Budgeting for CAC (or Cost-Per-Enrollment) in Teen Program Fees

Updated September 2024

While organic marketing and word-of-mouth advertising are excellent for building brand awareness, most teen programs still have customer acquisition costs. If the programs don't build those costs into their teen program fees, they may lose money on each new student — no matter how many strong marketing strategies they use.

Keep reading to learn more about customer acquisition costs, how to budget for them, and tips for including these expenses in teen program fees.

What are customer acquisition costs - or cost-per-enrollment?

Marketing and sales are an expensive part of operating any business, nonprofit, or organization. Customer acquisition cost (CAC) refers to how much an organization spends to acquire a new customer. Understanding this metric can help marketing teams analyze their return on investment (ROI) from marketing and choose the most effective strategies for attracting new customers.

The education sector, where organizations offer students enrichment, gap, and educational programs, refers to CAC as cost-per-enrollment. It's a metric used to evaluate the efficiency of admission and marketing efforts and represents the total cost of acquiring a new student. While specific metrics used to calculate cost-per-enrollment may vary among schools, common categories include:

• Admission/enrollment compensation
• Promotional materials (paid advertising, print collateral, etc.)
• Software costs (email, CRM, etc.)
• Travel and development expenses (travel, exhibitor fees, etc.)
• Office supplies and general expenses
• Other admission-related costs

Analyzing these cost components gives organizations valuable insights into the effectiveness of their enrollment strategies and helps them make data-driven decisions to optimize their resources. To calculate cost-per-enrollment, add all expenses incurred to convert a prospect to a customer and divide that sum by the total number of students acquired.

A study conducted by NAIS, the Enrollment Management Association, and the National Business Officers Association from late 2021 through early 2022 surveyed the financial landscape of admission and marketing efforts in over 150 independent day and boarding schools. The findings were intriguing.

• Schools with 700+ students generated $8.60 in tuition for every dollar spent on enrollment expenses — the lowest median cost-per-enrollment of all the groups.
• Independent schools spent 90% of enrollment costs on salaries, with little remaining for other enrollment categories like travel or promotional materials.
• While 81% of participating organizations had set clear enrollment goals, 19% had not clearly defined their objectives.

Setting clear, measurable goals helps drive effective enrollment management. Understanding desired outcomes empowers organizations to optimize their strategies and allocate resources efficiently.

Here's a hypothetical

Let's say you budget 20% of enrollment fees for new student acquisition.  If your teen program costs $500 for the first year or initial enrollment, you should budget $100 to acquire the new student. 

You've probably heard the phrase, "Retaining a customer is much cheaper than acquiring a new customer." It can cost five times more to acquire a new customer than to retain a current one. If you offer programs that appeal to the same students who return year after year, imagine how much you could save — especially since increasing retention by just 5% can increase profits between 25% and 95%.

That's why word-of-mouth referrals are so powerful in the education industry.

But that doesn't mean you can eliminate customer acquisition fees because in your industry, students remain students for a finite period and may benefit from your services only once. That reality means you do need ongoing campaigns to attract new students. It's the nature of your business.

Budgeting for cost-per-enrollment

Understanding your cost-per-enrollment and how it influences your bottom line requires evaluation and strategy. Some key metrics to analyze include:

• The percentage of referred or repeat students vs. those you actively “recruited” in the past three years 
• Your total annual marketing spend, including marketing technology and staffing
• Tuition or program fees per student (averaged if you offer discounts or specials)
• Leads or prospects generated from various marketing channels, including advertising channels and word-of-mouth
• Annual enrollment compared to capacity

Depending on the nature of your program, these metrics will vary. But gathering baselines for important sales and marketing metrics will help you measure expenses, budget accurately, and price your programs appropriately.

This information can highlight areas of opportunity for your marketing budget — like the most successful marketing channels to invest in. While your spend might increase, the cost won’t hurt your budget because that channel keeps your cost-per-enrollment lower. Maxing capacity on programs also helps stretch expenses across more paying students, increasing ROI per student.

Tips for incorporating cost-per-enrollment into teen program fees

Look at customer acquisition fees as a whole. Even if word-of-mouth advertising attracts a quarter of your students, add the total annual cost of generating new student enrollments into your fees.

For example, your full budget might look something like this:

• Fixed and variable operating expenses: $350,000
• Staff salaries: $400,000
• Marketing and customer acquisition costs: $200,000
• Profit: $50,000

You need $1 million in tuition revenue to hit that profit goal. If your program typically enrolls 500 students, you should charge each student $2,000. 

With 500 students generating $1 million — and  $200,000 in cost-per-enrollment —acquiring a new student costs your organization $400 or 20% of your per-student fee. If you increase fees to $2,100, you create a cushion for offering scholarships or early enrollment discounts and can still turn a profit.

Building that $400 CAC into your student fees guarantees financial stability, gives you room to grow, and provides a baseline of how much to invest in paid advertising to hit your goals. 

Knowing what it costs to attract a new student,  Investing strategically and increasing your marketing budget could potentially fill 100%of your program capacity and increase your bottom line. Imagine operating with a waitlist because of the interest in your offerings!

Granted, this example is a tad oversimplified, given the numerous financial factors comprising an operating budget. However,  it highlights the potential teen programs can achieve when calculating and building cost-per-enrollment into their student fees.

Managing and reducing cost-per-enrollment

Cost-per-enrollment can take a big chunk out of budgets, but there are ways to reduce these costs. Take note that cutting too much of your marketing budget too quickly can negatively affect enrollment.

Instead, opt for strategic replacements and tweaks instead of wholesale budget cutting. Here’s how:

1. Know your customers

Knowing your customers is fundamental to effective marketing. You can tailor your messaging to resonate with their specific needs and interests by developing detailed customer personas. A personalized approach can significantly improve conversion rates and reduce marketing costs. 

Analyze and define your customer persona. You might have a persona for students and one for parents as you learn each party’s interests, preferences, and motivational drivers. 

2. Automate instant customer engagement

We live in a world of instant gratification, so lean into it with your marketing. A customer deposits a check via their mobile banking app, which sends an instant email confirmation. Someone orders a product for in-store pick-up and gets an immediate text confirming the order receipt. An hour later, another text indicates the order’s ready.

Your teen program must meet those expectations for immediacy. A student or parent contacting you for information should receive an immediate, automated response with more information or a timeline of when to expect contact from a representative.

Automation also reduces repetitive, menial tasks, freeing staff to focus on students and parents likely to enroll in your programs. It can lower cost-per-enrollment by enabling you to enroll more students with fewer employees.

A caveat: automated MarTech solutions come at a cost, so use this tool strategically — and invest in the time to get to know your customers and their needs first.

3. Max out enrollment

Most teen programs operate at 80-90% capacity. While financially feasible, filling the remaining 10-20% significantly improves profits because those extra students don’t involve increased operational expenses or additional staffing. Their enrollment becomes nearly pure profit.

Maxing out enrollment improves ROI. It’s okay to spend more on your most effective marketing areas — once you’ve identified them — because they generate the best leads and lowest cost-per-enrollment.

4. Invest wisely in marketing 

All marketing channels were not created equal. Different marketing and advertising strategies generate different success rates. Investing in those that produce the best results is crucial to reducing cost-per-enrollment. Sometimes, trying a new approach that might generate impressive results is worth taking that risk.

Reach your target audience with TeenLife, which offers advertising on a platform students and parents trust to provide them with information about teen programs and enriching experiences. What better place to connect with your target audience? Contact us to learn how we can help you share your message with the right audience and drive results.