June 2009 Lawlor Focus

The Age of Frugality

It was easy to see a theme emerge at the 2009 Summer Seminar sponsored by Hardwick~Day and The Lawlor Group earlier this month: Times have changed, and there’s no going back.

• Referring to the current U.S. economic situation as “the Great Recession,” media analyst John Rash warned that college and university marketers must recognize that “the value equation is undergoing a fundamental—and perhaps permanent—shift” in the perception of the consumer.

• Sarah Flanagan, vice president for government relations at NAICU, said the public’s focus on sticker price has been exacerbated by the economy and will not go away.

• Bill Shain, former chief enrollment officer at Macalester, Vanderbilt and Bowdoin, expressed his fear that college and university administrators are falling prey to the same faulty assumption the banking sector held: that there will always be people who will pay more.

• Roger Goodman explained that Moody’s Investors Service gave the entire higher education sector a negative outlook for the first time ever this year due to the pressures that families’ lower household income and net worth are exerting on tuition, along with the impact of institutional investment losses on operations and financial aid. Goodman pointed out that the age of cheap credit has come to an end, and consumers are doing all they can to deleverage.

• Families will remain wary of taking on any more debt, predicted Chris Farrell, economics editor of “Marketplace Money,” and banks will be more conservative in their lending policies. Therefore, “it’s hard to come up with a scenario for credit creation going forward, so the pendulum will swing back on student loans,” said Farrell. “Since you can’t raise price, you must gain efficiencies.”

• Kent John Chabotar, president of Guilford College, asserted that because of the diminished economy, higher education officials must consider ideas for cost-cutting that were completely off the table during past years.

• Colleges and universities must also adjust to the mindset of today’s college-bound teenagers, whom Katie Elfering of Iconoculture referred to as “Gen We.” She pointed out that just as fish don’t see water, Gen We doesn’t see technology—they expect instant access to real-time, practical information.

• Harry Beckwith, bestselling author of Selling the Invisible, reiterated the need to respond to prospective students quickly and make them feel important, recognizing that the way someone feels about the person providing a service affects how someone feels about the service.

• Tom Williams of Williams & Company and Richard Cook representing Lahti Search Consultants discussed the challenge of acquiring the knowledge, skills and attitudes to do the job of today’s chief enrollment officer, and they warned that institutions that are oblivious to the necessary interplay of those three traits are in trouble.

Lawlor Recommends

As higher education’s high price and cost of delivery collide with consumers’ frugal attitudes, the business model of many colleges and universities is becoming unsustainable. Such tough times require administrators to think differently. As both Goodman and Chabotar pointed out during the Summer Seminar, mere changes in tactics will not be sufficient to weather this economic cycle; rather, fundamental changes in strategy are necessary.
 
Now is not a time, though, to retreat and succumb to “fearing the worst,” but a time to welcome innovation, evolution, and yes, even change.

Goodman noted that “higher education has experienced a long period of growth on the expense side.” Colleges can no longer do it all—or, at least, do it alone. Colleges and universities must be aggressive in their innovations, yet focused. Rather than engaging in the “me, too” arms race with competitors (in areas such as varsity athletic offerings, for example), institutions can perhaps find ways to operate consortially to eliminate overhead in cost areas such as backroom processing, commissioning market research, and even advertising. Seize opportunities and explore new collaborations that focus on sustaining or enhancing quality, yet highlight pragmatism, efficiency and sustainable value—the exact qualities a frugal marketplace seeks.

In the news

In “The Four-Year College Myth,” a Boston Globe writer argues that the path ingrained in us as “normal”—that is, going to college right after high school and graduating in four years—“couldn’t be further from reality. And until education leaders take that into account, too many students will lose out.” Their colleges may lose out, too, according to a Chronicle Research Services report that predicts the world of higher education in the year 2020 will be shaped largely by convenience and economics.

Did you know?

Dartmouth College took a risk and posted a YouTube video admitting its business model is “wacky”—and revealing why it makes Dartmouth so good.

Source: collegewebeditor.com