Unlock Your Nonprofit's Potential: 10 Actionable Pricing Tips
Pricing Pointers, Issue #7 🍎
If you want to do more good in the world, "What fee should we charge?" is the wrong question to ask. The right question is "What range of fees should we charge?”
Here are 10 tips to help unlock your potential to do more good.
Tip 1 - Identify diverse user segments and their varied capacity to contribute
When you understand how your target users differ in their ability and willingness to pay, your organization can:
Increase the income diversity of your user base. Serve a range of users by developing a range of fee options.
Increase your fee revenue. Charge higher fees to users willing and able to pay more.
Increase your reach. Keep the fee low, or even free, for users who need it the most. This gives them access to services they otherwise couldn’t afford.
Tip 2 - Recognize that a uniform fee limits your impact
A uniform fee, by its nature, presents a fixed financial threshold that all potential users must meet.
For individuals with limited means, even a low fee can price them out of accessing your programs or services.
Not providing options for some users to spend more misses an opportunity to generate extra revenue.
You could use that extra revenue to increase your impact in many ways. For example, you could expand existing programs or add new ones.
Tip 3 - Embrace a differential fee strategy to broaden your reach
A uniform fee strategy presents a dilemma. Either increase your revenue with a higher fee or increase your reach with a lower fee.
A differential fee strategy resolves this "Should we charge either $ or ?"dilemma.Ittakestheapproachof"Let′schargeboth$and."
You increase your reach by charging $ to those with limited means. And you increase your revenue by charging $$ to those able to pay more.
A differential fee strategy is particularly useful when you want to increase revenue, but still serve clients with limited means.
Tip 4 - Use a tiered fee menu
There are two ways to decide which users should pay a lower fee than others. The first way is for your organization to decide. The second way is to let your users decide by using a tiered fee menu.
A tiered fee menu is a list of different choices at progressively higher fee levels. Each user selects the option that best meets their needs and budget.
The same options to pay less are available to everyone. So users perceive this approach as fairer than a lower fee restricted to certain groups.
Tip 5 - Create tiers using offer stacking
A good way to create a tiered fee menu is the offer stacking technique.
Start with a basic, functional core offering. Then create a new tier, at a higher fee level, by adding more value to it.
The result is each tier will have "everything and more" than the tier below it.
The trade-off between what a user pays and the value they receive in exchange is essential. It's what will entice some users to pay more for a better experience or results.
Tip 6 - Encourage more use with quantity-dependent fees
People who purchase something a lot are often more price-sensitive than those who purchase less. Offering lower per-unit fees for larger quantities is a way of reaching them without reducing the fee for everyone.
For example, a city-owned ice skating rink sells a single admission for $5 and a package of 6 admissions for $25. Anyone planning to skate at least 6 times would save money by purchasing 6 admissions upfront.
Tip 7 - Manage demand with time-dependent fees
Adjusting your fee based on time is effective in situations where the value of a good or service depends on when it is purchased and/or used.
Charge higher fees for more desirable times and lower fees for less desirable times. This will incentivize users to change when they use your service.
The potential benefits for your organization are better resource utilization and more revenue.
And you can potentially increase accessibility by charging a lower fee for less desirable times.
Tip 8 - Manage demand with location-dependent fees
Adjusting your fee based on location is effective when the value of a good or service depends on where it is purchased and/or used.
Charge higher fees for more desirable locations and lower fees for less desirable locations. This will incentivize users to change where they use your service.
The potential benefits for your organization are better resource utilization and more revenue.
And you can potentially increase accessibility by charging a lower fee for less desirable locations.
Tip 9 - Encourage larger purchases by pairing products and services together
Add other products or services to your basic offering in ways that will enhance it.
This tactic can increase your revenue by catering to users who are willing to pay more for a better experience or result.
For example, a theatre could package valet parking along with its tickets for a single price. The theatre-goer who purchases this package escapes all the hassles of finding a place to park.
Tip 10 - Consider effort-based discounts to reach budget-conscious users
Budget-conscious users/clients are often willing to expend time or effort to pay a lower fee.
Consider various ways for people to pay in part with their time. These might be volunteering for a specific task or role (e.g., ushering at a concert), completing a workshop or training program, etc.
Your organization should clearly explain the available options and the corresponding fee discount. The Ordway, a nonprofit performing arts center, is a good example.
You should also consult with your attorney to make sure your planned fee discount doesn't run afoul of any labor or tax laws.