This has been a rough year for small, private colleges. Sweet Briar and others appeared prominently in the news, but this model of education is perpetually stressful for those involved. As both a previous student and employee of such institutions, I know them well. To further explain this dilemma, allow me an analogy.
Only 1% of home buyers are in the market for million-dollar homes. In my city, that $1M price is just over double the average home price. That ratio is roughly similar to the cost difference between most private colleges and their public university counterparts. And just like the abundance of private colleges from which to choose, there is currently a surplus of expensive homes on the market as well.
People in my city, more than ever before, are willing to pay a premium for a home that is “just right” in terms of location, year built, or updated amenities. Those are buyers who can afford to shop around and be picky. Conversely, people are still willing to buy fixer-uppers, but only if the price is very low. Buyers simply do not want to as often anymore. More and more buyers are becoming unwilling to pay an average price for an average home. Extremes are developing in larger segments of the home-seeking population.
These extremes occur in the market for higher education as well. Many of today’s public universities and community colleges provide the affordable price with hit-or-miss quality. I think many students and their families are willing to deal with crowded campuses, run-of-the-mill academic programs, and shaky professors when the price is affordable. But if the price ticks upward, even slightly, admissions will suffer.
For costly schools, people will not put up with such mediocrity. If you are a school that demands a premium price, you must offer a premium product. There is simply too much competition at that price point, and buyers have the luxury of being choosy. For colleges out there that, because of the high cost of tuition—as well as room and board and fees and books—are catering to a very specific brand of wealthy buyer, be advised that you must offer something truly special for that price. Your buyers can afford to shop elsewhere.
Top-quality professors, programs, and facilities are the only things for which students and their families will be willing to pay high prices. If you don’t have these three fundamental qualities, the market will not support you. It’s that simple. You will be like that average home on the block that refuses to drop its price, and thus, sits vacant for years. Buyers today have very specific requirements. You must adapt to the market, either by lowering you price or by upgrading your quality.
While colleges try to cast a wide net and hope to get as many new students as possible, in reality, such aims are simply not attainable. Just like Mercedes would like all of us to buy their cars, they also know that just can’t happen. It’s a car company for a very specific type of car buyer. Most small private schools are trying to attract 1% of college-bound students: those who can afford the cost or are looking for a very specific program, religious/ideological affiliation, “boutique” environment, or other unique characteristic.
For colleges today that are struggling (and seem to show up in the news on a regular basis), you must be aware of your target consumer. And you must offer something that aligns with the price you are charging. It’s not enough these days to rely on clichés like “small class sizes” or “strong sense of community” or “a place to change your life.” All colleges believe they are offering those attributes.
Just like a home seller must convince a potential buyer of the quality of a million-dollar home, you must constantly ask yourself, what exactly about your school is worth the high price?
Some schools are fixer-uppers. Some schools are average homes. Some schools are luxury real estate. A fixer-upper school is one that happens to have the basics of what customers are looking for, but it lacks the upgrades everyone would like. It’s rough around the edges, but the price is cheap and it suits their needs for the time being. An average school is one that checks all the boxes—location, amenities, some level of respectability—and is still affordable. Though it’s not quite as nice as more expensive options, it’s a safe and sensible choice. A luxury school has all the trimmings—top notch programs, esteemed professors, beautiful facilities, a prestigious reputation—and is where everyone would love to go. However, it carries a substantial price tag. It’s worth it for those lucky few who can swing the cost. They will have a great experience and will be able to carry that name brand for the rest of their lives.
Each of these types of schools is a great option for the right consumer. Each person has different needs, and there is a price point for everyone in most markets. The problems arise, however, when pricing doesn’t match quality. A fixer-upper can’t be priced the same as a luxury model. If it is, it will sit on the market, empty for long periods of time. And everyone can tell which model is which. Everyone can see that it’s a fixer-upper, and yet the price remains too high for sensible buyers. Why would anyone pay such a price when they could certainly get a respectable alternative or even something close to a luxury brand for the same price if they just look around a little more?
