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Lipman Hearne President and CEO Rob Moore's presentation with Terry Flannery of American University at the 2013 AMA Symposium for the Marketing of Higher Education
Citation preview
Higher Ed ROI:Making It Work for You
Rob MooreTerry FlanneryNovember, 2013
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Today’s agendaThe business contextBottom-line essentialsCalculating ROIGetting the dataThe virtuous cycleMeasurementA more ambitious modelA final thoughtQ&A
Lipman Hearne | AMA Higher Ed Symposium
The business context
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Where the money comes from
Public R/D
Net TuitionState/localFederalAuxilaryPhil/End
Lipman Hearne | AMA Higher Ed Symposium
Private Research
Net TuitionState/LocalFederalAuxilaryPhil/End
Private BA
Net TuitionState/LocalFederalAuxilaryPhil/End
American Institutes for Research 2012
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Step one: build your own pie chartMid-tier Private
Tuition/FeesGiftsFed/StateAuxilaryEndowment Income
Lipman Hearne | AMA Higher Ed Symposium
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Step one: build your own pie chartMid-tier private
Tuition/FeesGiftsFed/StateAuxilary FundsEndowment Income
Lipman Hearne | AMA Higher Ed Symposium
Why would you construct such a chart?
With whom would you share it?
What is the point you’re trying to make?
What is the goal of this discussion?
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Step two: the investment argument
Revenue
Tuition/FeesGiftsFed/StateAuxilaryEndowment Income
Lipman Hearne | AMA Higher Ed Symposium
Expenditures
InstructionAcad SupportStudent ServInst. SupportMarketingAuxilary
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The big takeaway
Lipman Hearne | AMA Higher Ed Symposium
1 Shift the discussion from cost (expense) to revenue (return)
2 Gain clarity on the business goals of the institution, and where marketing investment links to those goals
3 Make sure goals are trackable and achievable
4 Commit to achievable, priority goals
5 Start planning
6 Execute the plan and track results
Bottom-line essentials
differentiatesA strong brand that
11Lipman Hearne | Esalen Institute
clarifiesA strong brand that
creates loyaltyA strong brand that
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Assessing valueOverarching consideration
To increase value, either enhance experience or decrease cost.
Which makes more sense for your institution?
Lipman Hearne | AMA Higher Ed Symposium
Value ExperienceCost
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Understand the business realitiesWhat is the optimum “carrying capacity” of your institution?
• Traditional students• Nontraditional students• Graduate/professional students• Continuing education
What is the gap between this carrying capacity and your current enrollment?What is the relationship between key revenue factors?
• # of students vs. discount rate• Recruitment vs. retention
What is your current marketing investment?
Lipman Hearne | AMA Higher Ed Symposium
What revenue increase can you promise with a larger investment?
Calculating ROI
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Return On Investment FormulaBasic fact: to determine any formulaic relationship, you need both a numerator and a denominator• Numerator (top): Revenue generated• Denominator (bottom): Cost of investment
Liberal arts institutions—relatively straightforwardMA institutions—a bit more complicatedR/D institutions—a major headacheCapture what you can and estimate the rest
• Research/validate/confirm with your CFO
Lipman Hearne | AMA Higher Ed Symposium
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Cost/investment elements to consider
AdvertisingPrint publicationsWeb development/hostingMobile/digital/socialMarket researchOutsourced servicesStaff salaries/benefitsEtc.
Lipman Hearne | AMA Higher Ed Symposium
Denominator
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Classic ROINumerator: All revenue linked to marketing activitiesDenominator: All marketing costs
Issue: For complex institutions, very hard to get accurate data on both sides of the equation
Lipman Hearne | AMA Higher Ed Symposium
ROI(Gain from Investment -
Cost of Investment)
Cost of Investment
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Special focusAssumption: overall marketing budget/activities continue as
in previous years Specific target identified for special investment• Numerator: revenue linked to targeted activities• Denominator: marketing costs related to targeted
activities
Formula the same, but data more easily gathered and tracked
Lipman Hearne | AMA Higher Ed Symposium
ROI(Gain from Investment -
Cost of Investment)
Cost of Investment
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Enrollment example
Median Public U invests $250,000 to recruit 50 additional students (data based on average national tuition/fees income for public university)
ROI = 3.375• For each “exceptional” $1 invested, the institution nets
$3.375
Lipman Hearne | AMA Higher Ed Symposium
3.375 ($1,072,350 - $250,000)
$250,000
Getting the data
Job #1: Getting The DataMarketing function decentralized—total spend unknown?
