How It Worked Out at Converse College Betsy chose Option #1, and the college red
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How It Worked Out at Converse College
Betsy chose Option #1, and the college reduced undergraduate tuition by 43 percent to a total of $16,500. It arrived at this number on the basis of aprice-sensitivity study it commissioned from Noel-Levitz, a consulting firm. In this study, the company presented college-age students and their parents with different combinations of college choices, tuition, and financial aid. Their responses to these scenarios helped the analysts determine how important a tuition decrease would be relative to other possibilities and how much of a cut Converse would have to make to really have an impact. Exhibit 10.01a shows one of the slides from the company's report to Converse that recommended this option.
This decision moved the school away from the high-tuition/high-discount model in which students who pay more than the actual cost of their education ultimately subsidize the aid for students who receive the highest discounts. The decision also priced a private customized college experience comparably to flagship public universities while offering the added value of an 11-to-1 student-to-faculty ratio.
Why such a drastic price cut? The logic was that if Converse was going to make such an unusual move, the school wanted it to be truly meaningful and to make a bold statement. Converse created a multifaceted marketing plan to announce the move to reset tuition that centered on new messaging about a top-quality product for a great value with the tagline "Voice, Value, Vision."
With the tuition reset, Converse took a national lead in helping to solve America's college-affordability issues, as the tuition decrease rewinds the price back to what it was over a decade ago. The $16,500 tuition reset is coupled with a room-and-board price of $9,500 for a total cost of $26,000. This gives Converse one of the lowest prices of any four-year private college or university in the region and is comparable with total costs at premiere public universities both in and out of state.
Marketing Metrics: How Converse Measures Success
Converse received immediate increased interest from prospective students, and recruitment numbers are significantly ahead of previous years. The school showed a 6 percent increase in applications and an 11 percent increase in the number of prospective students who visited the campus and is projecting an increase of 5 percent in undergraduate enrollment for the first year. More broadly, here are some important measures the school uses to determine how its new pricing model is working:
Enrollment funnel. Prospective student inquiries, applications, visits, admittances, and tuition deposits.
Retention numbers. First to second year, second to third year, third to fourth year, and overall graduation rates.
Revenue generation. The impact of the tuition reset on college revenue, which Converse anticipates will remain flat if enrollment remains constant and will increase as enrollment numbers increase.
Student billing. Converse will assess whether students find it easier to pay tuition and pay on time by measuring the number and size of past-due balances.
Demographic shifts in student body makeup that may be attributed to the tuition reset. Converse already is seeing an increase in transfer students. The school is receiving more applications from students who are also applying to public colleges, indicating that it has broadened its target market by reducing its cost.
Tuition discount rate. A lower discount rate (the percentage that tuition price is discounted with the awarding of financial aid) is healthier for colleges, and the reduced tuition will result in a healthier discount rate. It likewise creates a more sustainable operating model with transparent and controllable financial levers with which to advance the college and its mission.
1.
Payment for a service such as education at Converse College must have ________ to all parties.
A.barter
B.elasticity
C.substitute value
D.value
E.demand
2.
If Converse College shifts to a new pricing strategy, it hopes to remain and even grow its ________, the desire for its services.
A.loss-leader position
B.supply
C.internal reference
D.demand
E.freemium pricing
3.
With a shift to more economical pricing, the________long dash—usedto illustrate the effect of price on the quantity demanded of a productlong dash—should shift.
A.law of demand
B.supply curve
C.law of supply
D.demand curve
E.online curve
Explanation / Answer
1.
The company C provided education at a reasonable price with other amenities to the students.
Thus, the correct option is C substitute value.
2.
To increase the demand of a product, the companies often reduce the price of the product.
Thus, the correct option is D demand.
3.
As per the law of demand if the price of the goods and services gets affected, there is a significant affect over the demand.
Thus, the correct option is D demand curve.
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