How Higher Ed “Loss Leaders” Influence Online Advertising

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Guest post by Eric Olsen
Web Content Manger, Lewis University

Yesterday, I drove thru McDonalds and picked up an ice cream cone for $0.54. An unbeatable deal. And surely, a loss leader for the company. Meaning that if McDonalds only sold ice cream cones, they wouldn’t stay in business very long. But most adults aren’t children like me, and order ice cream only after a #2 value meal that costs $7.00.

So, as a Higher Ed Institution, do you know your revenue-per-student-type figures and what your loss leaders are? Because, knowing your numbers can really make you aware of exciting prospect communication opportunities. For instance, let’s say a new freshman stays at your University, on average, for 3.09 years. (Note: This isn’t a years-to-graduation metric. This figure includes drop outs, and only notes the average time of stay per enrolled freshman.) And, let’s say a new transfer student stays at your University, on average, for only 2.68 years.

There’s your loss leader, right?

After all, this is the biggest reason why most prospect communications and marketing budgets target high schools and high schoolers. Because there’s a greater chance the new freshman student is going to attend your university for a longer period of time than the new transfer. That makes sense. But it’s only part of the equation.

Your Discount Rate (the average amount of Financial Aid) awarded and locked in to new freshman is probably significantly more than your Transfer Discount Rate as well, isn’t it? For this hypothetical example, let’s say your (Avg. Tuition – Avg. Discount Rate) brought in per freshman is $18,000 a year, and your (Avg. Tuition – Avg. Discount Rate) brought in per transfer is $20,000 a year.

FRESHMAN: 3.09 years avg. stay x $18,000/yr = $55,620 in net revenue.
TRANSFER: 2.68 years avg. stay x $20,000/yr = $53,600 in net revenue.

There’s a chance you’re spending the vast majority of your online advertising budget on traditional undergraduate students, when there’s a much less competitive audience that’s barely, if at all, less financially interesting. Perhaps your “loss leaders” aren’t really that, and you need to re-prioritize your marketing budget this summer? Of course, you already know this, because you’re acutely aware of your
institution’s numbers, right?

Eric Olsen is the Web Content Manger for Lewis University, a mid-sized Catholic and Lasallian
University near Chicago, IL.

Follow Eric on Twitter @eolsencreative

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  • http://twitter.com/isaacson isaacson

    isn’t this a bit over-simplified? Are all transfer students created equal? Are you really marketing to just those two groups only? I’m pretty sure there are a lot more factors here which make these types of equations much messier and is usually the reason that people avoid the numbers. If among the institution’s goals is to is raising the overall GPA and freshman on average have a higher GPA than transfer students, how do you factor that in? What about which of those two cohorts has a higher propensity to become a philanthropic donor? 

  • http://twitter.com/eolsencreative Eric Olsen

    “I’m pretty sure there are a lot more factors here which make these types of equations much messier and is usually the reason that people avoid the numbers.”

    Great point. This example is over-simplified. And individual University goals can rightly dissuade a turn to increased Transfer prospecting, even if they share figures like this. But, having numbers at the ready can also get us past the over-simplification that transfer students “just aren’t worth it.”

    This math wasn’t to prove a specific point besides let’s make sure we’re doing the math.