Revenue data: tuition rates, credit hours, FTEs or ?
CMO: authority/responsibility to gather data on expenditures, enrollment and revenue
Work with CFO, Provost or both to:• Gather centralized data on marketing expenditures• Change policies on how marketing expenditures are budgeted and coded• Identify consistent definitions for revenue calculations
Work with schools/colleges/admissions/development to :• Reduce the inherent threat• Understand marketing investments• Create template for compiling data
American University
Job #2: Frame Your MeasuresDeveloping a basis of comparison is critical• Measure against your own institution over time• Establish formulas and apply consistently over time• Measure against your competition where possible
Use data shared through formal and informal groups
Use publicly available data (ex: IPEDS)
Many measures may have less relevance until you have been tracking your ROI for three years
You will have to make some tough decisions about how the metrics are calculated in the first year and then use the same calculations year after year
American University
Strategic and TacticalMarketing Cost per Student
Revenue contribution
Market Share
Lifetime value of a student
Student Acquisition Cost
Cost per lead
Advertising to Sales Ratio
Response Rate
American University
American University
Ex: Marketing Cost Per Student
How much does it cost to market to one student?Calculate :• MCPS=total marketing expense ◦ With and without salaries included◦ For all students vs. For new students◦ By type of student◦ By school or college at grad levelMCPS declines as product matures; significantly higher for a newly launched programAdapted for ROI for annual fund; how much does it cost to market to one donor to the annual fund?
Marketing Cost Per Student
Total Expenses
= ______________
Total Students Enrolled
Adapted from CASE District II ROI presentation Flannery and Scarborough, February 2009
American University
The virtuous cycle
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The virtuous cycle
Recruitment
Retention
Advancement
Lipman Hearne | AMA Higher Ed Symposium
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The virtuous cycle
Recruitment
Retention
Advancement
Lipman Hearne | AMA Higher Ed Symposium
• A marketer’s job doesn’t end when the class arrives on campus.
• The cheapest student to “recruit” is the one you already won.
• Happy alumni provide multiple benefits.
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Impacts of retention• U.S. News reporting • Confirmation of recruitment of “right fit” students• Reality-check on the authenticity of the promise you made • Financial stability/predictability• Less need to “re-recruit” to fill in for shrinkage• Class stays robust through to graduation• Cost of recruitment for first-year students amortized• Private <$500• Public <$120
• “2% increase at Private College X means an additional $750,000…at Public University Y more than $2.5 million.”
Lipman Hearne | AMA Higher Ed Symposium
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Factors that affect retention• Is the student the “right fit” for the institution?• First-choice vs. fall-back
• Academic ability/preparation• Authenticity of brand promise• Did you make a promise you can fulfill?• Does the institution understand the promise you
made?• Financial aid follow-through• Orientation, advising, and intervention
Lipman Hearne | AMA Higher Ed Symposium
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Factors you can do something about• Understand the issues• Incoming student survey• NSSE• Stop-out/transfer tracking• Exit interview/research• Ethnographic intake
• Enhance brand awareness• Faculty/staff workshops• Messaging• Reinforcement
• Orientation
Lipman Hearne | AMA Higher Ed Symposium
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What do alumni want?
