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Mark Keleher: Good after everyone and thank you for joining Gray’s monthly webcast on the most recent student and employer demand trend in higher education. All the trends we will reveal this afternoon are derived from our program evaluation system. This is supports the academic review process at all colleges and universities across the country. Before I pass the baton over to our CEO, Bob Atkins, a couple of quick housekeeping items. Please free to share any questions with us in the chat window on the left-hand side of the page. We will be sure to answer any and all questions at the end of today’s webcast. Lastly, a copy of the presentation, as well as the recording, will be delivered all registrants via email. Without further ado, Bob.
Bob Atkins: Good afternoon, thank you very much for joining us today. I’ll be sharing results through August 2018 primarily on student demand, as well as a couple of other topics I thought would be of interest to you around program sustainability and program portfolio management. Without further ado as Mark says, let’s get into it.
Who is Gray?
First thing, just who is Gray for those of you who maybe new to our webcast and not be familiar with us? Gray is a strategy consulting firm. Our clients are higher education institutions and their stakeholders. Over the years we’ve created a very deep and broad dataset that covers student demand, things like we’ll share today on inquiry volumes, Google searches and Iped, employer data from BLS and Burning Glass, competition, wages from a variety of sources including the American Community Survey, the Bureau of Labor Statistics and the Gainful Employment Dataset. We have demographic data, placement rates for two-year schools and for profits.
Finally, one of our more recent additions is employer requirements by program, so we can see what skills, knowledge and capabilities an employee needs to have to be successful in the workplace. With that data we do a bunch of analytics, using some AI technics as well as more traditional statistics, to help clients decide what programs to offer, where to offer them and how to charge for them. Once we’re outside of that domain, there’s a wide variety of other work we do, I call business strategy, implementation and just general complex analytics.
We have just launched a new service as well, program economics that takes the costs and revenues per student, rolls them up to programs so you can understand what the contribution is for each of your academic programs before and after overhead, which I think is a very important component to understanding what programs you want to start, stop, sustain or grow.
Now, this month we’ll run through inquiry volumes, Google Search Trends and program sustainability at a national level and a little bit of a split between online, on ground and by programming city.
Overall Student Inquiries (All Sources)
When you go to read our charts, you’ll find that 2016 is the blue chart in the very back, green is 2017 and the magenta or red columns are 2018. In general, when you’re looking at this, you want the blue bar to be the lowest one, the green one to be the second highest one and the red bar to be third, the very highest one and the reason for that is, that would mean we’ve been growing for three years. That has not been the case as you can see. All the blue bars, actually the highest bars on the screen, the inquiry volumes have been declining for a couple years and in particular in 2017 they missed every single month, year over year. We’re actually seeing overall a better trend in 2018. You can see those red bars are rising, in some cases above last year, though not every month so far this year.
More specifically in August, we actually beat last year by 1%, that’s a big two-month trend and this year so far, we’ve actually beaten last year, four, five months here in a row. We’re starting to see an uptick on a fairly consistent basis, which is a big, positive switch in this data compared to prior years.
Conversions not quite as good of story although it’s a little bit – it’d be easy to misinterpret this data. Conversions first of all you might well ask, what are they? A conversion is when an inquiry proceeds to any further step in the funnel. That could be reaching out and spending time on the phone with a person. It could be an application, it could be an actual start. Unfortunately, the folks who submit this data, do it in all sorts of different ways, so you can’t be more precise then that. But, it does mean the inquiry has made to a next step and you can see here we go from 700,000 inquiries gross, to about 35,000 conversions a month. There’s a 20 to 1 ratio between an inquiry and a conversion on average. May’s down a little bit but it’s actually 15 decline at this point. May will continue to mature and in all likelihood within a month or two, it actually be at or above last years level. Now, that for some of you raises the question of, “What the heck is maturity?” And what we mean by that is that inquiries come in say in the month of May and we count conversions in the month in which that inquiry was received, so if an inquiry came in in May and converted in June, that would be called a May conversion. Generally speaking, these will convert for about three months will get you a lion’s share of conversions but there’s a trickle of conversions that happen after that, 4% or 5% of the total that might happen several months later, that’s why I’m pretty optimistic actually about May reaching or exceeding last years level. On a brighter note, June’s already at last year and so it should substantially exceed last years level. July is in very good shape to beat last year. August looks good, it’s a little too soon to tell but normally that bar would be quite a bit lower relative to last year after just a month. So, overall the conversion trends are good and they’re good in a context of raising overall inquires which makes it even more attractive.
