Should you give discounts to nonprofit organizations?
As my company grows, so do the requests for nonprofit discounts. If you are in the business of digital content creation, then you probably get a lot of requests for free and discounted services. At my agency, requests for discounts based upon nonprofit status are always met with “no”. We even get ahead of this question by answering it in advance on our FAQ page. I’m confident about that decision, but I didn’t always feel confident saying “no.” The first time I heard the words, “Do you provide a discount for nonprofits?” I thought, “Why on earth would I do that?” Then, I wondered, “Am I supposed to be giving nonprofits discount pricing?” [caption id="attachment_302" align="aligncenter" width="650"] How to get confident about your pricing.[/caption] I didn’t know the answer. So, I felt obligated to reduce my price whenever someone pulled out the nonprofit card. It didn’t feel good. I felt resentful as I worked on their project. They probably didn’t get my best work. Before I talk about how I finally decided to say no to discounts, let’s look at the idea that nonprofits automatically deserve a discount because they’re doing something for the larger good. I like what Jason Fried, Co-Founder of Basecamp, once said: “Some might say that nonprofits do good, while for-profits do business, but I don’t believe that 1. matters, or 2. suggests that for-profits don’t do good.” You may be surprised to know that I do provide pro bono services for both for-profit and nonprofit organizations that support causes I really care about. I often offer these discounts without being asked. But, nonprofits don’t have exclusive status when it comes to doing good or benefitting their communities, and so they don’t automatically deserve a discount. When I busted the assumption that nonprofits deserve a discount just because they’re nonprofits, that helped. But, how did I go from saying yes every time someone asked to confidently saying no? I realized I was saying yes not because I thought that nonprofits deserved a break for doing good in the world. I was saying yes because I had no confidence in my pricing. I had to feel confident in my pricing before I could learn how to say no to a discount request. Here’s how I got clear on my pricing. First off, just because my prospect confuses me with a donor doesn’t mean I have to accept. The missions of my nonprofit customers are not necessarily aligned with mine. After all, if I set my rates according to my personal interest in another company, then my client who sells spark plugs would pay a lot more for my services. I couldn't care less about spark plugs! Once I realized that there was no connection between nonprofit status and the pricing of my services, I evaluated my goals. Am I trying to be less expensive than my competitors? Am I running a profitable business now? How much do I need to make from my services? How much do I want to make? And I thought about how I wanted to work in order to achieve those goals. What is important to me in my client relationships? Does the nature of my customer’s business matter to me? Do I want to make my services affordable to everyone? Thinking about and discussing these questions gave me some clarity around my pricing. Here’s what I determined about my agency’s overall pricing as it relates to discounts for nonprofits: 1. I want to be fair to my clients. Fair means being consistent in my pricing. About 15 percent of my agency’s clients are nonprofits. If I create special nonprofit pricing, guess who has to make up for the loss in revenue? Not me. It’s the for-profit clients who pick up the tab. That just isn’t fair. So, I’m consistent with my overall pricing structure. 2. When someone is paying me less, then I am tempted to give them less. They get less attention and become a lower priority. I treat people inconsistently when I charge them different amounts for the same services. … Bottom line: Inconsistent pricing is bad business. Requests for discounts are requests for DONATIONS. Knowing the data and values that inform my pricing structure gives me the confidence I need to be consistent in my pricing. Comment or ask a question below.