September 2008 Lawlor Focus

What Does Value Mean?

Focus group sessions recently conducted by the National Association of Independent Colleges and Universities (NAICU) revealed that, unsurprisingly, the cost of a college education was the most top-of-mind issue in higher education among parents and the general public—and that "many who are anticipating the expense are at a loss as to how they are going to deal with it." One need look no further than last week's turmoil on Wall Street to understand why families are nervous about how they will finance a college education.

Economic uncertainty also explains the finding that 49.4 percent of consumers have become more "practical" in their purchases during the last six months (compared to 36.7 percent who said that one year ago), according to BIGresearch's Consumer Intentions & Actions Survey for September. Practicality of this sort is why Moody's Investors Service warned that small private colleges may start to lose market share to lower-cost public universities and community colleges as the economic environment worsens. NAICU advises that private colleges and universities need to demonstrate value, the same counsel marketing gurus have been advocating for years.

But "value" is, of course, a subjective concept perceived by the consumer, rather than something that is objectively determined by the provider. So how, exactly, do families with college-bound students define value in higher education?

A quick foray into the realm of consumer psychology* reveals that "value" has several components:

• Price—Although price is primarily an indicator of the amount of monetary sacrifice needed to purchase a product, obviously consumers do not buy solely on the basis of low price. Factors like prestige or convenience may take precedence in calculating value, and some people don't even evaluate worth in economic terms at all.
• Quality—Some consumers equate value with quality (and price can signal a product's level of quality). But quality is something the consumer receives, whereas value involves a trade-off of "get" and "give" components—an exchange between what consumers receive and what they give up to acquire and use a product or service.
• Utility—The microeconomic origin of value is linked to utility theory; that is, consumers derive value according to the utility provided by the combination of attributes less the disutility represented by the price. This model acknowledges that consumers do not always buy a product for its own sake, but rather as a means to another end.
• Satisfaction—Value is a pre-purchase evaluative judgment that generates a series of expectations in the consumer. Satisfaction is a post-use evaluation and has been described as "the attitude resulting from what customers think should happen (expectations) interacting with what customers think did happen (performance perception)."

So "value" is multidimensional, and it's also relative—not only because of its personal nature (in the sense that value varies in the eye of the beholder), but also because of its comparative nature (the value of one object is stated in reference to that of another object) and its situational nature (value depends on the context in which the evaluative judgment is made).

* Source: Raquel Sanchez-Fernandez and M. Angeles Iniesta-Bonillo, "Consumer Perception of Value: Literature Review and a New Conceptual Framework," Journal of Consumer Satisfaction, Dissatisfaction and Complaining Behavior, Vol. 19, pp. 40-58.

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It's this last point that bears special attention—that determinations of value are situational. This year, the situation in which prospective students and their families find themselves (hence, their foundation for defining value and worth) is marked by financial uncertainty. In such a situation, families have a heightened sensitivity to the "price" and "utility" dimensions of value.

Adam Smith's observation from long ago seems very pertinent today: "The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it." So, demonstrating value must not only motivate and inspire a willingness to pay the monetary price of education, but also overcome concerns about the effort costs, psychic costs and time costs involved in paying for that education.

Education is an investment worth making, but the situational question for today's families is, "At what price?" Therefore, your value proposition can no longer be implied; you must support it with evidence that addresses the "price" and "utility" components of value—and be even more persuasive in conveying the value of the "quality" component that has traditionally been the main differentiator for private colleges and universities. Here are some tactical suggestions you may find useful:

• Make the net tuition price as transparent as possible.
• Note the availability of payment plans.
• Highlight four-year graduation rates as an indication of the ability to graduate in an economically reasonable timeframe.
• Directly correlate learning outcomes with the skills employers seek.
• Reframe quality attributes in a practical context. (For example, correlate "personalized attention" with professors being able to provide meaningful and effective letters of recommendation.)
• Explain the real-world benefits of experiential learning opportunities, internships and extra-academic experiences.
• Highlight the job placements, graduate school placements, and post-graduate activities of recent graduates.
• Relate alumni satisfaction rates to successful career preparation.

In the news

USA Today recently published a feature story called "Liberal Arts Tweaked for Careers" that highlights how some liberal arts colleges are tapping into the practical bent of the families of prospective students. It says, "Liberal arts colleges make a passionate case that the skills they offer—analysis, writing, argument—are the best preparation for a career in the ever-changing business world. But at a time of surging college costs and rising career anxieties, they're ... all struggling with variants of the same question: Can liberal arts colleges maintain the distinctive education they provide, while serving students who want a clearer path to a business career?" Meanwhile, ABC's "Good Morning America" is featuring a web story on "The High Cost of Higher Ed" and the toll it's taking on students and their families, and the Boston Globe featured "Money Tight, Loans Scarce, Some Do College in Three Years," stating, "Soaring tuition costs are prompting a small but growing number of students to compress their college careers into three years and, in the process, save their parents and themselves tens of thousands of dollars."

Did you know?

The percentage of college students who use online social networks daily has doubled in the past two years.