Raising Tuition to Boost Reputation

Do business schools ever raise their tuition after they've dropped in the media rankings so they will appear more elite to potential students?
Do business schools ever raise their tuition after they’ve dropped in the media rankings so they will appear more elite to potential students? Yes, say Noah Askin, assistant professor of organizational behavior at INSEAD in Fontainebleau, France, and Matthew Bothner, professor of strategy and Deutsche Telekom Chair at the European School of Management and Technology in Berlin, Germany.

Askin and Bothner determined that colleges and universities in the U.S. that took this approach did improve slightly in the rankings in the following two years, but there was not enough data to indicate whether the approach would be effective over the long run. This technique has been described as the “Chivas Regal strategy,” named after a brand of whiskey that purportedly doubled its sales after doubling its price without making any changes to the product.

Colleges that used this strategy tended to be those whose peer schools were already charging higher prices, the authors note. They also say that these schools tended to achieve rankings in the U.S. News & World Report listings that were not among the elite, but still high enough that they faced intense competition.

“We found that this strategy is reserved for the more widely known schools, and for those whose rivals already price high,” says Bothner. “Even in an arms race for status, no school wants to be seen as pricing unfairly."

Read “Status-Aspirational Pricing: The ‘Chivas Regal Strategy’ in U.S. Higher Education, 2006–2012” at asq.sagepub.com/content/early/2016/01/29/0001839216629671.full.pdf+html.