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University of Phoenix Continues to Improve

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New Year's resolutions provide a windfall for numerous personal-improvement businesses, including smoke cessation programs, gym memberships, diet plans AND an especially, an increased interest in going back to school. For companies that market adult education programs, January is a very busy month.

One of the primary beneficiaries of this increased interest in going back to school is a company called Apollo Group, parent company to University of Phoenix. Apollo is a publicly traded company (Symbol: APOL) and is therefore required to openly report performance on a quarterly basis. These reports provide insight to the inner-workings of this very influential organization, and present a chance for all of us to learn about what factors are affecting our students and our marketplace.

In general, the for-profit sector's performance is improving. An industry focus on recruiting and retention has enhanced operating performance with revenue per student holding up with higher enrollment and retention rates. These institutions are focusing operational efforts on improving overall profit margins. Tuition prices are becoming more variable with prices and discounting adjusted to local market conditions and maximizing revenue per classroom. In a strategy opposite to that of airlines— airlines tend to hold the last seat at a huge premium to take advantage of the last minute consumer who will pay anything to get to their desired destination—the last seat in a classroom may be discounted at the 11th hour to fill the individual section.

The for-profit sector has also fared well with recent changes in federal student loan and grants programs. Since it is viewed to be counter-cyclical to the job market, for-profit is poised to see a bump in enrollment as a result of a worsening job market. Less hiring equals more studying. While this is the traditional trend, the current credit crunch may have an unknown impact on how adult students pay their tuitions.

Recently, much has been written about the market leader and parent company of the University of Phoenix, the Apollo Group. Several years ago, Apollo started Axia College of the University of Phoenix, designed to provide Associate’s degree programs to working adults with little or no previous college experience. Today, nearly 50,000 students are enrolled in Axia, which offers a tuition price below that of the flagship University of Phoenix. The company hopes that a well-articulated program will encourage Axia graduates to matriculate into University of Phoenix to pursue a Bachelor’s degree.

The results of this strategy are not clear. From a business standpoint, the lower cost of Axia draws more students into the programs, but providing mid-way milestone makes attrition (toward Bachelor’s) much more of an issue. Phoenix indeed reports a decline in Bachelor’s degree candidates, but is seems hard to determine how many of this student count are Axia first and second year students that would have otherwise been Phoenix Freshman and Sophomores. Overall, enrollment of 325,000 is up 11.4%, and there were a reported 67,400 new students for the quarter.

By degree level, Associate’s degree students increased 38% (vs. a 41% increase last quarter) to 114,300, Bachelor’s students fell 1.5% (vs. down 1.4% in 4Q) to 137,800, Master’s degree students increased 4.5% (vs. a 3% increase in 4Q) to 67,300 reflecting better performance of ground-based counselors placing students in online programs, and Doctoral students were up 24% to 5,600.

The recently Apollo Group purchased an online advertising agency called Apitmus with the intention of reducing its cost of acquisition from the current $2,600 to a target cost of $2,000. This $2,000 per student figure is often cited as a industry average.

In the quarter, the company hired 515 new enrollment counselors, a 13% increase in their counselor workforce. Many of these have come from the traditional school ranks and serve to help guide students into programs and help them persist. This increase gives their enterprise a student/counselor ratio of 80:1, which is believed to be among the highest of any educational enterprise. No breakdown of this number compared to online, on-campus, enrollment or retention was provided, but there were hints to collaboration between on-ground counselors and online programs.

Phoenix views retention very much as a customer service issue. One stock analyst reports on an “early alert system,” which is an automated process that allows an instructor to indicate early on in the student’s life cycle any weakness they are seeing in the student’s experience (e.g., if the student does not turn in an assignment or is not participating in class discussions, etc.). The report is sent electronically to the student’s academic counselor who then conducts an “intervention” to find out if the problem can be remedied.

There seems to be growing interest in online programs with reporting features as 80% of Apollo's new students are electing to take classes online as opposed to on-ground. This rate is up from 65% just one year ago. Apollo offers its programs at over 100 regional campuses nationwide as well as online.

No show rates for the fourth quarter were close to 40%, much higher than the historical 20%. With 67,400 new students in the quarter after this 40% no show rate, the enrollment engine at Apollo is clearly humming!

The company reports conversion rates and retention are higher in specialized offering versus more general studies. Efforts to create new, unique program concentrations are currently increasing.

What seems to become clear in these reports is that Apollo views their students’ success as good business. Classroom success that leads to career success is what drives an ever-increasing amount of students to enroll in their programs. Traditional schools should take note of some of these successful practices to better serve their customers—the students.

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Additional sections of this journal address student recruiting and student retention. We have also placed all articles with a common theme of Innovative Practices in Communicating with Students in a separate portal. New articles will be posted each Monday, please check back by bookmarking this site or placing a link to this online education and distance education programs portal.

Mark Shay is the founder of EDU - a leading academic advertising provider, - part of Halyard Education Partners, a leader in student lead generation and enrollment management services.