While these two worlds might appear to be so far apart that they have nothing in common, there are some important cross-category lessons we can learn.
Global and local consumer goods suppliers have for years sold ~80% of their products to their consumers through Woolworths and Coles, who sell not only their products, but also their competitors. Suppliers have had to learn how to build a relationship with the supermarkets so to represent their products favourably to their consumers (versus their competitors), to grow their business.
In the 1990's it was all about incentives, with suppliers offering Woolworths and Coles financial incentives over and above their competitors to buy more, shelf space, deeper discounts and off-shelf displays to drive their growth.
But to their credit, Woolworths and Coles soon worked out that, rather than waiting for suppliers to come to them with increased incentives, if they went to their suppliers pro-actively and demanded better terms in exchange for more support they could increase their profit quicker.
By the early 2000's suppliers were being regularly approached with requests for extra incentives and thinly vailed threats that if they didn't pay up the supermarket chain would take the offer to their competitor and then reduce their focus on the supplier's range in-store, (significantly impacting the suppliers revenue).
Supermarket's then started to go as far as to auction off volume driving incentives to the highest bidder, forcing some suppliers out of business and reducing suppliers profit margins even further.
For the supplier this meant incentives quickly increased every year reducing their profit margins, and they either paid up and maintained revenue, (suffering a further reduction in profit margin), or refused to pay and suffered a significant revenue decline.
The same pattern is starting to happen between higher education institutions and agents in Australia.
As institutions become more reliant on their international student revenue, they are offering agents increasing incentives to recommend them to prospective students. Agents are learning to leverage their control over the supply of international students and focus on those institutions that offer them the highest incentives.
Some agents already auction their student pipeline to the highest bidder.
That is after all what the incentives institutions are offering agents hopes to achieve? Preferential recommendation based not on student needs, but the margin an agent can earn.
So how can you break free from this vicious cycle before it's too late and the once lucrative revenue from international students is less profitable than domestic students?
By recognising that you have more value to offer agents than just money and develop a triple-win approach to growing your revenue.
Triple-win recognises that for a successful "sale", the needs of 3 different parties needs to be met. For higher education institutions this means the institution, the agent and the prospective student.
While agents are motivated by making more money, there are several ways an institution can help the agent make more money. Increasing financial incentives is only one approach, (that also has significant long term margin implications).
It's easy to forget that it's a competitive market out there for agents too. Prospective students don't simply walk to their nearest agent and ask them to apply to the first university they recommend. Prospective students not only have 1,000's of institutions to choose from, but also a choice of agent.
Each agent therefore needs to compete with other agents to grow their revenue and here lies the opportunity for institutions to engage agents and develop a partnership.
Rather than choose to steadily increase the financial incentives you pay your agents, institutions can choose to partner with agents to help them increase their share of the available students by providing a better service to prospective students.
By sharing student insights and developing joint marketing activity programs a transactional relationship can be evolved into a sustainable, mutually beneficial partnership. Where the agent prefers to recommend your institution, not because you offer the best terms, but because you are best at helping them grow their business.
To help an agent grow their business (better than your competitors), how can you;
Attract prospective students to the agent?
Help the agent's counsellors, in each office, engage and influence prospective students in such a way that they stop searching (for another agent or institution) and choose to apply to you?
Make the outcome of an application more predictable for the agent and the student to reduce the risk of an application not generating an offer?
Minimise the time (and therefore money) it takes the agent to apply through your systems?
Reduce the time it takes from application to offer?
Engage the student as they wait to start (and avoid a change of mind)?
Developing partnerships with the right agents will avoid your reliance on financial incentives and build a sustainable student pipeline.
So when it comes to international student recruitment, there are surprisingly some valuable lessons to be learnt from Woolworths and Coles if we are to avoid eroding the margin that makes international students attractive in the first place.
If you'd like to discuss starting your own agent partnership program, please let me know.
At MacMorgan we help institutions take a student centred approach to growth, if you'd like to find out more about our unique approach, please contact me.
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John Chatterton
+61432 906 790