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Reverse Musical Chairs:

A Study in Competitive Market and Demographic Analysisor

Maintaining Stable Enrollment in a Down Market

ERB ConferenceOctober 2014

Laurel Baker TewViewpoint School, Calabasas,

CAlbtew@viewpoint.org

818-591-6580

Chad TewTew & Associates

chad@chadtew.com818-653-6200

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Laurel Baker Tew

Viewpoint School - Chief Enrollment Officer & Director of Admission & Financial Aid

Trustee of SSATB

University of Southern California – From Admission Roadrunner to Director of Admission

The Wesley School – Co-founder & Trustee

EducationBA & MA, University of Southern California

Alumna and Former Trustee of Viewpoint School

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Chad Tew

CFO: California Health & Longevity Institute

Principle: Tew & Associates

Viewpoint School - CFO/ treasurer 2000-2013

The Wesley School – Co-founding Trustee

Enrollment Management Sys. - Sr. Consultant at MIT, Georgetown

Admission & Marketing positions – Chapman U. & Westminster College

Teaching – Marketing, Business Plan Development, Economics

Education MBA, University of Southern California BA, University of Utah

chadtew.com

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Tew & AssociatesFounded July 2013

Consultants in Education & Business

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Enrollment Leadership Goals

Promote enrollment & budget stability in a dynamic market

Develop a competitive marketing modelMarket-informed outreach planMarket-based enrollment strategyCompetitive tuition settingFinancial aid / variable pricing

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Success Strategies for Enrollment

Shift Focus to Enrollment, not just AdmissionNew students plus retentionThe # that matters to CFO, Head, &

Trustees

Learn the language of numbersThe information age is about dataCommunicate in the language of the

Business Office & Trustees

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Success Strategies for Enrollment Leadership

Tie & Communicate your efforts to strategic goalsMulti-year budgeting, building plans,

fundraising

Think like a for-profit, mission-driven organization

Become the expert in fighting Disrupters!

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Disrupted Business Models

Graphic thanks to Motley Fool

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The traditional school business model is next

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What’s disrupting the school model?

Demographic shifts, mobile population

Charter Schools: Offering community, local control, and academic depth & breadth without tuition

Technology: New low-cost and no-cost alternatives, along with increasingly robust online tools, networks, and resources

Psychographic shift – Many more parents with the confidence to try non-traditional options: “Private’s too expensive… Public’s not an option … I can do it better myself anyway.”

NAIS PRESIDENT JOHN CHUBB :

Private schools --9% of the school-

age population—not growing.

Charter schools-- 4% and growing.

“The fastest growing market for

home and charter schooling is now

highly educated parents in affluent

areas choosing to save money—

usually for college—and do it

themselves.”

Chart Source: SSATB

1999 Today

Charter Schools

340,000 enrolled

1.9 million enrolled

Home Schooling

Less than 500,000 enrolled

2.1 million enrolled

Online/ Virtual Schools

Less than 500,000 enrolled

2 million enrolled

“Disruptive Innovators” – Non-Traditional Education Options

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Generation X Psychographic:

(Born between 1965-1979)

• Far more deeply involved in all aspects of

their children’s education than the

generation before them: academically, socially,

emotionally.

• Non-traditional education models

(Disruptive Innovators) highly appealing.

Image courtesy of chicagonow.com

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When having it all means not having children (Time Magazine 8/12/2013)

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Baby Bust

Stewart Friedman, Wharton: Survey of the Class of 1992: 78% said they planned to have children.

Survey of the Class of 2012: 42% said they planned to have children.

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New Household Formation Disturbingly Low

1995

2014

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Who’s out?More than 10% of private schools will close their doors or be forced to merge with another school in the next five years!

• Based on current demographic trends

• Ceteris Paribus – All other things being held constant

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Reverse Musical Chairs

Every year the enrollment music

stops, some private school students are

removed, but the number of empty desk

chairs remains the same

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Children can’t come to school if they weren’t born

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Average Number of Children per Woman in the U.S.

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H.S. Grads on decline in many states

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Source: “Knocking 2012” by Western Interstate Commission on Higher Ed. / ACT and College Board

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Who’s not Knocking at the College Door

Projected change in total Public and Nonpublic High School Graduates between 2008-09 and 2019-20United States total down 2%Biggest Regional losers are

Midwest (8%) and Northeast (7%) both with heavy concentrations of independent schools

Source: “Knocking 2012” by Western Interstate Commission on Higher Ed. / ACT and College Board

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Sinkholes

-9% Alaska, Massachusetts, and Pennsylvania

-10% Montana and Wisconsin-16 % Rhode Island-18-19% Maine, Michigan,

New Hampshire, and Vermont

-23% Washington D.C.Source: “Knocking 2012” by Western Interstate Commission on Higher Ed. / ACT and College Boardchadtew.com

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The school-age population has decreased in 3/4s of US Counties

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Growth in Hispanic child population balances white decline

2013 2050

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Families with children are changing & CA is in the lead

2013 2030 2060

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Production of H.S. Grads in CA

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1996

20282014

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Where does this leave private schools?

