Streetsmart Financial Basics for Nonprofit Managers

Chapter 17Pricing: How Much Should It Cost?

In the end, price is nothing more than a barrier to service, and the art of pricing is deciding how high or low to set that barrier. Other factors can be barriers too, such as geography, cultural considerations, and political realities. But few will doubt that pricing is usually the last and most carefully attended hurdle to clear for those desiring a particular service.

What drives consumers to seek a specific service is the value they expect from it. Museums offer the chance to explore a different culture, social clubs the opportunity to relax with others who have similar interests and tastes, and schools the potential of broadened intellectual experience and possibly higher earning power. Each of these types of programs carries an explicit price that a potential consumer must evaluate before deciding to use it. These evaluations range from relatively long and considered deliberations about school enrollment to seconds when it comes to emergency services.

In each case, the underlying dynamic is the same: Pricing decisions are merely the arena for a systematic public dialogue about the value of a service. The nonprofit manager's challenge is to step out from being a bystander in this process and to influence it constructively and proactively.

To do so, it is necessary to understand how nonprofit pricing works. One way to understand the pricing process is along the following continuum:

Services whose essential nature place them toward ...