commission

Attaining load & diversity control

Perverse incentives ensure perpetual challenge [4 min read]

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As the global education sector rebounds, institutions, and universities in particular, seem to have found themselves in one of two broad buckets. Either they are nervously watching the pent-up demand flow back to their competitors whilst they themselves struggle to rebuild pre-pandemic load, or their admissions team is under the unprecedented pressure of record application volumes.

One large and well-ranked university in an Australian state capital finds itself in the first, least desirable, bucket. With international numbers remaining well down on the boom days of 2019, it set aside A$90M in additional international attraction spend over three years (2023-2025) - this is approx 3% of annual budgets, an astonishing sum of money. Despite this mainlining of cash, its own financial forecasts say its 2019 load figures will not have been recovered by the end of 2027, or fully eight years on from its high watermark. Its task is made more difficult by a concurrent commitment to cut its China reliance deeply, from 60% of load to 40%.

Meaningfully diversifying to this extent is an expensive exercise, yet it’s critical to most institutions’ strategies. A recent report suggests more than 70% of institutions view diversifying as of greater importance post-pandemic than prior, with, like this above example, the need to discontinue reliance on a now uncertain China supply the key driver.

Whilst there are many routes to diversifying, agents are a key part of the mix. Their in-country presence and expertise are critical to expanding reach and awareness, and they can deploy and deliver results often far quicker than, for example, partnerships.

But what about the institutions in the second, more desirable, broad bucket? In a leadership role at a UK university in 2021-22 I saw an admissions team slammed by huge uplifts in application volume, with processes and systems (and FTE headcount) built for volumes half or a third the actual demand levels. Many institutions are experiencing this ‘admissues’ dynamic today. It often looks a bit like this: huge spikes in applications, roughly in-line offers uplift, large enrolment drop-offs. It can lead to increased effort and spend on conversion, and several large third party suppliers have positioned themselves as solving exactly these challenges.

As with the sector level, where institutions experience differing levels of demand, application volumes within a single institution can vary considerably across programs. It’s usually the globally in-demand courses that see greatest increases, and it’s almost too obvious to state why: more potential prospects. Right? Yes, but these spikes - often with little appreciable uplift in conversion - are also exacerbated by something slightly less obvious.

The perverse incentive of traditional agent agreements

Institutions set their tuition fees in line with market demand. A Bachelor of Commerce degree at the University of Adelaide costs A$47,500 a year because that’s what they can charge (we won’t explore here the size and ubiquity of scholarships Adelaide offers to increase the market size for which this fee’s achievable). And a Bachelor of Arts at the same institution is A$7,000 a year less because, in largest part, the demand for this program is lower.

So an agent on (e.g.) 15% commission stands to earn A$1,050 more in commission for sourcing the more abundant prospect type. We can all see what this leads to. Not just more applicants for Commerce at Adelaide, but at many similar institutions. And those institutions are buoyed by uplifts in applicant volumes and spend more money and commit more effort to persuading this increased volume of prospects (and their influential agents) to choose them. 

But they also need to pivot activity and budgets to the underserved program areas, like the Bachelor of Arts. There isn’t enough interest for a single institution in part because its agents are not incentivised to work harder to find these student types, so agent bonuses are applied, additional marketing campaigns created and funded, and Faculty of Arts colleagues take a greater, hands-on interest in recruiting to their programs. Depending on an institution’s structure, this can mean significant central or corporate team spend and devolved, duplicate, Faculty spend.

How to counter this?

There are two changes that could mitigate or avoid these issues, and today’s traditional agent agreement dynamic prevents either from being implemented.

The first is to marketise commission pricing. Move away from the set-in-stone contracts that run across multiple years and incentivise the acquisition of the most easily reached prospects. To do this, an institution must accept a possibly uncomfortable truth: that not all prospects (either those for certain programs or those from certain markets) are of equal value to the institution. In short, they should be willing to pay slightly more for one versus the other.

The second is to resequence the entire agent apparatus to be program-centric, not agent-centric, as this image shows. 

A resequenced agent sales mechanism

Today’s institution > agent > program dynamic generally allows any partner agent to recruit to any program or course an institution runs. What this means in reality, when an institution’s hundred partner agents each have 100+ institution partners, is that no one agent is actively and concertedly attempting to recruit to specific programs at said institution. Because why spearfish when you’re allowed to use trawler nets instead?

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