Expenditure per Student – A Misleading Indicator of Marketing Opportunity

As the market revvs up once again for the 2015/2016 school year, the education marketing industry will analyze opportunies as they relate to budgets. There will be considerable focus on legislation at the federal and state levels. Ultimately opportunity will be discussed in terms of the available expenditures per student. However that discussion leaves out one of the most important factors in indentifying sales opportunity – especially for marketers of supplemental education products that rely on discretionary spending.

Deep in the funding mix are influences of the local economy that have major impact on discretionary spending. State and federal funding are for the most part designed to offset the imbalance between wealthy and poor communities, essentially leveling the playing field. However to truly level the playing field the federal and state funding would need to be significantly higher for poor communities to offset the challenges they face. Far from discretionary, the money coming from state and federal budgets include requirements that dictate how those funds are to be spent. The bulk of discretionary funds come from the local tax base, and that skews wealthy.

Looking at the funding mix through the lens of expenditure per student, the nuance of the funding mix is comepletely lost.However when we look at the school market based on funding mix we see an altogether different story. The chart above shows average district expenditures per student organized by the percent of low-income students. The difference in distribution of local, state, and federal funding is apparent.

The institutions in the lowest-income areas receive the lion’s share of federal and state funding. As a result, they have higher than expected expenditures per student, but their purchasing is highly influenced by outside education policy. They are the prime target for products and services that are designed to help schools address the challenges of poverty.

The average expenditures per student of middle-income districts are similar to those of low-income, but the bulk of the funding is from a blend of state and local sources. They are the home of “typical” schools, and their purchases are more influenced by local needs and state requirements.

High-income districts have the fewest restrictions. They are predominately locally funded, and are the only group of school systems with higher than average expenditures per student. The schools in these districts are excellent targets for offers that depend on discretionary funding.

Of course in the very highest-income neighborhoods, there is also a higher percentage of students attending private schools – leaving that high level of discretionary funds to be used for fewer students.

If school budget is a factor, having a lens on the funding mix may be the most critical for reaching your marketing objectives.

Be sure your data team has access to tools that enable filtering schools and districts by their funding mix. One tool we us is the MCH Response Potential Model(RPM), which ranks the nation’s districts and schools according to their likelihood to purchase supplemental education products.