Sustaining Higher Ed is a monthly blog dedicated to helping college administrators and board trustees lead their organizations toward greater financial stability so they can stay on mission during challenging times.
In our March blog on customer-centric strategic planning, we urged college and university leaders to focus on their customers (e.g., students), not their competition. Last month, we took the notion of customer-centrism one step further, asking “if students are customers, are colleges and universities retailers?” Our answer was yes, in the sense that a more retail-based approach to higher education might reveal new opportunities for growth.
This month, we’ll look at one of the fundamental concepts of retail—brand management—and consider how that concept translates to higher education. But again, we’re not losing sight of the customer. If our advice in March was to focus on your customer, not your competition, our advice this month is to focus on your customers more than your brand.
The focus on the customer is critical because it is the customer who defines the brand. Put simply, a college or university’s brand is what its customers—current and potential—perceive it to be. In the long run, retaining current customers and attracting new ones is far more important than maintaining the brand.
Customer equity vs. brand equity
An article published some years ago in the Harvard Business Review lays out the critical distinction between customer equity and brand equity. Customer equity is the sum of the lifetime values of all a company’s customers, across all the company’s brands. Brand equity is the sum of customers’ assessments of a brand’s intangible qualities, positive or negative. Another important distinction: “Brands come and go, but customers…must remain.”
Clinging to a brand that no longer aligns with customer preferences can be an exercise in futility. The HBR authors cite the example of General Motors’ Oldsmobile brand, which saw its customer base dwindle as younger customers increasingly perceived Oldsmobile as old-fashioned. Ads with taglines such as “This is not your father’s Oldsmobile” attempted to change customer perceptions but may have reinforced the association between the brand and an older generation. Ultimately, GM retired the brand as its market share continued to fall. A better strategy would have been to focus on moving younger customers to another GM brand that aligned more with their tastes or creating a new brand altogether, maintaining or building customer equity with the company if not with the Oldsmobile brand.
The HBR authors have another helpful insight: Customer choices are driven by three forms of equity. One of these is brand equity—the customer’s subjective assessment of whether the brand’s offerings have value above and beyond objectively perceived value. Value equity, a second driver, is the objective assessment of quality, price, and convenience (how is the product rated, how much does it cost, how easy is it to access?). Finally, relationship equity factors in the costs of switching brands—choices to stay with a brand might be driven by a reluctance to go elsewhere because of a steep learning curve, user-community benefits (such as a loyalty program), or friendships and relationships with people associated with the brand. Companies should work hard to understand what drivers most influence their customers’ choices.
What this means for higher education
A starting point for applying these concepts to higher education is to assess how an institution’s brand is being defined by its customers and to understand what is driving the choice of customers to engage with the institution. It is important to conduct this assessment across at least three customer tiers: enrolled students, alumni, and prospective students. Questions to ask include:
- What drove currently enrolled students to commit to the institution? Have their perceptions, and the institution’s brand equity, changed in their eyes (for better or worse) since they enrolled?
- What keeps alumni engaged with the institution? Is their support holding steady, increasing, or declining?
- What are prospective students looking for? Are there enough of them who are interested in what the institution’s brand currently represents?
Drivers of choice will vary among these tiers. Value equity will probably be strongest among prospective students, who will be factoring questions of price, quality, and convenience into their decision to apply and commit to a college or university. Brand equity will be important for this group as well, but may be even stronger for currently enrolled students, for whom intangible factors like a reputation of exclusivity, robust internship opportunities, or the halo of success around high-performing athletic teams are likely to strengthen their bond to the institution. Strong brand equity will build relationship equity, which may be the key driver for alumni’s continued engagement with the institution, although brand equity also will drive alumni choices (to donate money or time, for example).
An understanding of how the institution’s brand is being perceived across these customer tiers can then shape strategy for the institution’s future:
- If an institution has a strong brand across customer tiers, brand expansion might be an option, especially if the brand is expanded to a product that has a similar customer base and is perceived to offer similar value. Several U.S. institutions have expanded their brand by establishing branch campuses overseas; few have done so domestically, although there may be compelling opportunities to do so.
- If an institution’s brand is holding steady but research indicates an emerging new customer segment with different preferences (or an existing customer segment with changing tastes), creating a new brand that coexists alongside the legacy brand might be an option. Arizona State University’s development of ASU Online—which appeals to a customer very different from its traditional residential students—is an example.
- If an institution’s brand appeals to too narrow an audience, or if the relevance of the brand is declining in customers’ eyes, there are several options. The most difficult to execute—but highly rewarding if successful—is to rebuild the brand to appeal to a broader customer base: One of the most famous examples is Washington University in St. Louis’s transition from a local “streetcar college” to an elite national university. Another option is to align with another institution to strengthen the brand of both partners; a recent example is the Pacific Northwest College of Art’s merger with Willamette University.
In certain instances when a brand’s relevance has diminished, the best option—and the most difficult decision to make—may be closure or a sale of assets. This is analogous to the “retire the brand” fate of Oldsmobile in the example above. By focusing on the customer and expanding, rebuilding, or creating a brand to meet the customer’s changing preferences, institutions can work to avoid this fate and build thriving, longstanding relationships with their customers instead.