Right size your Marketing Budget By : Wendy Rolon
Chief Operating Officer

Right size your Marketing Budget

Right Size your Higher Ed Marketing Budget - Tribeca

“How much should we be spending on Marketing?” As a full-service Marketing Agency exclusively serving Colleges and Universities, this is a question we are very often asked by both prospective and current clients.  Our answer is most frequently, “Well, how many students are you trying to start?”

The size of your Marketing budget is always dependent on the size of your start expectation coupled with your Admissions and Marketing result.  Marketing can be complex and there is certainly no one-size-fits-all plan for every school, but before you decide on “how” to spend your marketing dollars, you must first determine how many dollars you need to spend.  On an overall basis, you can determine if you have set aside enough dollars in your marketing plan using this simple formula:

 

Starts in the period ÷ Net Admissions conversion x All-in cost per lead = Marketing $pend

 

Let’s apply this formula to an actual scenario:

The College’s plan contemplates 500 new starts for the term.  The Admissions team performs at a net conversion rate of 6% in the period (6 starts from every 100 leads (6%)).  The all-in cost per lead for the College is $100 (more about this later).  On an overall basis, to achieve the start, the College should plan to spend:

 

500 ÷.06 x $100=$833,333

Cost per start = $1666.67

 

 If you are a College or University that sees that marketing budget and thinks, “Great, that is exactly what we expected to spend based on our current result!”, then this article is not really written for you.  Many schools, especially smaller schools or school groups, pause and think “Wow, that’s a lot of money!” or “I don’t have that much in my budget.”  This is where the decision-making becomes tricky.

I learned a long time ago from my mentor, Randy Proto (may he rest in peace), that all growth plans need to accommodate a sufficient amount of dollars for Marketing and Admissions, regardless of where other budgetary adjustments initially need to be made.  Without the proper investment in the front end, you are not likely to achieve the front end result and are unlikely to achieve your growth and profit goals on the back end. Make no mistake about it, Marketing is expensive and is typically one of the largest, non-personnel related expenditures in a school’s budget.

Let’s look at a fairly typical reaction to the shock on the sticker price for the marketing budget as calculated above:

 

Start goals – In our experience, schools almost never reduce their start expectation as a result of shortfalls in the marketing budget.  Typically, start budgets are built on the anticipated revenue needs  of the school and are usually the last component to be adjusted, if they are adjusted at all.

 

Admissions performance – In our example, the Net Admissions conversion result for Admissions is 6%.  Ideally, a school will outperform its Admissions performance assumptions in the plan resulting in more starts.  However, planning for a material improvement in performance over your current levels can put your plan at risk and can set an expectation for Admissions performance that is unrealistic for your team.  Statements such as “The Admissions performance “should be better” or “used to be better”” may be true, but should be reserved for opportunities for over-performance versus being relied on for the purposes of developing an achievable plan.

 

Cost per lead – We all know that lead costs vary per channel.  A Google AdWords lead can be more expensive than an Organic or a Self-generated lead but, for purposes of simplicity, each school spends a total amount on marketing and receives a certain number of leads from all sources.  The total amount spent divided by the total leads received can give the school a good gauge on their all-in cost per lead. As with Admissions performance, schools should look for every opportunity to maximize lead volume and reduce lead cost.  However, using your current cost per lead result is the best way to ensure your marketing spend serves your current start plan.

At this point you may be thinking, why should we plan on the getting the same result? Shouldn’t we be planning for improvement in our new marketing plan?

When it comes to generating revenue, your best bet is to first have a tangible plan that meets your financial and operational outcomes and then incrementally plan for improvement.  You can always make additional budgetary adjustments and increase starts and/or reduce expenses as your performance improves.

Let’s look at what a “based on improvement” marketing budget looks like, using our example:

Starts – 500

Admissions conversion performance – 9% (versus 6%)

Cost per lead – $85 (versus $100)

 

Seems reasonable, doesn’t it?  It’s just a few more starts per 100 leads and an all-in CPL of $85 should be manageable, right?  With the “based on improvement plan”, your new marketing budget looks like:

 

500 ÷ .09 x $85 = $472,222

 

Quite a savings!  It is so tempting to move forward on the premise that your school really can do more with less, but can it? What happens if you reduce your spending but do not improve your results?  See below:

 

$477,222 ÷ $100 per lead = 4700 leads @ 6% net conversion = 283 starts, a 217 start shortfall L

 

A 217 student start shortfall has a more significant negative impact to profitability than the additional marketing spend would have, so you always have to consider all of the elements when determining how much you are willing and able to spend on marketing your school.