Why universities must ‘think like a business’ to survive in a changing market

Upcoming funding changes to higher education policy have seen a dramatic shift in the strategic direction of universities in Australia.

Whilst the role of a university has always been diverse; from teaching to research and community engagement, we’re now seeing a new function emerging – the notion of a university as a commercial entity.

The challenge universities are now faced with is how to effectively plan and evolve revenue models in order to successfully adapt to the major upcoming funding changes.

According to Kelly Smith, Director of the International Centre at the University of Western Australia (UWA), the key to achieving this will be to ‘think like a business.’

“Students are viewing themselves as consumers, which is going to become a much more pointy-ended issue as we move into the fee-deregulated space. Universities need to think about the way they engage in the same way all big and successful organisations do,” he said.

While most universities remain silent on details and strategy towards new fees, UWA is one of the big players in the sector quickly moving to respond to the government’s planned policy changes.

Earlier this month, the university became the first in Australia to announce its proposed pricing in the context of the government’s planned deregulation of student fees in 2016. This followed extensive modelling of different options and likely impacts at a course and institutional level.

The new pricing model means that students will be paying more come 2016; at a new price of $16,000 per year in an undergraduate study and about double the current average fee.

While the fees will vary from university to university, overall, the Federal Government’s higher education reforms, still to get the support of the Senate; mean the cost of a degree will go up at least 30% and as much as 60% more in some cases.

According to Alec Cameron, Deputy Vice-Chancellor (education) at UWA, the increase in price is necessary to ensure the stability and commercial viability of the university in the future, as the industry becomes more competitive.

“The sector has consistently and validly argued that we are underfunded; our proposed pricing model addresses the accumulated funding deficit, by taking the responsibility to set fees at the level we believe is necessary for the university’s future,” he said.

Cameron also says there were a number of factors taken into consideration when creating this new model.

“Our price of $16,000 per year of undergraduate study in 2016 is, of course, higher than current student contributions. In setting this price, we were conscious of: the reductions in cluster funding in the proposed current legislation; the withdrawal of funding from the sector by the previous government; and the Bradley and Lomax-Smith reports commissioned by the previous government, both of which identified underfunding of the sector,” he said.

The university’s decision to act so quickly in response to policy changes was primarily driven by then need to inform prospective students about their plans in the event of deregulation.

“We intend that our pricing is simple and transparent to students. Given recent discussion about the opacity of actual entry standards at universities, and the potential for similar complexity and opacity in pricing models, UWA sees simplicity and transparency in pricing and entry standards as highly valued-principles that we are offering to students,” said Cameron.

While putting the student at front of mind appears to be a central part of UWA’s new pricing, Stephen Weller, Chief Operating Office & Deputy Vice-Chancellor (Corporate) at the Australian Catholic University, warns there will be a whole new set of challenges that will arise as a result – the main one being a change in expectations.

“From a university perspective, we’ll get the same amount of money, because we’ll pass the cost on. Many students aren’t asking what it’s going to look like in 2016. There’s more concern around HECS.

When people start to pay more, they will expect more. There’s clearly an issue of expectation management. It’s an area where the sector has significantly improved over the last four years, because it’s moved into a competitive environment. But there’s still a lot of work to be done,” he said.

So how does meeting student expectations equate to higher revenue? The answer is improved satisfaction will ultimately lead to more business and more customers, just like any other commercial organisation.

“Universities are either incredibly bureaucratic or incredibly resilient. My view is they’re both. They can be slow to move; they’re traditional institutions. But they don’t have to be. We responded to amalgamations and demand, and as a result our university has grown from 12,000 to 30,000 students,” said Weller.

With students previously basing their decisions around questions like ‘what experience am I getting’ change will see the concept of ‘what price am I paying’ arise. If the demand-driven system is also extended to private providers, it’s really going to put the emphasis on value.

As a result, universities need to think about how to deliver on expectations in a consumer driven environment, and how to market price whilst meeting these expectations.

“That whole notion of how you bundle price and meet expectation is new to the sector in Higher Ed. It’s also new to the consumer. The key message I would say is: you have to be student-centric. You can’t just say it. Put the student at the centre of your business and ask yourself: what is the student’s return on investment? What are they going to get that makes us a better proposition than another university?” said Weller.

This notion is echoed by Smith, who says UWA embracing all things digital in order to capture a holistic view of the entire student life-cycle to meet changing expectations.

“The digitally savvy student is really a digitally savvy consumer. Universities must embrace this in order to engage students on the right levels and improve ROI. With an increase in price, students will expect more in return – a big part of this is delivering quick responses to students in an engaged, online environment,” he said.


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