3 Smart Moves for Nonprofit and Public Sector Managers to Boost Revenue and Increase Community Impact
Pricing Pointers, Issue #39 🍎
Every nonprofit and government manager faces a balancing act: generating revenue to sustain programs without pricing out the community they serve. Traditional discounts often fail, leaking revenue while missing those in true financial need.
What follows is a blueprint for a more sophisticated approach. By shifting from simple discounts to strategic fee menus, you can improve your financial health, ensure long-term sustainability, and increase your community impact simultaneously.
Rethink Traditional Fee Structures to Balance Mission and Revenue
Finding the funds to serve your community is a never-ending challenge. User fee revenue, when it’s possible to collect it, helps pay the bills and reduces your reliance on other funding sources.
But you are also committed to serving all segments of your community, and you worry that charging a user fee will discourage some community members from using your programs. So you’re willing to charge some particular groups of users (e.g., senior citizens) a reduced fee to increase the reach of your programs. However, there can be a lot of income diversity within a particular group of users.
The criteria used to determine who gets a reduced fee may not be a good indicator of a particular user’s ability to pay. Ideally, a reduced fee should be targeted at just those users who’d otherwise be priced out of a program and should not lower the fee for users who would have purchased anyway.
Doing this reduces the chance you’ll increase participation at the expense of lost revenue. With group-based fees, all the users in the targeted group get a lower fee even if they don’t need it, while other users don’t get it even if they do.
It must be said that sliding-scale fees are a form of group pricing where the groups are sets of users with the same ability to pay. On paper, this approach eliminates the problem of giving fee discounts to users who don’t need them. In practice, however, the logistics get messy. Vetting each user’s finances adds to your administrative costs. For the user, the hassles of documenting their means and the loss of their privacy can push away the very people you are trying to help.
Adopt Fee Menus to Empower User Self-Selection
A fee menu is a list of choices available to every user, and the fee for each choice. All of the choices are available to all users, and each user selects the option they prefer.
Smart fee strategy involves creating options with trade-offs. This allows users to select the option that best suits their wants and budget. However, it ensures they pay a lower fee only if they give something up or do something that advances the organization’s mission.
For example, a city-owned, outdoor pickleball court has two fee levels: Users must pay $ to play in the morning, when the weather is cooler and demand for courts is the greatest. However, if a player is willing to wait until the afternoon hours, when the weather is hotter, they can play for free. There’s a trade-off between how much a player must pay and the desirability of the time.
For another example, a city-owned, indoor ice rink charges skaters $5 to use its rink one time. However, users can buy 6 admissions for $25. Thus, users who buy more admissions are charged less per admission. There’s a trade-off between how much a user must pay per admission and the number of admissions they must purchase.
Note the guiding principle here. Fee discounts aren’t simply given; they are earned by a choice the user makes. For example, the user accepts a less desirable time or commits to a higher volume of use.
Master Strategic Cross-Subsidization for Greater Mission Impact
The easiest way to create fee tiers with clear trade-offs is the everything and more rule: every higher tier must include everything the tier below it has, plus something extra. (In my examples, a better time or a larger amount.) Let premium tiers subsidize your mission. Surplus revenue from users choosing more expensive options can help cover the costs of serving others at lower fees.
A $0 tier ensures you never price anyone out while still collecting meaningful revenue from users willing to spend more. Because this choice is available to everyone, it maintains a sense of fairness while ensuring your programming remains accessible to all.
Tiered fee menus allow your organization to practice strategic cross-subsidization. You can generate surplus revenue from users who choose premium options and use those funds to cover the costs of serving others at lower fees. This approach allows you to increase your reach and mission impact while simultaneously improving your financial health. The “profit” from the top tier is what literally pays the cost of providing the free tier.
Transform Your Fee-Setting Philosophy
Stop viewing financial accessibility as a drain on your budget. Instead, use fee menus to transform your pricing into a sophisticated engine for inclusion.
Shift your focus from deciding who deserves a discount to creating premium value for those who have the capacity to contribute more to your mission.