Good morning, Greater Washington. I hope that you had a good-and-haunted weekend. Over on the Hill, we had a sane rally not too far away and an insane number of trick-or-treaters at our door. We went through 8 bags of candy in about 2-3 hours.
Our excessive candy purchases, which came with a Halloween discount from the 14th Street SE Safeway, led me to think a bit about pricing. This evening, I came across this article from the Chronicle of Philanthropy, which opens with a thorny question: “When non-profit groups set prices for their services, they are often encouraged to follow models set by businesses. But is this the best approach for all?”
Norah McVeigh begins with the more straightforward cases: universities, museums, theatres. In other words, she first addresses the non-profits that typically generate profit (or revenue) in much the same way that a for-profit business would. The best schools and largest arts venues “charge a premium for their services offer differential pricing and tiered pricing, creating multiple price points to attract different customers.” I would add that, in the case of theatres, both for- and non-profit models exist in the marketplace. For a simple example, New York is home to non-profit off-Broadway houses and for-profit Broadway houses and productions actually can transfer from one to the other.
However, she then addresses the more complex cases: homeless shelters, soup kitchens, and the majority of non-profits in the human services and international sectors. Quite frequently, “the services that non-profits provide for these in-need populations are paid for by a government entity,” which removes pricing from the non-profit’s control entirely. I would also say that most human services non-profits, such as job training or housing assistance programs, make it their mission to provide all services at no cost. In fact, removing pricing from the equation is why they entered the field in the first place.
McVeigh points out that “before those nonprofits can take advantage of for-profit pricing models, the would need to have discussions with government funders.” But while she focuses on “nonprofits that primarily provide services to customers who aren’t the direct payers,” I wonder about non-profits whose clients are not payers in any form whatsoever — and for whom paying and pricing are deliberately removed from the discussion. Does putting a price on something, no matter how small, help or hurt the relationship between the organization and the client? Or does the absence of any price ensure that outreach is more comprehensive?
On the flip side, what if organizations in that first category (schools, arts institutions, etc.) could cut or eliminate prices? Most theatres or museums, for example, aim for a roughly 50/50 ratio of earned to contributed income. But what if they were suddenly positioned to provide their primary services at no cost and fund those services entirely through grants and supplementary programming? In most situations, such a change is not realistic or even desirable, but it does offer food (or candy) for thought. How might that alter the nature of the work or the make-up of the clientele?
In sum, we seen to know instinctively which types of institutions fit into which categories, but should it necessarily be that way? For non-profits that provide services free of charge, would you be interested in creating an earned income source whose pricing could be drawn from the for-profit sector? Second, for non-profits whose revenue is divided between earned and contributed, how would you like to re-write that ratio? And to return more specifically to the above article, when a provided service is only part of (or entirely unrelated to) a revenue stream, should its market value factor into its pricing?