Average Price for Pay-Per-Inquiry
Now, there is always something wrong when you look at data like this and here the issue is price. Price has been going up generally. To put that in context, last year price rose a little bit but stayed in the range around $45 an inquiry. This year, there was a burst, really started in late November and prices shot all the way up to $49.48 in the month of May. Fortunately, that trend has subsided and the average inquiry price is now back down around the $45 range to $45.39. Hopefully it will either keep dropping or settle down in this $45 range where it has been for some time.
Split Between Online and On-Campus
Now let’s take a look at the split between on-campus and online programs, starting with online. Very much a bright spot in the data. You can see that over the last several months online has beaten last year every month since April. We had a bad month in March but actually beat in January and February as well. All but one month so far this year is up. And this month is actually up 7%, which is fairly significant growth for online. However, that means that if we’re only up 1% overall, something bad happened on-ground and of course it did. The on-campus programs are down 10% this month and they continue a multiyear decline. Last year they were down over 10% and this year they’re trending down as well. The demand for on-campus is very weak. I think as we hear in the industry that demand is off, what people are really talking about is demand for on-ground programs and that’s actually a proxy for the high school graduate, the traditional student as well. I think that market is very soft. On the other hand, the adult market and the online market, which are not the same but very closely related, are pretty healthy. As an institution if you’re not moving towards those more mature students, delivered in an online format, you’ve got a bit of challenge, you’ve got a serious headwind in terms of demand for those on-ground programs.
The Big 5 Programs
Now, let’s split it up degree and programs. First thing in our largest programs, we’ve had two that have been growing very for the last couple months, criminal justice and health care administration, both up double digits for several months. Medical assisting has been going down for two or three years now, it fell another 22% this month. I’m not sure how long it can continue at such decline, such high percentages given how small it’s gotten but still shrinking. Business administration and nursing are more less flat, down slightly and of course, adding anything that’s as big as these two would go down as worrisome. Business administration is the largest program in the country, registered nursing comes in right behind it. These are very large important programs and it is worrisome to see demand declining. On the other hand, we’ve got some things out there that are growing in particular around computing and technology, you’ve got computer programming up over 100%. Demand for cyber security programs up 57% and we have two healthcare programs that are up over 40%, health services and allied health diagnostic intervention and treatment, so those are really two of the strongest areas overall in hirer ed and have been for some time. Fundamentally, computer programming and technology and health in general.
We have a new arrival on the list, which is entrepreneurship. This is a program lots of people think we should be teaching and expect lots of demand for it. I’m glad to see it on the list. In our experience it tends to be a fairly small program without a lot of student demand, which has always surprised me, so it’s nice to see if coming through here.
Inquiry Volumes by Degree
We think about his by degree level, it generally kind of true that the hirer level degrees are doing better but his month it’s more of a mixed bag. Doctoral degrees were up 17%, masters up 3% and bachelor’s actually declined, associates however were a bright spot up 5%. Undergraduate certificate, that’s more of your trades sort of thing, that was down 21%, a very weak month for those programs.
Year-Over-Year Inquires by State
Now, you might ask where is demand growing? If you’d like to know where physically it’s located we can do that as well, just give us a call we’d give it to you at least by state. What I see here is I think is interesting, which is the growth is happening in more rural states, Minnesota, Nebraska, New Mexico, Alabama, all the dark blues, running down the center of the country along with a fair number of other darker blue states. In addition, we got a couple of new entrants on this map, West Virginia and Maryland, both up over 12%. Generally speaking I think it’s true that relatively more rural states are where the growth is but certainly got a couple of outliers in particular Maryland.
The Big 5 Cities
Now, in terms of cities, we keep track of the five biggest. LA is up again, up 11%, Houston is up 10%. Last month actually all five of them were up, which is the first time I can remember. This month unfortunately some of the negatives returned, New York was down 3%, Philadelphia down 14% and Chicago down a really substantial 21%. The growth in the industry is not evenly distributed. You’ve got some markets that are doing relatively well and others where growth is falling.
Google Search Trends: Programs
Now, let’s take a look and see what Google says and whether it confirms our inquiry data. And of course, I’m bias but I would say overall, it does. Google’s up 5.4% this year in our programmatic search and it’s been kind of touch and go for most of the year, so it’s nice to see a solid month coming in. I should mention this, it’s not every program under the sun, we keep track of 200 programs, 25 keywords each and those are large programs. You look at Ipads they produce 67% of all completions. It’s a substantial sample but it is far from complete and the good news is here it’s showing healthy signs of growth.
