Higher Education Strategy Associates

Chasing a Buck

There are a lot of institutions facing a demographic challenge over the next few years. Outside the GTA and the B.C. lower mainland, the youth population is in decline, and that means institutions in these regions are either going to have to start increasing their yields or find some new markets to exploit.

(Or, I suppose, cut their budgets a bit, but that seems to be a last resort.)

Though I can’t claim to have a lot of granular detail on the issue, I’m getting the sense a) that most institutions have decided to go for new markets, and b) that the ratio of frantic, flailing activity to serious strategy and planning in this area is alarmingly high.

The two obvious candidates for attracting new money are “older students” and “foreign students.” Going after “older students,” interestingly enough, now seems to be entirely a digital affair; it is assumed that this demographic has little interest in hauling itself to campus and should be addressed primarily via online programs. But – and this is the crucial bit – what is it exactly you should put online? The same courses you were offering before? Or totally new courses? It’s a critical question, but it doesn’t seem to be one a lot of people are asking – the automatic assumption seems to be that offering the same courses with a new delivery mechanism will do the trick. I’m not convinced this will end well, especially given the costs of translating old content into a new format.

Another option, of course, is to aggressively court foreign students. You can charge them more, of course, which is a bonus. But they also cost more to educate and they cost a lot more to find and recruit. That sounds simple, but a lot of schools haven’t figured out that second part; I know of at least two in Western Canada that are losing money hand over fist on international students because they don’t systematically stack up costs against revenues.

In both cases, the issue is marginal net revenue: there is no reason to do something for the sake of chasing revenue if the costs are too high. More to the point, it’s comparative marginal net revenue that matters. Why spend any time or energy recruiting foreign students if you can make more per student via the digital option (or vice-versa)?

Ultimately, institutions need to be more strategic about deciding which avenues to exploit in order to chase a buck. The temptation to just “do something” is very real, but needs to be resisted. Deciding on the right balance between different types of revenue-generating activity needs to be done with a lot more deliberation than is often given at present.


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