Retention – the new revenue stream

Drawing a sufficient number of leads and new starts is the lifeblood of any career college. But while schools focus on new advertising and marketing strategies, attrition is undermining recruitment – and more importantly, the bottom line.

It’s $1.5 million you’ll never see again. Gone, before you even knew it was missing. Worse yet, you never knew you had it.

For years, the emphasis of lead generation has been finding new ways to attract students, including advertising and marketing campaigns and public relations tactics. These methods continue to pay off for some schools, but for others, the money being poured into new recruitment strategies still isn’t translating into profit.

While some career colleges are seeing a rise in student starts, the bottom line isn’t showing an increase to parallel the swell in new students. In the rush to fill classrooms, career colleges are focusing little attention on the needs of existing students. And many schools are failing to see the impact of attrition, which theoretically can reach million dollar figures.

All this is happening because administrators are failing to tap into a key source of lead generation that resonates from the inside of the schools: students. Once downplayed as a standard industry buzzword, retention is shucking its monotony and is rising as the latest tactic for attracting new leads. From estimates provided by a group of six retention experts polled by Career College Central, lost revenue due to attrition can be as much as $3,000 per student if the student drops in the first quarter.

Others included in the poll wouldn’t commit to an actual dollar figure, noting that the effects of attrition can be limitless, putting a hit on ongoing and future initiatives, such as capital equipment, new programs and higher raises.

The biggest proponents of retention swear by its simple, common sense application and tout its cost-effectiveness. Dissenters, actually, are few. Common sense would prevent operators of any college to encourage students to leave before completing their education. Yet some unwillingly fall into a broad range of detractors, from those who never fully committed to the concepts of retention to those who simply don’t understand how it impacts the bottom line.

Missing the connection
“Retention means students complete college and ideally graduate within the time frame prescribed,” said Dr. Susan Schulz, Chief Operating Officer of Susan F. Schulz and Associates. “If they’ve done that, you have to assume they are a happy, successful, satisfied student because they’ve gone to school in an environment that promotes their ability to be successful. It’s very simple. If they are happy and successful, aren’t they going to tell other people?”

Schulz started her company in Boca Raton, Fla., in 1994 to assist school owners with compliance, attending to issues such as licensing and accreditation. Schulz and Associates now also represents schools in Latin America and Canada. Her work in the area of retention primarily stems from a training module she created in her doctoral dissertation.

Compiling research for her doctoral thesis, Schulz reviewed exit interviews from a massage therapy college in Boca Raton, Fla. She’d spent six months interviewing students, dropouts and graduates, and observing the college’s operations, including its admissions processes.

“We clung to each other like rats in a river,” Schulz said, recalling one student’s exit interview comments about her educational experience. “I never met the girl who wrote it and I don’t know if she graduated, but I could hear her voice. Her words were really very touching … very sweet.”

Somewhere in the process, these students had been deserted inadvertently by a school with the best of intentions: getting students into class, fast.

Broken into six parts, Schulz’s module promotes a philosophy that retention and recruitment are one in the same. Lead generation, at the time, was almost solely focused on external ways of luring students to classrooms while little attention was being paid to the bigger picture of satisfied students.

She began looking for answers outside the popular realms of advertising and marketing to solve her clients’ lead generation issues. Beginning with the premise that retention efforts are vital to the success of any school, she began theorizing – as have many schools and consulting agencies in the sector – on the overall impact on schools with low retention rates, including the effect of lost students on the bottom line.

What attrition costs
The Business Intelligence division of PlattForm, an agency that provides creative services and media placement to the postsecondary education industry, has led focus groups and training sessions on the subject of both student and employee retention.

The department uses findings from the Career College Association as a focal point for putting a dollar figure on the overall impact of attrition on enrollment.

retention2.jpg According to CCA, at a typical career college about 40 percent of students drop out before completing their training. Assuming a career college’s average monthly tuition is $1,200, the average time to graduate is 14 months, and most dropouts occur during the first half of the term, schools lose at least seven months of revenue – $8,400 – per dropout.

The larger view can be even more frightening for career colleges. Applying CCA’s estimates to an entire enrollment, a typical school of 500 will lose 200 students, or 40 percent of its enrollment, annually. If it could save only 10 percent of those dropouts, or 20 students, the school would retain $168,000 in revenue.

According to Jan Friedheim, a Strategic Coach with Education Systems & Solutions, up-front costs of lost students are undoubtedly high, but can vary significantly depending on the state where the career college is located.