Google Search Trends: Brands
We also take a look at brand search and so let me take a minute and just describe what the difference is. Some students come in and they’re looking for a specific program, they want to be a nurse, they want to be a policeman and they want to take a program associated with and those folks come in in the charts we just saw under programmatic searches. There are other students who may have already picked their program and they’ll for brand or I think more commonly, there are really students who are really picking their college first and then don’t make up their mind about their program until their sophomore year. Those folks do brand search. These are really two ways of looking at demand in the market and in this case, Google brand search is up 1.7%, we have positive trend there after a number of weak months.
If we now take a look at the negatives and talk about what’s going down. Fastest declining programs in Google search tend to be in education and hospitality. I guess teachers are no longer staying in hotel rooms or something but teacher education multiple levels education down 22% and 26% respectively. The very bottom of the list we’ve got hotel management and hospitality down 68% and 43%. There’s one more education or education general that’s also down 43%. A big shot into education and hospitality. In addition, we got a special flavor of criminal justice here that dropped 31%. Administrative assistant down 29% and chemistry down 25%.
Going back to brand search, we check to see who’s growing from a brand perspective and it’s a very eclectic list. UTI has been the top of the class for some time now, up 19%. West cost university, a public I believe up 17%. Western governors, despite its enormous size, close to 100,000 students their brand search is up 13%. SNHU also up 13%. University of Wyoming is doing well, Florida Career College up 12% and then we get one of our major state schools up 8%, which is the first time it’s made this list.
Program Sustainability: An Integrated View
Now, let’s take a look a different question really which is, what data should you be looking at in order to decide if a program is sustainable and in addition, to select new programs? We would suggest that there are four factors you want to look at to make decisions about program sustainability, health of the program market, academic standards, institutional mission and program economics.
Program Economics: Methodology
Let me take a moment and just take you through program economics as we do them. Essentially what we do is we aggregate data by student across courses to add up to a program. For each student we collect tuition, less institutional grants, you shouldn’t deduct anything but institutional grants, if they get a state grant or something like that, that’s really just tuition to you so that stays in but institutional grant should be subtracted and then we allocate that revenue across the courses the student takes on a per credit hour basis. If they took two, three credit courses, there would be six total credit hours. If they had $6,000 in tuition, that would be $1,000 per credit hour for each of those courses. We go through a similar piece of work on cost for the instructors, direct benefit and salary and benefits and similarly if that instructor costs $6,000 we would allocate that across the course that they teach, assuming they teach two, three credit hour course, we’d had $1,000 in cost per credit hour for the courses that instructor teaches and assuming all those students took those courses, $1,000 in revenue. In that instance, those courses would be break even. Now, the next trick of course, is to find all the courses that students take, not just in their major but outside their major as well, their general education requirements and such. Then we add all those courses up, both the ones outside and inside the major, we take the students revenue per credit hour, the instructor cost per credit hour and sum that up to get ourselves to program cost and revenue. I hope that makes sense, it’s a lot of visual math. If there are any questions, please free to note them on the Q&A section of the webinar. Also, feel free to email or call and we’d be glad to explain it more.
Program Economics: Program Scorecard
Once you’ve done all that, you can produce numbers that allow you not just to understand one program but to really understand how that program is performing against the other programs at your institution. Shortly, we’ll have the ability actually do this not just for comparison within your school, but across schools using information from [INAUDIBLE – 0:18:47.4] and the Delaware Cost Study, but for now, what you can see is that revenue per student credit hour is $183. Now many of you may ask, “Is that a lot or a little?” And it’s a very good question. In this school, what you can see is that green color matches the color for the 75th percentile, that means this programs revenue per credit hour is in the top 25% of programs offered by the school. Similarly, for cost per credit hour, you can see it’s 70, that’s also 57th percentile and contribution is 113, which places it right at the 75th percentile as well. You might say, “Well, that’s interesting but what does that come to in total dollars?” And on the right-hand side of the chart you can see total revenue there at 2.5 million, that’s at the 90th percentile, it’s bigger than all but 10% of programs. I’ve got contribution margin of 1.5, also at the 90th percentile and finally my instructional cost is 967, that inherited the pink color, so it’s in the top 10% in terms of cost but in that case it’s not a good thing, so we shade that pink. You can see both the data on a credit hour basis as well as overall.
