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Last month, I saw that Lee Bradshaw was speaking at a HolonIQ event. I was unable to make the meeting, but Lee’s topic, Growing Online Programs Without Breaking the Bank, sounded fascinating. I asked Lee if he could turn his talk into a Q&A and in the process give us an update on how things are going with Rhodes Advisors.
Q: What kind of interest is Rhodes Advisors seeing, and what insights can Inside Higher Ed readers glean from what you’re seeing?
A: Josh, thank you again for reaching out to explore what my team and I have been up to and what’s on our minds these days. The last time we spoke about this topic was in February. So, here is a quick update for your readers: Since we launched earlier this year, Rhodes Advisors has supported the assessment, strategy, growth-focused capacity building and implementation at several universities and for more than 30 online and residential programs nationwide. That’s a bit of a vanity metric, but I’m opening up my notes to share as evidence of the continued acceleration of higher ed’s appetite for DIY. If you had asked me what the number would be today when we chatted in February, I’d have said, “A university or two and five to seven programs. And all online.”
The biggest trend I see today is that universities are working hard to rethink their relationships with OPMs and figure out what it means to operate programs with the level of performance management and capital efficiency some OPMs use. A theme across the sector is leadership expects that investments in these programs are being used thoughtfully and strategically. This tells me that as universities take on more of the full scope of required operations, they are in the midst of the problem-solving moment the OPMs were experiencing back in [roughly] 2010.
This is not to say that all universities can or should grow programs to the size some OPMs did, but it is to say that operational excellence is applicable to programs whether with 30 students or 300 when you’re tasked with generating surplus by keeping costs under control. And the pro tip for growth and efficiency that I will share with your readers is that they should get good at one operating metric, LTV:CAC [lifetime value to customer acquisition cost], because marketing and recruiting costs are the bulk of the budget if higher ed leaders intend to grow a program and a portfolio. Whether that’s to 30, or to 300.
Q: What is LTV:CAC, what does it consider, and why is it helpful?
A: This metric is at the top of many higher education leaders’ minds. I was invited by HolonIQ to give a talk about LTV:CAC at the Back to School Summit a couple of weeks ago in NYC. (Here’s the full workshop deck.)
Let’s explore this ratio before putting its value into practice. LTV is the tuition a student pays for a learning experience or degree, net of discounts and attrition. For example, if the tuition for a degree program is $30,000, the average discount is 10 percent, and your graduation rate is 85 percent, your LTV is $22,950. It’s that simple.
The other half of the ratio is CAC. I am not here to make a case that learners should be called customers. I may be a pedant, but I try to avoid semantic debates. I am here, however, to share that in the early 2000s, it was realized in all industries using digital marketing strategies that it’s possible to precisely measure CAC (due to attribution technology). And it was widely accepted that an important hygiene is to keep track of your costs and efficiency of spend. CAC for higher ed is a bit more complicated than LTV, but I would define it as the sum total of all advertising media costs, your marketing staff compensation, vendor fees, your recruitment staff compensation, content and creative costs, and the technology licenses you use to keep it all together. Generally, I would suggest universities include all costs required to attract learners.
When you divide your LTV by your CAC as a ratio, you will get a number. In the early years of program launches, that number might be small (1.0-2.0), and as your program matures in years three to five, you should see a bigger number (5.0-8.0)—i.e., initially, you will spend substantially more to recruit the learner, and these costs will decline as the program matures. If you aren’t on that directional arc, you must figure out why quickly. From the dozens of programs we’ve investigated this year, it’s one or more of such things as a misalignment of the market and a program, lack of clear positioning on websites and advertising, or friction/breakage in the funnel between a marketing agency and the recruiting team. All of these are solvable, but we first need to investigate.
Q: Why should universities use operating metrics that OPMs use? What will it take for a school or university to adopt this planning and assessment metric?
A: Quality online and hybrid programs balance art and science; I’m talking about science right now. OPM executives have been obsessed with the science of operating metrics and their implementation for a while. As the operational baton is handed over, provosts, vice provosts, deans and department heads must obsess over them, too.
From my experience working with various institutions, I’ve noticed a common challenge: Many universities are launching and managing online programs without fully leveraging the right performance metrics. This is not a critique but rather an opportunity for growth. In my previous work raising significant capital in the private sector and using it to operate a business, we had to be laser-focused on operational efficiency and accountability. That’s how we learned all of this. Every dollar invested required a clear demonstration of its impact and alignment with strategic goals.
Similarly, universities, particularly public institutions, must be careful stewards of funds, especially taxpayer dollars. So, if you are running the program in-house, maximizing the return on investment in marketing and program growth is critical. I’ve seen too often that substantial amounts are spent with little accountability, not to the benefit of OPMs, but to the major ad platforms like Google, LinkedIn and Meta. The key is ensuring every dollar contributes to student success and institutional sustainability.
One of Rhodes Advisors’ clients recently said something I liked: “With growth comes change, and that’s hard because people don’t want to change.” It’s easy for me to sit here today and suggest the adoption of LTV:CAC. It’s hard to put technical systems in place, keep tabs and know when to have conversations with your teams to manage the number.
So, to keep things simple, I would suggest a bottom-up approach:
- Start by communicating the metric’s importance with your team to establish purpose and value.
- Then, I would have them run their numbers to find bright spots where programs are performing well with a 5.0-plus LTV:CAC ratio and also on a steady growth arc trailing three-plus years. Both measurements need to be considered.
- Finally, use those high-performing programs as change management opportunities to encourage your teams to start their own processes to calculate and manage using LTV:CAC. People generally want to do great work, so they will often naturally align with these goals and push to achieve them.
Top-down force rarely works, especially in higher ed, and Rhodes Advisors can help institutions gather the necessary data and run these calculations in an easily understood and frequently updated framework. That’s one of many methods we use to support universities to increase the success of their online and residential programming.
All that said, metrics are just one piece of the puzzle, albeit an important one. Another big step for leaders is to decide which capabilities are needed to develop an overall online plan. It starts with building out the business plan, sizing the enrollment potential, understanding the competition, reviewing the opportunities for brand awareness and modeling the resources needed to build a pipeline and drive from inquiry to application and enrollment. If you’ll have me back, I’d love to write about this part of the process next!
