Pricing Your Goods or Services

By Rolfe Larson, Senior Consultant for Strategic and Business Planning, Joining Vision and Action.

Nonprofits and government agencies like to provide services for free. Admit it, the idea of charging for what you do does not come naturally to your organization.

With budgets tight and getting tighter, many organizations are finding ways to charge for their services. Whether you want to put a price on something you’ve been providing for free, you want to begin a new paid program as a way to generate income, or you’re not sure about your current prices, the challenge is always two-fold: 1) figuring out how much to charge, and 2) figuring out how to justify that price to your customers.

How this affects nonprofits.

For nonprofits and government agencies, justifying a price higher than what your customers are expecting—which is sometimes free—can be particularly challenging.

JVA’s Pricing Your Services 3-hour workshop on March 16 in Denver is designed specifically for nonprofits and government agencies who charge, or want to charge, for some of their services—but aren’t exactly sure how best to price them. Find out more about this workshop here.

Debunking the myth.

We start with the biggest myth about pricing in the nonprofit world: that you need to pick one price for something and stick with it. In fact, almost every price is variable: think happy hour, daily discounts, 50% off sales at your neighborhood thrift store, even day old bread.

We also delve into figuring out your unit costs and then determining how customers value your services—how they perceive them relative to their alternatives.

This essential market research provides the background material for figuring out what kind of pricing makes the most sense for your situation. Here are four of the most common types—many pricing strategies are a combination of two or more of these:

  • Premium Pricing: higher perceived quality, convenience, brand, social value (think Mercedes Benz)
  • Bundling: combine two or more services to provide customers with greater value (think cable TV-internet access)
  • New Customer Pricing: lower prices often offered to new customers (think Groupon)
  • Sliding Fee Pricing: pay more if you make more money (think IRS)
  • Suggested Donation: give people a chance to contribute based on how they value the service (think public radio)

Finally, nonprofits often struggle justifying their prices to customers, who sometimes expect things to be free or very low cost just because they come from a nonprofit. The approach that seems to work best is to be upfront about why the organization needs to charge (usually because funders won’t pay or pay enough for them), and then be ready to demonstrate that the asking price is competitive compared to alternatives in the marketplace. Don’t be defensive: what you have for sale is valuable!

Good luck!