Quick note on credit hour, the big reason to do that, it allows you to compare one program to another, independent of their size. It’s very helpful for that particular purpose. You can also see, as I mentioned, the aggregate numbers here, we’ve got the number of courses, the number of students taking courses in this major and total credit hours as well as the total number of instructors teaching at least one course to one student in the major.
Program Economics: Indirect Costs
Now, that gets you all your direct cost per credit hour. The next challenge is to round up your overheads, since the great deal of the costs in institutions is overhead, some of which is really directly supportive of programs. For example, marketing admissions financial aid, without those there are no programs and as we get into this more with clients, first we’ll allocate those and then we’ll actually go in and do the analysis to directly calculate the amount spent by program. When you do this it’s flexible, you can go in and change your allocations, you can switch allocations from one area to another. Importantly, you can also turn this whole sheet on and off, so you can see your variable margins as well as your fully loaded margins by program.
Program Portfolio Analysis.
That’s another dimension of looking at programs and determining the health of each individual program you offer. Having done that, you bump up against another layer of analytics, which is, is my program as a whole healthy and productive and as productive as it should be? And for that, you need to step back and find ways of looking at your whole portfolio and this chart is an example. I apologize for the colors, we’ll get them fixed. Each circle here is an institution and the X-axis is the number of programs offered by that institution. On the y-axis we have total completions. In effect we’re saying, how much does having more programs affect the number of students you have and the number of completions you get? And I look at this and it looks like it’s a fairly loose relationship between adding programs and getting more students. If you run the regression on it, you find it is indeed very loose, there’s a 6% fit between regression of programs against completions. There’s very loose relationship between offering more programs and having more students. In fact, you can see up in the left here, there’s some people with amazingly efficient portfolios who are producing tens of thousands of completions a year on the back of just 40 programs or less.
Now, I can make an argument that those guys are actually maybe too efficient and they should be looking at opportunities to move up and to the right, that is add more students by adding some more programs. On the other hand, you’ve got schools here where they offer 50 programs, that are producing less then 1,000 completions, so their productivity is quite a bit lower. I think to really get – as we make this more sophisticated, it’ll start to tear it apart by group of school so you get a better sense of how you’re doing verses your peer group. But, this is a place to start and say, “Am I as productive as others?” And if not. “How do I need to alter my program portfolio to get there?” That requires that you look at each individual program within your institution and he’s a framework I would suggest that can be helpful. The x-axis here is the change in national share for that program, this could be the change in whatever you define your market to be. Often times it’s a 30-mile radius around your campus. The point though is, it’s the change in market size, as opposed to the size of your particular program. On the y-axis we have the two-year growth rate for your two program. That allows us to see whether you’re growing as fast as the market or not. The circle size if the or portion of the completion and the color is related to the Pez percentile, that is the attractiveness of this market using Gray’s scoring system, which I haven’t shared today in the interest of time but there’s a 60 variable scoring system that leads to those color that we customize for our clients. What you want to see on this chart, is a large green dot, up and to the right. Unfortunately, we don’t have many of those, we do have one. Good size program, good market because it’s dark green. Gaining share, it’s growing faster then the market. That’s a very healthy position to be in and if this programs growth rate of 100% per year, it’ll get big fast.
We’ve one other large green dot here for this school, very large successful program, growing faster then it’s market, which is down around 8% or 10% and this one’s getting up closer to 50%.
Then we get into things that worry me. This pink circle for example, the pink suggests that it’s a poor market. It is overall growing 10% at the national level but we’re actually losing share a pretty good clip, it’d be close to 50% share loss on an annual basis. I’d take a look at this say, “I’ve either got to fix it and push it back up towards the line.” Which would make sense for programs grown, or I just get out of it because I’m not performing well there.
That’s a little bit about a couple of frameworks you can use to assess the help, not just of one program but of your whole portfolio. With that, let me wrap it up for today and briefly summarize what we’ve talked about.
Key Demand Trends and Observations
First, we’re finally seeing consistent growth in overall student demand. Both Google search and Gray inquiry data confirm this growth trend. However, all that growth is happening online, on-ground continues to decline. Prices for inquires were at all time highs but they’ve begun to drop. The economics here are getting more attractive, we have a little bite of growth and we have slightly declining costs of acquisition. Another interesting phenomenon that we saw was that demand growth appears to be – the growth rate appears to be higher in more rural areas. Then we get to Gray’s philosophy, I really believe that program contribution can and should be included in program reviews. Money doesn’t drive your mission but money does enable it and therefore having a good understanding of where your money is coming from and going to can help ensure that you have the money to invest in things that are important to your mission. Finally, in our view, a portfolio is more then the sum of its parts and we’ll be sharing with you some other ideas of about how to look at your portfolio over the next few months and also would welcome any of your ideas on how to do that affectively.
