Five Drivers of Price Sensitivity in Higher Education

Sensitivity to the published price of colleges and universities has become a major market force as prospective students and their families consider what they are able and willing to pay for a college education. Among the factors shaping their perceptions of price are:

  1. Media framing. After several years of news stories about the rising price of a college education, media focus has now shifted to solutions for reducing the price. “Free college” is a new mantra, albeit still widely aspirational.
  2. Sticker shock. About four out of every ten families will eliminate a college based on its published price alone. Relatedly, 49% of private college presidents in the LAWLOR-RHB “Independent College Presidents Survey” reported that addressing affordability is very challenging for their institution.
  3. Discounting ambiguity. The lack of transparency in how a college arrives at a family’s net price affects their willingness to pay. For example, families who are sophisticated about tuition discounting suspect they could be getting more merit aid—and they aren’t shy about going after it.
  4. Loan aversion. Because the average amount of student loan debt that families incur has reached such a high level, loans are viewed negatively as debt instead of positively as financial aid. (New federal data show 2008 graduates who took out only undergraduate loans spent 11.3% of their salary for student loan payments in 2012.)
  5. Signaling effect. Colleges with a high sticker price must live up to the expectations of high quality that people associate with that price. Classroom equipment, residence facilities, campus activities, “customer service,” and even curb appeal influence families’ view of whether a college’s sticker price is appropriate.

Most people still believe that college education is a necessary and valuable investment, and reports like The Chronicle of Higher Education’s “The Future of Work” help point the way for college degrees to maintain their workforce relevance. But gone are the days when people believed a college degree was worth pursuing no matter what the price. Today, price sensitivity prevails.


Higher Ed Intelligence

Learn more about our collaboration to share market intelligence, including the results of the Independent College Presidents Survey. (Higher Ed Intelligence)

Loan Repayment Statistics 

“The Debt Burden of Bachelor’s Degree Recipients” examines student loan repayment four years after graduation for the Class of 2008. (NCES)

The Future of Work

A report authored by Scott Carlson explores job market changes, college career services, and higher education’s role in the workforce. (Chronicle)


Lawlor Recommends

The reality of today’s marketplace demands that colleges and universities become more effective at “marketing smart”—which requires capturing data specific to your institution that can inform intelligent marketing solutions. When it comes to solving the price sensitivity problem, this could mean conducting a pricing study.

A pricing study can help you measure the strength of your institution’s brand equity in comparison to other colleges and universities, as well as what role the published tuition priceplays in the overall assessment of the value proposition of attending college in general and your institution in particular. Gathering empirical evidence about your competitive positioning and optimal pricing can inform solutions for sustaining interest in and selection of your institution in response to a price-sensitive marketplace of prospective students.

Market intelligence informs intelligent marketing solutions. Now is the time to be #MarketSmart.