Survival of the Fittest?

Looking farther afield for students

Competitive Pricing

Adaptive Mission

Is my School Sustainable?

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Viewpoint School Case Study

K-12 day school on 40-acre campus

1,215 students Calabasas, CA (pop. 23,000):

an affluent city in Los Angeles County, zoned zero-growth

Local school district: Las Virgenes Unified

Current tuition $29-34k $40M annual operating

budget Founded in 1961 as

elementary $66M worth of new

construction since 2003

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Viewpoint School Case Study

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THE CHALLENGE: HOW TO MAINTAIN STEADY ENROLLMENT IN A CHANGING EDUCATIONAL

MAREKET

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Collaboration between CFO, Enrollment Dir., Head, & Trustees

Began with joint work on 5-year budget projections

Informed by experience in college enrollment planning

Projections started with detailed history review

Drew on existing research on local population trends

Led to commissioning of primary demographic research on target markets

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Tuition Sustainability Task Force

Ad hoc trustee group based on mostly Finance and Strategic Planning Committees, CFO, Admission, & Head

Not born from crisis Enrollment remained strong during Great

Recession More churn in families

Asked - are historical tuition and expense increases sustainable?

What are other threats to financial sustainability? chadtew.com

Historic and

Projected Tuition Growth

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High School Tuition Growth

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1993

2011

Projected Tuition at 7.1% Increase

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1993

2022

Factors Impacting Tuition key for CFOs and Trustees

• Competition

• Financial aid, including mission-driven aid

• Tiered tuition: Primary/Lower v. Middle/Upper

• Building reserves to combat future challenges (e.g., high inflation)

• Strategic Factors

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• Review internal factors: mission, program variety and

quality, cost structure, unique market, etc.

• Evaluate competing schools & prices

• Review general market trends

• Gather more demographic data (birth rate, income distribution, “graying,” etc.

Task Force Action Steps

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• Evaluate competing schools & factors at each entry grade

• Gather and analyze competition price data

• Capture total cost less financial aid discount

Competitive Analysis Goals

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• Increase & concentration of wealth• Slow decline in local public schools• Increase in private school enrollment• Increase in charitable giving• Access to cheap municipal bond funds

for construction• Several new/expanded schools

General Market Trends from mid-1990s to 2007

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• Reduced wealth, high unemployment, increasing concentration of wealth

• Continued decline in local public schools• Flat private school enrollment• Spiking demand for Financial Aid• Flat charitable giving• Dried-up access to bond funds and loans• Only one new school/limited expansion• School closures and mergers

Market Trends in Great Recession2008 - 2012

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• Flat to slow growth in California population

• Uneven gains in wealth and employment

• Continued concentration of wealth

• Continued higher demand for financial aid

• More diverse population

Projected Future Market Changes

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• Accelerating decline in local public schools

• Flat or declining private school enrollment

• Rapid growth of charter schools and spiking interest in home schooling

• Technology becoming big driver expanding educational options and possible hybrid models

Possible Future Market Changes

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Defining Competition

Competition = other schools that families consider when applying to your school

Cross-over v. Peer schools

Peer = schools with which we share attributes (e.g., independent, private, NAIS)

Cross over = schools with which we cross applications (geography; public; religious)

Difference has significant impact at various entry grades

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Enrollment Pipeline

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BRAND NEW CHARTERS IN LOCAL MARKET

L.A. Unified School District Conversions to Charter:

Calabash Elementary Woodland HillsCalvert ElementaryWoodland HillsSerrania Elementary Woodland HillsWoodlake Elementary Woodland HillsWH ElementaryWoodland HillsHamlin Elementary West HillsHaynes Elementary West HillsPomelo Way Elem West HillsWelby Way Elem West HillsTopanga ElemTopangaEmelita Elementary TarzanaNestle Elementary TarzanaWilbur Elementary TarzanaEncino Elementary EncinoHesby Oaks Elem/MS EncinoSherman Oaks Elem Sherman OaksDixie Cyn Elementary Sherman OaksCarpenter Elementary Studio CityMarquez Elementary Pacific Palisades----------------------------------------------------------Hale Middle School Woodland Hills----------------------------------------------------------El Camino Real High Sch Woodland HillsTaft High SchoolWoodland HillsPalisades High School Pacific Palisades

Las Virgenes District new charters:

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BRAND NEW FREE HOME SCHOOL OPTIONS

IN OUR LOCAL MARKET

“Led by highly educated moms, Topanga families take charge of their kids’ education in unique ways. Offering SM Mountains conservancy courses; travel to London; lessons in French; jazz studies; sign language; Shakespeare; chess.”

