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Knowledge is Power: Pricefx Says It’s Time for Colleges to Embrace New Value-based Pricing Strategies

Pricing expert at Pricefx says value-based pricing could disrupt the way universities charge for degrees and fix the skyrocketing costs for higher education

While college degrees have never been more important, they have also never been more expensive. According to the U.S. Department of Education, tuition at public four-year colleges has more than doubled over the last 30 years, even after adjusting for inflation. To pay for the high cost of higher education, students turned to federal and private loans. More than 43 million Americans collectively owe $1.73 trillion in student loan debt. As a result of these skyrocketing prices and student loan debt horror stories, students are increasingly focusing on the cost and value of a college degree(Pricefx ).

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“Degrees are not one size fits all and pricing should reflect that”

These pressures leave higher education institutions trying to balance student acquisition and retention, affordability and revenue growth. Gabriel Smith, a pricing expert at Pricefx, the global leader in cloud-native pricing software, asserts that the most common tuition pricing methods are out of touch with reality and higher education is in need of new, innovative approaches that appeal to today’s price-conscious students.

“Colleges are too often failing to provide enough value to their students to justify the price tag – their salad days are over,” said Smith. “Students – and parents – are waking up to the lie that any degree, at any cost is the key to success. While federal loan programs are available to many, increasingly students are evaluating tuition costs and the ROI of a specific degree. Forward-thinking colleges can leverage this opportunity to grow their student base and reputation by implementing new value-based pricing strategies.”

By offering new, differentiated pricing models, today’s colleges and universities can stand out in the competition for student enrollment. A flat-rate pricing model based on cost factors or the cache of a school doesn’t meet the new thresholds that prospective students are seeking. When evaluating the ROI of a degree, students are assessing key factors such as earning potential after graduation, the likelihood of job placement in their field of study, industry demand and growth trends for jobs in their field, the quality of instructors, the reputation of the school and the depth of the alumni network.

“Degrees are not one size fits all and pricing should reflect that,” continued Smith. “Tuition and fees should align with services rendered and with what students can expect to earn in their field post-graduation – colleges should have more skin in the game.”

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Pricefx is experience in working with companies in a variety of different industries provides insight into what pricing models could disrupt higher education.

  1. Price by major: Colleges and universities can adjust pricing for different majors, charging more for degrees that hold a higher value for employers. For example, the computer science program, where graduates are likely to get jobs in their field of study and enjoy a higher starting salary, would be a premium-priced degree, while a philosophy major would pay a lower tuition.
  2. Price segmentation: Beyond in-state and out-of-state tuition and room and board options, higher education institutions can further segment fees by providing a menu of offers designed to find out what prospective students are willing to pay for, such as in-person, virtual or hybrid instruction and access to extra on-campus amenities. This allows administrators to determine where the ROI is on their investments for student instruction and experience.
  3. Price transparency: In effort to retain students, schools can also offer lock-in pricing to provide complete transparency on the actual cost of the degree. Instead of annual increases, some colleges, such as Purdue University, are offering to freeze tuition at a certain price point.
  4. Deferred payment based on employment: Forward-thinking schools can also defer payment until post-graduation, taking a percentage of their salary to pay for tuition. In this scenario, already employed by the Lambda School and others, the payments would only kick in after they have a minimum salary and there is a cap on how much and how long payments are made.

By taking a fresh look at what different types of students value and then creating programs and pricing structures that reflect that value, higher education institutions can help their students make the right choices and avoid being mired in debt for years or even decades. The current methods are not sustainable in their current form and will fuel innovative approaches that could be the downfall of traditional educational institutions unless they adapt.

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