tuning

Problem: As the recruitment cycle begins to wind down, you’ve run out of budgeted funds for your marketing efforts.

Given: The fiscal structure of universities should be similar to corporations in regard to marketing budgets. Generally, to maintain current market share, corporations spend around 5 percent of their total net revenue on marketing. Corporations looking to grow or gain greater market share budget a higher percentage—usually around 10 percent of net revenue.

Assumption: Let’s imagine we’re working with a private college with the following characteristics:

• 637 new student enrollment • $23,500 tuition • 35% average discount rate = $9.7 million first year net revenue.

Let’s also imagine this school has a very high four-year retention rate of 75%. This single entering class represents a four-year net revenue topping $33 million.

If our private college budgets as a corporation, i.e. 10% of net revenue for growth marketing, it would have an initial marketing budget of approximately $970,000 and might exceed a four-year marketing budget of $3.3 million.

If you were to ask a VP of Enrollment with similar enrollment, tuition, discount and retention rates about their marketing budget (if they do have a line item for marketing costs), most would say their marketing budget is nowhere near these figures. But most likely, they would be wrong. Thus, the marketing budget runs dry as the recruitment cycle concludes… and everyone scrambles for more funding.

According to the higher ed consulting group Ruffalo Noel-Levitz, the 2015 median cost of recruiting each new student at a private university is $2,232. Note: the 2013 median was $2,433.

Most college CFO’s would not say they are not budgeting 10% of net revenue for marketing. However, in my sweeping generalization, the Ruffalo Noel-Levitz research indicates that most private schools are in fact spending more than 10% of net revenue to enroll each new student.

Bottom Line: To determine a realistic marketing budget the CFO should include:

• Staff salaries and benefits, prorated, for all full- or part-time employees working with undergraduate recruitment or admissions, including temporary or work-study employees and prorated salaries, benefits, and operating costs of supervisors who carried additional responsibilities outside of undergraduate recruitment and admissions;
• Capital costs (equipment, if any)
• Supplies
• Travel
• Publications and advertising, including Search name purchases related to recruitment
• Web and electronic communications costs related to recruitment
• Consultant services
• Vendor/outsourced services including creative services of photography, design and copywriting; and
• Any additional expenses related to recruitment and admissions not named, such as costs associated with recruiting and admissions that are covered by departments outside the admissions office but excluding grants and/or scholarships.

Lesson learned: Determine your enrolling net revenue, calculate your anticipated marketing costs. Avoid the end of the year scramble for funds by boldly tracking your comprehensive marketing costs this year. Confidently request the funds needed to do your job well.