Friedheim said in some states a pro rata refund policy is in place, so the school can’t keep much tuition. There are other variables, including acquisition costs, the amount of tuition collected and the timing of the drop. Dropout rates can also cause issues on a much broader scale.

“Accrediting standards have to be met and if your drop rate is above standard, you will be subject to some pretty serious action by the accrediting and sometimes state regulatory agencies,” Friedheim said. “That could be very costly.”

Referrals from retention
More is at stake here than money. According to the research from some of our retention experts, schools that solve retention issues can draw 25 to 40 percent of leads from referrals.

If students don’t complete the programs they enroll in, the school and the students suffer. The school loses tuition and another satisfied graduate to spread the word in the community. Students lose time, money and the possibility of starting a new life. So student success is imperative, not merely an added bonus.

The hole schools fall into gets deeper once dissatisfied students drop out, said Pam Tiemeyer Jones, founder of Lightpoint Learning in Atlanta, Ga. For every student lost by career colleges, potential leads are subjected to negative feedback spread by students who had lackluster experiences. Schools miss out on additional leads along with a few semesters of revenue from students who bail.

Tiemeyer Jones provides training and employee development for all departments of career colleges and traditional colleges and universities. Like Schulz, she is an expert in retention-building techniques and began leading seminars across the country in 2003 while working as a professional trainer for Datamark, an advertising and marketing agency in Salt Lake City, Utah.

From a lead generation perspective, retention is not providing new leads unless a student is referring them. However, it is keeping revenue in the school simply by providing quality service to students and training existing staff to be responsible for retention.

“The cheapest leads I can buy are from my own students,” Tiemeyer Jones said. “Referrals should be coming by word of mouth. Those are the ones I want. Instead, schools are putting a ton of money upfront, letting it walk right out the back door and losing months and months of revenue. It’s a huge revenue loss.”

There are companies responsible for helping prevent these types of downfalls, such as Student Resources in St. Louis, Mo., which enhances the career colleges’ services with many issues outside of the classroom. Janet Mug, President and owner of the company, said aiding students with a full range of support services was important when attending to students’ non-school needs. The company addresses an array of issues including personal counseling, and locating community and healthcare resources. All help students live up to the daily responsibilities that often put them in a better position to stay on track in school.

Correcting retention
In some instances, the faith many students have in their institutions of choice are undermined from the initial stages of enrollment. By the time most students are through with the admission process, they’ve already made a critical decision. They’ve made up their mind – sometimes subconsciously – whether they are going to stay in school or drop out. All too often, schools are undoing any chance of utilizing retention as a lead generator by offering too much complex information in one sitting. Others fail to clarify criteria for the student, not only about what is expected from them in the classroom, but about what to anticipate in the coursework.

“Retention practices define the school – internally and externally,” said Loren Kroh, President and Co-founder of Corvus LLC. “Students who withdraw because they feel they were mistreated or misled will have a dramatic negative effect on recruiting efforts. Prospective students are more likely to believe a peer than a stranger – particularly one in a sales position.”

The entire focus on the admissions and educational processes should be centered on making students happy or satisfied, according to our panel. In turn, satisfied students translate into happy graduates and lead to more referrals. Some schools might hold orientations for students, but these can also be contributors to retention issues if the discussion isn’t meaningful.

For example, orientation for some schools consists primarily of a welcome by the admissions rep and a quick tour of the campus or facility. Students are shown break rooms and restrooms, provided with books, and then hurriedly passed on to class.

While it might seem more efficient to expedite the orientation process, important conversations about backup plans for child care or rides to school are skipped. Often, important discussions about how family members or significant others might react to a student’s pursuit of better things never occurs.

Satisfied students not only spread the word about their experiences, but the education they receive transfers into the workplace. Work-ready graduates can transform a college into a resource for businesses, which in turn provides leads.

If schools with poor retention rates are abandoning students, the ones with high retention have seemingly found them. Being found, in this sense, means students don’t feel deserted. Instead, they are pleased with their educational experience and feel like individuals in pursuit of a changed life, not a number hurried into the classroom to fill seats.

For schools, the result is increased referrals and smaller marketing costs as students spread positives about their school among their friends and family, and within the workforce. The answers to lead generation are not solely tied to advertising budgets, but rather in the cordialities of working closer with students. They are already in class, they have already committed to the idea of education and graduating alongside their fellow students, but in many cases the commitment to schools could run much deeper.

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