Who is Britain’s market leader in higher education? Coventry University.

imageNik Darlington 6.23am

Universities suffer from herd mentality. Individual institutions refuse to break cover unaccompanied. The process for setting tuition fees is no more scientific than perusing the immediate competition and nudging a little bit this way, a little bit that way.

The UK’s only genuinely world-class universities - Oxford, Cambridge, Imperial and UCL - set the ball rolling by announcing £9,000 fees. Second-rung universities that aspire to being world-class - Birmingham, Durham, Exeter, Manchester, Warwick - predictably followed suit.

I have always maintained that only the top slice of universities would get away with this and most other institutions would have to think more intelligently. Then the likes of Aston University confirmed £9,000 fees, and other middling to lower tier institutions, such as UWE and Falmouth, suggested likewise.

I admit that I began to have doubts. House of Commons Library research indicated that many universities would have to charge at least £7,500 to make up for cuts to teaching budgets. Instead of a bleating race to the top out of vanity, universities might be forced to do so out of necessity.

Mercifully, a number of universities have since announced or suggested that they will charge much less than £9,000. Bishop Grosseteste UC in Lincoln will charge £7,500. London Met will average between £6,000 and £7,000. Several others are expected to be in the same range. It is an encouraging sign that university executives do know their markets and are pricing themselves accordingly, in the process creating some form of competitive marketplace.

Since most universities charged the maximum fee in 2006, a genuine market in undergraduate fees never happened. Universities charged the same partly to protect the unit of resource (funding per student), but also to protect their brand, because they were concerned that discounting would send a negative message to students. Consequently the key marketing strategy for most universities centred on how to design the most optimal and affordable scholarships and bursaries. Some research has suggested that this created a quasi-market, although there is no hard evidence for this.

The undergraduate marketplace is broadly price inelastic and quality is measured by variables such as entry requirements (UCAS tariff) or university league table position. Overall, a university’s general reputation is a more important benchmark than price, though this is largely unmodelled at the new fee levels.

Leeds Metropolitan University have announced that they shall be pricing their undergraduate courses at £8,500. This was the institution that tried to bounce others into a price war in 2006 by setting their fees at £2,000. Once again, Leeds Met have plumped for a soundbite rather than sound sense. A £500 discount is not, by itself, going to convince people to study at Leeds Met (99th in The Timesrankings) ahead of their more illustrious neighbour, the University of Leeds (ranked 26th). A lower fee in the region of £7,000 would have seemed sensible positioning. What Leeds Met have actually done just seems like more wanton attention seeking.

Less prestigious universities are stuck between a rock and a hard place: funding squeeze on one side, a relatively price sensitive marketplace on the other. Encouragingly, some institutions are being intelligent and experimenting with variable fees.

Coventry University has announced fees ranging from £4,600 to £9,000 in six packages, offering what they say is "unbeatable value for money". Variable fee levels - or multiple price points - will better capture students’ willingness to pay and achieve more optimal student volumes and fee revenue. See chart below:

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Languishing in 84th position on the Timesrankings (£), by the most basic standards Coventry is not a prestigious institution. Yet dig deeper and you see that, like many other middling to lower universities, Coventry has core competencies that set it apart. It is the only university to offer a degree in disaster management. It has an improving and growing business school. Its digitising and modelling laboratory is the only facility of its kind in any university worldwide. Universities like Coventry need to focus these unique skills, or their 'USPs’.

As well as variable pricing, Coventry is embracing bundling. The fees will include “extras” such as textbooks, course starter packs, printing credits and field trips. Not only is this an attractive business offer, it is smart education. Some of the most offputting things I found about studying at university were exhorbitant costs for lecturers’ own textbooks and having to top up with credit whenever I wanted to print something. It isn’t the cost itself that is offputting, it is the constant reminder of it. So an all-inclusive tuition fee should make such annoyances disappear and not discourage people from acquiring necessary materials.

As a Times editorial (£) said yesterday, in a competitive marketplace universities would have to find innovative ways to differentiate themselves from competitors, such as shorter degrees. As more and more universities announced fees at or close to £9,000, with no change to how (or which) courses are delivered, it seemed that we were getting nothing more than business as usual but at a higher price point.

Of course, the emergence of a properly competitive marketplace would have been easier if the Government had accepted Lord Browne’s recommendation to remove the fee cap entirely. Nevertheless, competition and innovation is still possible.

Coventry University has proven that some in the sector can think outside the box and have the courage to experiment. Vice-Chancellor Prof Madeleine Atkins and her colleagues are providing demonstrable market leadership and other university executives need to wake up and take note.

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