A jobSelf-guided connectivity Low debt loadPride of accomplishment
Continued degree relevancePride in institutional progressNetworkingSelective connectivity
Institutional prideSelective networkingLegacy consideration
RecognitionAchievement validationsImpact opportunities
10 years 20 yearsGraduation 30+ years
Lipman Hearne | AMA Higher Ed Symposium
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Alumni “solicitation effectiveness”
1995 2000 2005 20100
0.05
0.1
0.15
0.2
0.25
0.3
0.35
LAPriv RDPub RDPriv MAPub MA
Lipman Hearne | AMA Higher Ed Symposium
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Engage them where they’re at
Lipman Hearne | AMA Higher Ed Symposium
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ROI• University invests $900,000 for sophisticated integrated
annual fund campaign that raises an additional $5.2 million
4.7 = ($5,200,000 — $900,000)$900,000
Lipman Hearne | AMA Higher Ed Symposium
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Philanthropic impact of individualsIn 2012, higher education received $41.3BB in philanthropic support• Estimated $10.1BB came from alumni/ae• Approximately 25% of total
Additional $8.26BB came from parents & non-alumni individuals
• Approximately 20% of totalFoundations/corporations/other orgs counted for the rest
• Question: who runs foundations/corps/other orgs?• Answer: people
Recommendation: Participate in/subscribe to VSE
Lipman Hearne | AMA Higher Ed Symposium
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Capital campaignUniversity spends 5-15% of goal on a campaign; materials and events 20-30% of that total; mar/comm 30% of that
ROI: 165/1
Source: http://www.phildev.iupui.edu/TheFundRaisingSchool/PrecourseReadings/precourse_capitalcampaignspierpont.aspx
$1B$6M
$20M$100M+
Lipman Hearne | AMA Higher Ed Symposium
Measurement
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Things that can’t be definitively measuredCorporate definition of brand value:
Brand value in academe is harder to measureOne evaluation system lists HE brands among the highest value in the world
• Harvard, Stanford, MIT in top 10 (w/Coca Cola, American Express, Nike)
• Berkeley, Cambridge, Oxford in top 15Brand value has impact on selectivity, retention, alumni pride/engagement, faculty recruitment, corporate and foundation investments
Lipman Hearne | AMA Higher Ed Symposium
Brand Value Market capitalization Assets
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Things that can be measuredTraditional advertising w/specific CTAOpen house invites w/tracking infoCoupons, swag giveawayProgram outreach w/distinct URLAnything digitalGoogle analyticsSocial media
Lipman Hearne | AMA Higher Ed Symposium
0
20
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60
80
100
120
140
160
180
200
E1
E2
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E7E6
E8
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A more ambitious model
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Retained value of each student recruited
Lipman Hearne | AMA Higher Ed Symposium
Sally BillyInstitution Median Public U Average Private U
Total revenue $67,626 $168,896Cost to recruit $457 $2,185Cost ratio 148:1 77:1
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Scaling up: Investment/return per class
Assumptions: 3,000 matriculants, 80% first-year retention, 50% live on-campus first two years, 60% graduation rate, 10% alumni giving rate (x40), average gift $1,000
Lipman Hearne | AMA Higher Ed Symposium
Median Public UYear 1 $52,969,500Year 2 $42,375,600Year 3 $29,375,600Year 4 $24,950,800Alumni Giving $7,200,000Capital commitment $25,000,000Total revenue/class $181,614,500
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Scaling up: Investment/return per class
Assumptions: 1,000 matriculants, 90% first-year retention, 40% discount rate, 50% live on-campus four years, 50% live on campus two years, 70% graduation rate, 20% alumni giving rate (x40), average gift $2,000
Lipman Hearne | AMA Higher Ed Symposium
Average Private UYear 1 $29,346,400Year 2 $26,411,760Year 3 $19,477,120Year 4 $16,958,480Alumni Giving $11,200,000Capital commitment $40,000,000Total revenue/class $143,393,760
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Acquisition cost ratioMedian Public U
Average Private U
How important is revenue to your institution?How should you “scale” marketing investment relative to the importance of revenue?How integrated are your recruitment, student affairs, and advancement divisions?
Lipman Hearne | AMA Higher Ed Symposium
132:1$81,614,500
$1,371,000
65:1 $143,393,760
$2,185,000
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Enrollment exampleMedian Public U invests $250,000 to recruit 50 additional students
What happens when we factor in lifetime value?
And that’s not even counting annual fund or capital/planned giving Lipman Hearne | AMA Higher Ed
Symposium
3.375 ($1,072,350 - $250,000)
$250,000
9.1 ($2,531,090 - $250,000)
$250,000
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Enrollment exampleAverage Private U invests $250,000 to recruit 25 (full pay) additional students
And lifetime value?
With 40% discount rate?
Lipman Hearne | AMA Higher Ed Symposium
3.39 ($1,055,600 - $250,000)
$250,000
11.7 ($3,176,816 - $250,000)
$250,000
7.37 ($2,094,056 - $250,000)$250,000
A final thought…
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Convince the powers-that-be to invest more in marketing
Lipman Hearne | AMA Higher Ed Symposium
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Convince the powers-that-be to invest more in marketing
then deliver on the promise you make!
Lipman Hearne | AMA Higher Ed Symposium
Questions?
Copyright 2013
Thank you.