
Why non-profit pricing? - pchristensen
http://37signals.com/svn/posts/2580-why-non-profit-pricing
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bonaldi
> _Some might say that non-profits 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._

It's pretty easy to say "non-profits should pay the same as for-profits" when
you exclude the entire foundation of the difference.

Non-profits get treated differently to incentivise their work. Instead of
working to increase shareholder value, they work for some ulterior goal --
generally a beneficial goal that couldn't be brought around as a side-effect
of some profit-making enterprise.

This difference isn't just a "some other difference", it's the crux. It's why
they get special tax status while for-profit businesses -- yes, even those
that "do good" -- don't. Society wants to encourage the work of non-profits.

Companies should consider offering special pricing to non-profits because it
helps to encourage organisations that exist purely to do good, not
organisations that are legally mandated to make money and may do good as a
side-effect.

~~~
patio11
That assumes you believe non-profits actually do good. I do not feel this is
remotely accurate about nonprofits as a class. Some aim to do good but are
hideously ineffective, and some do "charitable" things that I find full-stop
evil. (Some do good well, and I _choose_ to donate to them.) That is true for
just about anyone, since nonprofits are so diverse. Why assume a-priority they
are better than other organizations?

~~~
bonaldi
The actual implementation of non-profit status in the US is a different issue.

Consider patents. I agree with the idea of patents, but totally disagree with
the US implementation. Likewise, I agree with giving discounts to non-profit
organisations, but the more I dig the less I agree with the US system for
awarding the status.

But that wasn't the argument made in the post. It wasn't "we would discount to
non-profits if only there weren't so many lame orgs with that status" it was
"why would we ever do this?".

~~~
lsc
>The actual implementation of non-profit status in the US is a different
issue.

And how would you change that? I mean, you can't actually have the government
decide what is "the greater good" and what is not- the whole point of
charities is that they are non-governmental entities; they work on problems
the government is either not addressing or addressing ineffectively.

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timmorgan
I know a few non-profits who get tens of thousands of dollars worth of
Microsoft software and Cisco hardware for mere pennies on the dollar. Every
year.

What would they be using if these large companies weren't so "generous"?
Probably lower-cost alternatives, free, and open source options. And then
they'd tell their non-profit friends about it. Not a good idea for Microsoft's
bottom line I bet.

For companies like 37s and BingoCardCreator, on the other hand, a non-profit
discount probably doesn't make a lot of sense.

~~~
furyg3
I work for a non-profit as an IT manager (35 paid employees, ~50 unpaid
employees) for an organization that tries to reduce poverty in the world. I've
worked as an IT manager at "for-profits" for a while now, and this job is by
far the most challenging.

This isn't true for all non-profits, but here there is nearly no budget. Our
pay-scale is fixed, and we use interns in a big way. We rely heavily on
'sponsorship' from organizations who support our cause for nearly everything
we do.

Of course I take advantage of blanket donation programs (from Microsoft and
Cisco, for example) and "non-profit discounts", but that's not what I really
want. I don't want to pick SharePoint because it's free for us, I want to pick
it because it is a good solution and fits our needs. Sadly (and by-design,
surely) that price point affects my proposals to management, and I have to say
"Microsoft gives it to us for free, 37signals offers no discounts". :(

But these blanket discounts aren't what I push for with vendors. I want to
build a special relationship with our sponsors. I want _you_ to donate _your_
software or services to us because _you_ believe in _our_ cause, just as I
believe in our cause and have taken a serious pay cut to support it. I want
that relationship to be sustainable: I don't want you to feel that the burden
of supporting us is greater than the reward.

And there can be a lot of rewards. We have an extensive for-profit network,
and we work very close with them. We have a ton of young, highly-educated
staff who come through our organization. We have a very large base of
supporters who engage us, and who we engage, online (twitter, facebook, etc).
The list goes on and on, it only requires a bit of creative thinking to
replace dollar signs.

So I'd re-phrase the question: What are _you_ doing to leverage a group of
people who _need_ and _are passionate about_ using your product for an
_important cause_ which _you support_ , but don't have the resources to pay
full price?

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credo
>> _We don’t want to be one of those companies that has a "who you are
determines how much we can charge you" pricing model. We find those models
unfair, dishonest, and flat out unappealing._

Using moralistic language like this to describe non-profit pricing is a bit
too harsh.

Would it be dishonest to donate their product or offer a discount to a single
non-profit ? If not, why would it be dishonest to offer the same deal to 10
non-profits or all non-profits ?

I wonder what the blogger would say about freemium plans and tiered pricing.
Freemium pricing always means that the paid customers subsidize free customers
(many of whom will never become paid customers).OTH the absence of freemium
may reduce the number of paid customers making the product un-viable.

Is it unfair and dishonest to do freemium pricing ?