With that, thank you very much for joining this month. I hope you enjoyed the webinar and the floor is open for questions.
Mark Keleher: Thanks for that Bob, we do have a couple of questions. If anybody has any additional questions, please feel free to enter them into the chat window on the left-hand side of the page and we will take them here momentarily. But before we do that the webcast live will be available for download as soon as the meeting has ended on the post meeting survey page.
First of all, Bob, on chart 12, someone was interested if you have any insights on why there is a decline in registered nursing? We’re showing a 3% decline since January of 2012 year over year.
Bob Atkins: Yeah, this is student demand, so it’s always a bit mystical why it would go up or down. It’s a relatively small number which means it’s not all that significantly different from zero. When those two caveats, there are couple of things that could be going on. One is, several players, big for profits have left the industry over the last two years in the space, most notably ITT, which had opened 24, 25 nursing programs across the country; sadly, I don’t know if any nurse ever passed the [INAUDIBLE – 0:28:31.0] out of their courses but that’s a topic for another day but they’ve left the market and often that will cause a dip as advertising spend diminishes. Other than that, you know I think it’s hard to say. I think nursing may have a perception as being a safe place to go in tough economic times and as the economy gets better, people feel a little bit more comfortable taking the risk of going into a different field and that’s about as much as I know. It’s funny having this data, we know what the data is but we don’t know why it is that. I’m not sure why it’s going down but I think it’s probably a combination of a little bit more security on peoples on part and therefore willing to take other programs and decline in competition.
Mark Keleher: Perfect, thanks for that Bob. A couple other participants are interested in the student demand for specific programs, how would you – if they wanted to access a specific trend how could be do that for them?
Bob Atkins: Fundamentally we have a piece of software we call our program evaluation system that includes demand data as well as information on employment and competition. It’s a very robust database and can help you with that if you’re interested, give us a ring.
Mark Keleher: Perfect, thanks for that Bob. Two other questions but if there are any other questions please feel free to enter them
Bob Atkins: One other thing I should say on that, when you’re only looking for one program at a time in one market, the other way to get that data is just to go to Google and you can get it pretty easy out of Google trends or by going into Google AdWords and pulling down – having someone give you what the correct ad words are for that particular program, you should have it within your institution, if not you can figure it out on Google AdWords as well by putting in the program name and they’ll give you all the related terms you might want to search on. Put those terms in and see what the keyword volume is over time. That’s all accessible through Google and it’s all free. Unfortunately, it’s not possible to do that if you need dozens of programs and dozens of markets.
Mark Keleher: Perfect, thanks for that Bob. How do we use this data to rank markets and programs?
Bob Atkins: What we do is we combine the data with a scoring system that we customize with you, so that you can take each of the many factors we capture, employment, student demand and so forth and the very specific metrics we have for those, inquiry volumes, Google search volumes, number of jobs and so forth and assign a score to those variables and then the system will go off and calculate which program received the highest score and rank order all the programs that we keep track, top 1,400 programs for you, according to the weight you assigned to those criteria.
Mark Keleher: Perfect, thanks Bob. This is the last question unless any others come in through the chat window on the left-hand side of the page. One of our participants noted that brand searches are out pacing the programs searches, in terms of Google, can you share any insights as to why that maybe?
Bob Atkins: I think that what’s going on there is, there’s a group of people who I would call, probably the more traditional students who are looking for a degree who have come in looking for a school first. I think as people are more locationally oriented and I don’t mean that just for locational programs per say but oriented towards a job, they’re going to come in on a brand search. It’s possible that this is a little bit the same thing we’re talking about in nursing, whereas people get more comfortable with the economy, they’re willing to be a little less focused on vocationally oriented education or career-oriented education, looking for a college first. But again, I think that difference is fairly small, it’s risky to over interpret it probably.
Mark Keleher: Alright, perfect, thanks Bob. That’s all the questions we have for this afternoon.
Bob Atkins: Great. Well, thank you all very much. I hope you’ll rejoin us next month, when we’ll share the results for September.
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