The coronavirus pandemic has created a perfect storm in the higher education industry. How an institution responds now, in the days and weeks ahead, will establish the course of their future. Some have very few options for survival where others, if they set the right bearing, can position themselves to not only weather the storm but also flourish in the long term.
The purpose of this post, which is the first in a series of posts that we will publish over the next few days and weeks, is to highlight what you can expect from the marketplace and what you can do “now” to minimize the severe financial risk you may be facing. Future posts will cover important topics such as mitigating disease-transmission risks, making degrees and cohorts profitable at lower registration levels, achieving incremental revenue through collaboration, making internal processes more productive, leveraging technology to establish innocuous services for students, faculty, and staff, re-purposing space due to remote-working success, and more. Our hope is to provide insights into how you can protect or even increase your enrollment and financial well-being in the aftermath of the Covid-19 crisis. With FA20 now only four months away, this first post will focus on the planning and associated messaging that should be addressed urgently to satisfy new selection criteria, and thus maximize short-term enrollment potential.
For purposes of this first post, following are a few quick bullets to acknowledge some of the realities of the marketplace and industry circumstances. There are, of course, many more realities, which we will recognize in future posts.
We are in a season where traditionally new registrations and melt are roughly equivalent. However, the reality for many institutions is that FA20 melt could far exceed new registrations. And, unfortunately, that melt usually shows up at the last minute. Depending on the level of drop in enrollment, institutions may be facing shortfalls in net-tuition revenue of several million dollars. If you’re building scenarios that take into account enrollment drops ranging from 5% to 20%, you already have a good idea of the implications to your institution.
The nearly free-fall drop in the markets has jeopardized endowments and donor giving, putting funded-aid at risk. Yet, an attempt to overcome a drop in funded scholarships by raising discount rates can quickly become unsustainable. Net revenue begins declining at a 50% discount, eventually reaching $0 at a 100% discount.
Because of the uncertainties resulting from the coronavirus, many students (and parents in the case of TRAD students) are re-thinking their education plans, including which institution they will attend. In addition to the things that have always been important to their decision, they now have a supplemental set of criteria related to health and financial risk. Getting the degree they want, at a price they can afford, with outcomes they can count on are still important criteria. Those haven’t gone away because of the virus. In fact, outcomes will be more important than ever. However, three additional criteria must now be addressed: proximity, congestion, and finances.
Many students will decide to pursue their education online. At least in the near term. However, it is highly likely that many students who attend online, will select an online program from an institution that satisfies their campus criteria. They will want to have the option of returning to campus at some point, without programmatic or credit-transfer challenges. Hence, developing a strategy with associated messaging around key selection critia is important to retaining your online student population.
We all hope that Covid-19 becomes a non-issue. But, no different than the hoarding and financial constraints that resulted from the Great Depression and the 2008 Recession, there will be a reaction to the shelter-in-place orders that the virus instigated. Students and parents will want to be prepared in the event (heaven forbid) of another such crisis.
Proximity:
One way the reaction to the shelter-in-place experience will manifest is by mitigating the necessity of mass transportation systems such as air travel, or hotels and restaurants associated with long drives. Even if mass transportation systems become safe, it is reasonable to expect that students will want to have a contingency plan to get home without requiring the use of those systems if another communicable disease develops in the future. As much as we hate to admit it, odds are that this will happen again. In the students mind, that is best addressed by selecting a college or university close to home. However, our team has been able to identify several strategies that we believe would change that mindset. Contact us if you would like to discuss those or evaluate the viability of strategies you already have in mind.
Congestion:
Another way this will manifest is by mitigating exposure to an infectious spread if a similar situation to Covid-19 were to arrive on the scene in the future. There is already evidence of resistance to congested areas such as inner-city campuses, or campuses in highly-crowded communities. For those with more secluded locations, the exposure potential associated with hundreds or thousands of students living full-time on a contained campus must also be addressed. This is actually a much larger topic and will be covered in more depth in a future post.
Finances:
The market decline has eroded many people’s savings, and in some cases their income. As a result, many students will be looking for more affordable solutions, at a time when most institutions are not in a position to increase their gift-based awards. Several institutions have already started addressing increased-affordability by reducing student costs, such as the elimination of application deposits, residential deposits, commuter fees, parking fees, and more. In addition to cost reduction, affordability can also be addressed through policies, such as a robust transfer-credit policy, or by including online courses in tuition-block pricing.
Once businesses re-open for a month or two, and we can see that people are working, eating at restaurants, and participating in gatherings such as concerts and sporting events, without getting sick, the comfort level of returning to campus will increase and the number of students taking courses online will decrease. It is our opinion that campus life remains of interest, if for no other reason than the right-of-passage that going away to college has represented. However, that doesn’t eliminate the need to address the three criteria mentioned above. Even if all is well, we believe the marketplace will want to be prepared in case something similar to Covid-19 happens again.
Every institution has its own individual situations that must be uniquely addressed. And individual messaging will need to be developed and delivered. Effective messaging will necessarily need to include not only marketing, but also training of faculty and staff so the message is crisp, confident, and consistent. But, at the risk of beating a dead horse, time is of the essence.
Four months from now you could experience a severe drop in revenue. Especially if your mode is preservation. On the other hand, four months from now could be the beginning of a new and bright future. But that will mean recognizing that the economy is going to look different, and moving quickly and creatively to capitalize on new opportunities.
There are ways that we can help – both through consultation with you and through collaboration with a group of institutions. Don’t hesitate to contact us for more information at mmc@mikemoroney.com