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What's the math in cutting tuition costs by 40%?

A lower sticker price means less discounts, but it also means a cut in the overall price.

Photo of Joanna Spoth
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Utica and Rosemont Colleges are both cutting their tuition costs by 40% next year. We need to guarantee students and families discounts. Increased sticker prices mean more discounts, so this model cuts the sticker price and cuts discounts, but also cuts the overall cost. 

Does that actually result in cash savings?

At Rosemont, the average savings will be $815 over next year," said Hirsh, the president of Rosemont "but that ranges according to the individual students' packaging anywhere from $100 only to ... $14,000." 

Utica's Hutton added that "The entire range of our students will save money. Ninety-three percent per year will save between one thousand and five thousand per year. The remainder will save five thousand and up. The vast majority of our students will save significant dollars in this."

Rosemont College President Sharon Hirsh told CNBC that the effort was part of an attempt to shift an existing model. "We realized that we, among so many other colleges, were going according to a model that was raising the sticker price at the same time that we had to raise discounts," she said. "And so we've gone from a high sticker price/high discount to a lower sticker price/low discount rate."

Watch the video here.

What is a provocation or insight that might inspire others during this challenge?

Among other things, this move affects the Colleges' marketing and positioning against other Universities. How will this change in sticker price impact the demographic of students applying and being accepted into their schools?

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Photo of Kaye Han

Joanna, great post that leads on from your other regarding how the sticker price and discount is used as a pricing strategy to manipulate the perceived value of education. Realistically, adding this complexity to an already complex situation to parents and students is in the benefit to most universities. At the end of the day, universities are trying to increase revenues and profits like any other business or organisation - the question is should they be allowed to do it in this way. It'll be interesting to see how Utica and Rosemont's marketing is affected by this strategy.

I feel this situation is similar to online dating websites where all men exaggerate their height by 5cm. Because all men have exaggerated their heights, women have already naturally taken this into account. The problem is, if you as a man want to be honest and put your real height, you'll be seen as 5cm shorter than you actually are. It's one of those vicious cycles.

I already have an idea for this but I'll have to wait 18 days till the next phase haha.

Photo of Joanna Spoth

Can't wait to see it, Rob! :) I agree with your provocations, although I'm not convinced this in the benefit to most universities! As you stated in your other post, we associated high cost an selectivity with the quality of the thing. Perhaps Utica and Rosemont will now see a decrease in the quality of their applicants - I'm not sure!

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