For schools out there facing a financial squeeze, you must look at your institution as a home: either lower the price or you better start making upgrades.
Only 1% of home buyers are in the market for million-dollar homes. In my city, that $1M price is just over double the average home price. That ratio is roughly similar to the cost difference between most private colleges and their public university counterparts. And just like the abundance of private colleges from which to choose, there is currently a surplus of expensive homes on the market as well.
People in my city, more than ever before, are willing to pay a premium for a home that is “just right” in terms of location, year built, or updated amenities. Those are buyers who can afford to shop around and be picky. Conversely, people are still willing to buy fixer-uppers, but only if the price is very low. Buyers simply do not want to as often anymore. More and more buyers are becoming unwilling to pay an average price for an average home. Extremes are developing in larger segments of the home-seeking population.
These extremes occur in the market for higher education as well. Many of today’s public universities and community colleges provide the affordable price with hit-or-miss quality. I think many students and their families are willing to deal with crowded campuses, run-of-the-mill academic programs, and shaky professors when the price is affordable. But if the price ticks upward, even slightly, admissions will suffer.
For costly schools, people will not put up with such mediocrity. If you are a school that demands a premium price, you must offer a premium product. There is simply too much competition at that price point, and buyers have the luxury of being choosy. For colleges out there that, because of the high cost of tuition—as well as room and board and fees and books—are catering to a very specific brand of wealthy buyer, be advised that you must offer something truly special for that price. Your buyers can afford to shop elsewhere.
Top-quality professors, programs, and facilities are the only things for which students and their families will be willing to pay high prices. If you don’t have these three fundamental qualities, the market will not support you. It’s that simple. You will be like that average home on the block that refuses to drop its price, and thus, sits vacant for years. Buyers today have very specific requirements. You must adapt to the market, either by lowering you price or by upgrading your quality.
While colleges try to cast a wide net and hope to get as many new students as possible, in reality, such aims are simply not attainable. Just like Mercedes would like all of us to buy their cars, they also know that just can’t happen. It’s a car company for a very specific type of car buyer. Most small private schools are trying to attract 1% of college-bound students: those who can afford the cost or are looking for a very specific program, religious/ideological affiliation, “boutique” environment, or other unique characteristic.
For colleges today that are struggling (and seem to show up in the news on a regular basis), you must be aware of your target consumer. And you must offer something that aligns with the price you are charging. It’s not enough these days to rely on clichés like “small class sizes” or “strong sense of community” or “a place to change your life.” All colleges believe they are offering those attributes.
Just like a home seller must convince a potential buyer of the quality of a million-dollar home, you must constantly ask yourself, what exactly about your school is worth the high price?
Some schools are fixer-uppers. Some schools are average homes. Some schools are luxury real estate. A fixer-upper school is one that happens to have the basics of what customers are looking for, but it lacks the upgrades everyone would like. It’s rough around the edges, but the price is cheap and it suits their needs for the time being. An average school is one that checks all the boxes—location, amenities, some level of respectability—and is still affordable. Though it’s not quite as nice as more expensive options, it’s a safe and sensible choice. A luxury school has all the trimmings—top notch programs, esteemed professors, beautiful facilities, a prestigious reputation—and is where everyone would love to go. However, it carries a substantial price tag. It’s worth it for those lucky few who can swing the cost. They will have a great experience and will be able to carry that name brand for the rest of their lives.
Each of these types of schools is a great option for the right consumer. Each person has different needs, and there is a price point for everyone in most markets. The problems arise, however, when pricing doesn’t match quality. A fixer-upper can’t be priced the same as a luxury model. If it is, it will sit on the market, empty for long periods of time. And everyone can tell which model is which. Everyone can see that it’s a fixer-upper, and yet the price remains too high for sensible buyers. Why would anyone pay such a price when they could certainly get a respectable alternative or even something close to a luxury brand for the same price if they just look around a little more?
For schools out there facing a financial squeeze, you must look at your institution as a home: either lower the price or you better start making upgrades.