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NEW TUITION-CHARGING HYBRIDS IN OUR LOCAL MARKETS

Demographics Studies

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• Hiring a demographer• NAIS Data Center• SSS by NAIS data mining• Wealthengine; Zillow

Defining Viewpoint’s Target Market

Defined as households with (1) children (51% of households) and (2) income over $200,000/year (7% of households)3% of total households meet the criteria

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How Much Income Does it Take to Send One Child to Viewpoint?

(SSS by NAIS Affordability Index Calculator:For a family of four with one child at Viewpoint)

Viewpoint’sCurrent Tuition 2013-14

Minimum Gross

Household Income

Needed to Afford Full

Tuition*

K $27,800 $225,000

MS $30,650 $235,000

US $32,750 $245,000

Viewpoint’s Projected Tuition 18-19 **

Projected Minimum

Gross Household

Income Needed

to Afford Full Tuition*

K $35,144 $260,000

MS $38,747 $275,000

US $41,402 $295,000

* Income model based on a family of four with one child at VPT. Each additional child enrolled requires an additional income of approximately $120K.

** Projection is based on a presumed 4.8% annual tuition increase.

2013-14 2018-19 Projected **

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Concentration of High-Earning Households

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Modified Target($175,000 with kids)

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Core K Markets: Households with Both Children and Appropriate Level of

Income(Source: NAIS Data Center)

CALABASAS Families with at Least 1 Child Age 5-9, income

$200-349K

MALIBU Families with at Least 1 Child Age 5-9, income $200-

349K

CALABASAS Families with at Least 1 Child Age 5-9, income

$350K+

MALIBU Families with at Least 1 Child Age 5-9, income $350K+

0

50

100

150

200

250

174

74

142

61

180

75

148

63

218

90

187

77

2010

2013

Projected 2018

CALABASAS

CALABASAS

MALIBUMALIBU

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Graying of Kindergarten Market(source: hired demographer)

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Broader Data

Examined unemployment data, especially for college-educated and top income quintile.

Examined local median home prices over past 10-15 years, as people had been using home equity to pay tuition.

Looked at home sales volume to understand turnover rate.

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Population Data

So. Cal. population grew only grew 3.3% in past decade and number of families with children actually declined by 7.1% in Los Angeles County

A study comparing 2000 and 2010 census data found the number of children under 18 decreased 10% in Los Angles County and that the number of children between 5-9 years old decreased by 21%

Income for top-earning families has grown steadily, with the number of families making at least $200K/year increasing to 7.8% in 2010, but rate of growth was slowing.

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Conclusions re Demographic Data

Household incomes not projected to grow as quickly as in last decade

Number of families with children expected to decline in core market area

Growth of families with the wealth to afford full tuition was growing more slowly (but growing)

School already has excellent market penetration

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Task Force ConclusionsPromote enrollment & budget stability in a dynamic market

Update/build a competitive marketing plan Use data, insights, and demographic

research to create a market-informed outreach plan and a market-based enrollment strategy

Be strategic in tuition setting Use competitive data to consider both

the list price and the net tuition after financial aid for each cross-over school and at each entry grade

Improve sophistication in financial aid budgeting including multi-year projections

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Additional goals

Long-term key is growing other revenue sources Summer programs Renting-out campus facilities Programs for community and/or

adults Moving the school to be less dependent

on tuition with the assistance from increased endowment income

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No More Kumbaya?

Old paradigm: We are all brother and sister educators working side by side in our respective schools to provide stellar independent education

That only works when there are more kids than seats. As the empty seats multiply does the NAIS / CAIS world turn into the Lord of the Flies – a cut-throat game of domination, kill or be killed, survival of the fittest?

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How colleges are dealing with it

Chronicle of Higher Ed 10/18/13 CIC: Council of Independent CollegesAASCU: Amer. Assoc. of State Colleges & Univer.

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Alternative School Future

Independent schools as a whole build market share and take a bigger slice of the pie from the public school world.

Will full-pay families continue to underwrite increasing financial aid?

Find alternative sources to fund increased financial aid.

Become tighter, more business-like operations that can support the same high level of program for a lower cost.

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How will your school meet the challenge?

How would shifts like the one in the case study affectYour target

familiesYour parents’

customersHow does this

affect your budget and enrollment forecasts?

Who at your school examines long-range strategic impact of demographic shifts?

Do you have a seat at the table?

What outside help do you need?

It’s hard to be a prophet in your own land.

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Adage

To survive an attack by a bear while hiking, you don’t need to outrun the bear, you just need to outrun your slowest hiking companion!

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