52
- 53. Convince the powers-that-be to invest more in marketing then deliver on the promise you make! Lipman Hearne | AMA Higher Ed Symposium 53
- 54. Questions?
Editor's Notes
- # 3Them: “We want to increase diversity, bring in more out-of-state students, significantly reduce our discount rate and lower our unfunded financial aid support, improve yield, and raise the average SAT score at least 10%.”You: “Won’t happen.”