Pricing Considerations and Strategies for Nonprofit Organizations

by J.B. Maverick

4 min read

Whether you operate a consignment clothing shop or museum, manage a youth sports league, sell items online, or just offer a monthly membership for a fee, your nonprofit organization has to confront the challenge of setting prices. For your nonprofit to be successful in terms of remaining financially solvent, you need to attach the same amount of importance to pricing as a for-profit company. Crafting a pricing strategy is always a matter of balancing the desire to maximize your number of customers or donors, by setting prices lower, with the desire to have the maximum amount of financing available to serve clients, by setting prices higher. The following are some key tips you can use to craft effective pricing strategies for your nonprofit to help create higher profit margins and produce growth in your number of supporters.

Focus on Value

One of the most common pricing mistakes made by both for-profit and nonprofit business enterprises is going with a straight cost markup pricing strategy, figuring a set percentage above cost to determine prices. Using such a strategy can lead to errors on either side, pricing too high and thereby discouraging purchases, or pricing too low and leaving potential profits unrealized.A smarter approach is focusing on the value your products have for your customers or donors, and realize there is no inherent relationship between cost and value. A product, even if it costs your organization very little, may have a very high value for your potential customers. Make a greater effort to determine the value that customers or donors place on what you’re selling, either through surveys or by comparing prices of similar products offered by other nonprofits. The New York Metropolitan Museum of Art raised its recommended admission donation from $15 to $20 when a similar price increase was put in place by the Museum of Modern Art, a comparable alternative choice for patrons.

Enhance Value by Creating a Value Statement

One way to increase the value that people associate with your products or services is to create a clear value statement for your nonprofit organization that gives potential customers a reason to pay the prices you ask. Your value statement should be a clear message of what your organization represents and what it does, expressed in the loftiest terms possible. It should be strong enough that if a potential customer raises a question about price, your staff members can refer to it to confidently respond with an explanation of why it’s worth supporting the incredibly valuable work your nonprofit does, even if it involves paying slightly higher prices than might be available for similar products or services elsewhere.

Use Flexible Pricing Structures to Serve Different Customers

Another common mistake made by nonprofit organizations is putting together a “one-size-fits-all” pricing structure instead of using a more elaborate and comprehensive pricing scheme. Consider maximizing the appeal of your products or services to a variety of potential customers who may have different valuations of your products, different product preferences, and different amounts of money available to spend with your organization. You can develop a pricing structure with a broader reach and appeal by doing things such as offering different versions of products and different membership plans for supporting your organization. For example, many museums offer both inexpensive paperback books with pictures of their art and also larger, more expensive, hardback coffee-table versions of such books for a substantially higher price. You can vary prices with audio-only and video versions of recordings. If your organization has membership plans in return for regular donations, offer a full range of options to potential donors, both in the amount of regular support and in terms of payment options. Some supporters may prefer to pay a lower monthly fee, while others may prefer a higher, but less frequent, quarterly or annual membership fee.

Reach Out to Lower-Income Supporters With Differential Pricing

Go further than using tactics such as variable membership pricing plans by offering completely separate pricing structures for special segments of the population. You don’t want to make the mistake of pegging all of the prices for your nonprofit organization’s products or services at a level that’s prohibitive for lower-income individuals or families who may wish to patronize your organization but have very limited financial resources. You can implement differential pricing strategies designed to elicit extra income for your organization while simultaneously making your products and services available to more patrons by using strategies such as lower, off-peak pricing for visitors, discounts specifically for low-income individuals, or discounts based on connections with other organizations. You could offer discount pricing for any customer who is receiving services from a designated social welfare program that offers services to women and children. You may wish to have your marketing or public relations department design campaigns to reach out to certain segments of the population who may not even be aware they can access your organization’s products or services at special rates.The best pricing of products and services for a nonprofit organization is obtained by putting together a comprehensive pricing strategy that offers a wealth of options designed to broaden your base of supporters and elicit maximum value appreciation of your offerings.

References & Resources

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