Determinants of Private Higher Education Institution Choice: The Roles of Reference Groups, Tuition Fees, Location, and Word-of-Mouth among Chinese Ethnic Students in Medan, Indonesia

Abstract

The increasing competition among private higher education institutions (PHEIs) in Indonesia has intensified the need to understand the factors influencing students’ university selection decisions. This study investigates the effects of Reference Groups, Tuition Fees, and Location on University Choice Decisions, with Word-of-Mouth (WOM) communication serving as a mediating variable among Chinese ethnic students in Medan, Indonesia. The study adopts a quantitative explanatory research design and employs Partial Least Squares Structural Equation Modeling (PLS-SEM) to analyze data collected from 347 Chinese ethnic undergraduate students enrolled in five private universities in Medan. The findings reveal that Reference Groups exert the strongest positive influence on both WOM and University Choice Decisions. Tuition Fees positively affect WOM and University Choice Decisions, although with relatively smaller effect sizes. Conversely, Location demonstrates a significant negative relationship with both WOM and University Choice Decisions. WOM significantly influences University Choice Decisions and serves as a significant mediator in the relationships between Reference Groups, Tuition Fees, Location, and University Choice Decisions. The structural model exhibits substantial explanatory power, explaining 68.6% of the variance in University Choice Decisions and 88.9% of the variance in WOM. These findings highlight the dominant role of social influence and interpersonal communication in shaping educational choices among Chinese ethnic students. The study contributes to the higher education marketing literature by integrating Reference Group Theory, Human Capital Theory, and Word-of-Mouth Communication Theory within a culturally specific context. The findings also provide practical implications for university managers seeking to strengthen student recruitment strategies through family engagement, alumni networks, and positive WOM generation.