What determines university choice, and what is its monetary value?

Given the current uncertainty and continued speculation over the UK’s future relationship with Europe, and with the first Teaching Excellence Framework TEF fast-approaching, the higher education sector is facing a range of unprecedented challenges. While Brexit poses a severe threat to the sector’s future ability to attract students from overseas, the TEF’s focus on a range of metrics of the perceived quality of teaching is likely to further encourage the already fierce competition in the market for UK students.

To increase the pressure, as universities are competing for their slice of the applications pie, demographic factors mean the pie is becoming smaller.

In this competitive market, it is all the more important than ever that universities understand in detail the factors influencing the choice of one university over another. New research by London Economics sheds some light on the issue.

Surveying parents’ choices

In an online survey administered by YouGov, we collected information from 700 parents with children undertaking or approaching A-levels. Adopting a ‘choice experiment’ model, parents were asked to select their preferences when presented with a choice between two higher education institutions out of a possible eleven, spread across HE ranking tables.

In making their choice, parents were presented with a range of information on each of the two universities in question: league table ranking, graduate employment rates, tuition fees, bursaries, and more.

What is the monetary value of different university characteristics?

Using the variation in the information provided to parents, we were able to estimate a monetary ‘value’ associated with the different factors listed above. These estimates of parents’ and students’ willingness to pay for different university characteristics allows for comparisons of the relative importance of these characteristics in university choice, and of the additional income which universities might generate for improvements in these factors. For instance, we were able to assess the additional tuition fee that a university might be able to charge (in terms of pounds per student, per annum) – without deterring selection – if its ranking were to be one place higher.

University characteristicEstimated value (£ per annum)
University ranking£43
Graduate employment rate£122
Fee waiver (per £1,000)£280
Accommodation waiver (per £1,000)£210
Cash (per £1,000)£530

While undergraduate fees cluster around the £9k fee cap, there is more variety in the real fee as bursaries and waivers reduce the overall amount received by the institution. At the most prestigious universities, this can reduce a gross fee of £9k down to as little as £7k net. With this in mind, assigning a monetary value can shed light on both the relative impact of the different factors, and gives the potential to make data-driven decisions related to the real net fee.

On average, the analysis suggests that each ranking place is ‘worth’ approximately £43 per student per annum in additional tuition fees: a university could reduce the gap between its gross and net fee by this amount without hitting its desirability (i.e. increase the net fee charged). As further shown in the table, an increase in the graduate employment rate by 1 percentage point is ‘worth’ approximately £122 in additional tuition fees per student per annum. Our research thus implies that the impact of a 1 percentage point increase in the graduate employment rate is approximately three times more valuable than a one place upward shift in ranking.

In terms of the perception of the value of different types of bursaries and waivers, the analysis suggests that the provision of a £1,000 fee waiver would allow institutions to charge an additional £280 per year in tuition fees, on average, while maintaining current university selection rates. Unsurprisingly, while a £1,000 cash bursary would sustain a £530 per annum increase in fees, while a £1,000 accommodation waiver to eligible students would sustain a £210 per annum increase in tuition fees.

Understanding choices

As universities brace themselves against multiple challenges to the attractiveness of a university education, understanding the determinants of selection is becoming increasingly important. Our analysis illustrates how different institutional characteristics – such as ranking or graduate employment outcomes – can influence university choice, and how the relative importance of these factors varies across different universities, the choice of competitor universities, and socioeconomic status of parents. The analysis also estimates the substantial monetary benefits which universities might achieve for given improvements in the characteristics of their offer.

There are important lessons to learn for universities themselves in terms of where to target their resources and their marketing for future applicants, by highlighting the relative importance of different university characteristics – particularly graduate outcomes and different types of bursaries – in influencing student demand. The results are also relevant to the implications of the TEF, by illustrating how different metrics of ‘quality’ impact students’ university choices.

2 thoughts on “What determines university choice, and what is its monetary value?”

  1. Ian says:

    Do parents decide students’ universities? My experiences are atypical, but (very) far from this. With well-known obstacles to social mobility being repeated, using parents’ expectations reinforces assumptions, that children’s lives follow their parents’. I wonder how choices vary, when the parents do not hold a degree, and other characteristics?

  2. William says:

    No they don’t, Ian, certainly not in the majority of cases, though they may have some influence on whether HE is a good idea or not. Willingness to pay also depends on who’s paying and the research only involved parents. Dangerous for universities to action anything based on one target audience only

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