[disclosure: All of our iPhone apps are registered in Apple's "education
pricing" discount program for students and faculty. I see nothing dishonest
about this.]

~~~
jasonfried
"Would it be dishonest to donate their product or offer a discount to a single
non-profit ? If not, why would it be dishonest to offer the same deal to 10
non-profits or all non-profits?"

At our discretion, no. Just like you may choose to support a specific charity
or cause without supporting all charities or causes, we may choose to put our
support behind a specific charity or cause. As I mentioned in post, we've done
exactly that.

But to say we should support every single non-profit by offering them a lower
price simply because they are a non-profit doesn't make sense to me.

~~~
JoelSutherland
This is exactly his point.

You choose causes to support based on some criteria. Others choose causes
based on the US Tax definition of 'non-profit'. Given that both are a matter
of choice, it is harsh to call a set of criteria different than your own
dishonest and unfair.

Or to strike more directly at the heart of the matter: when we behave
charitably it is almost always suboptimal. A dollar given to the Gates
Foundation is a dollar not given to Habitat for Humanity, and vice versa.

To criticize a system of generosity for being suboptimal is certainly
reasonable, but now how most would probably want to spend their time.

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patio11
I have not enjoyed getting teachers who make $60k explain to me why I need to
subsidize them (haven't hit $60k in my entire life).

~~~
hdctambien
Where I was a teacher, $60k was the highest you could earn without a PhD. And
it took 10 years to work your way up to that level.

EDIT: This was 5 years ago. I doubt teachers are making thousands of dollars
more these days. My point is, the argument "teachers make so much money! What
are they complaining about" is at best misinformed.

If you're hurting for money, try substitute teaching for 1 or 2 days and see
what the difference is between a teacher's workday and your own. You'll
probably take your less than $60k job over their most-likely-also-less-
than-$60k-more-like-$30k-job

~~~
andrewce
When I taught, I was working 10-12 hour days (some of this was due to my own
inefficiency, and some of it was due to the massive inefficiency of the school
in which I taught) and pulled in about $30k/year. Our salary schedule was such
that the most I could earn without a doctorate was about $38k (after 20 years
of experience).

That said, there are plenty of grant programs within schools. At least two of
the districts in the city in which I live now have foundations set aside for
things like this.

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notahacker
If one of the principal reasons for choosing your product is an opportunity to
maximise profits, then an organisation that doesn't actually have that
motivation arguably derives less value from it and logically ought to be less
willing to pay market price. Same applies for discounts "for academic use"
etc. Price discrimination isn't just about assuming a particular entity has
less funds, period.

Whilst nonprofit != charity it's also perfectly reasonable to make the value
judgement that it's fair to implicitly subsidise social goals at the expense
of other clients' shareholder returns. Provided no laws are being flaunted, I
can offer discounts on a service I provide to people for virtually any whether
its because I believe in their mission, like them on a personal level, respect
their OAP or veteran status or just desperately want their money. One of my
local curry houses gives discounts to Arsenal season ticket holders. Nobody
should feel _obliged_ to make these concessions, but when many companies do
makes sense for nonprofits to ask the question. I bet 37signals get plenty of
emails from startups and small businesses asking for a dose of sympathy and
lower prices too.

Sometimes, where you have a high margin business and close competitors that
will discount, it makes sense to give them what they ask for too.

~~~
sokoloff
I think a lot of the academic discounts are an attempt to get lock-in and thus
maximize profits over time.

If a budding artist gets used to Creative Suite (because it's cheap for them),
or a new coder gets a cheap Mac, or a mechanic student gets a discount on
SnapOn tools, all of those have a likely impact on their future purchases.

~~~
tokenadult
The discounts on Westlaw for law students in the late 1980s were certainly
meant to gain lock-in. The law librarian who taught my law school class how to
do online searching told us, "The company wants you to think of their product
as heroin."

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wnoise
Or, you know, a standard case of price discrimination
(<http://en.wikipedia.org/wiki/Price_discrimination>). Non-profit vs. others
isn't a perfect measure of willingness and ability to pay, but does have some
correlation. Rebates and coupons aren't perfect at identifying those with
higher elasticity either, but they are still in common use.

~~~
webwright
...In common use on 37Signal's signup pages, in fact. I don't blame 'em
(because coupons work), but it certainly doesn't perfectly jibe with their
"consistent pricing" mantra.

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terra_t
my experience is that non-profits are just as niggardly as ordinary businesses
are, if not more so, but there's no incentive for the organization or its
employees to do any better... nothing ever has an upside.

~~~
maukdaddy
While your command of vocabulary is impressive, you should be careful with
'niggardly'. The word, while not technically racist, is obviously very close
to some very bad parts of US history.

I'd suggest: stingy, greedy, or others -
<http://www.answers.com/topic/niggardly>

~~~
stratomorph
The resemblance is entirely coincidental. The two words have unrelated
etymologies. We might as well advise people to avoid words like "luck" and
"truck," which are not technically profane, but obviously sound very close to
a very bad word.

~~~
tjr
"Niggardly" is a rather uncommonly used word, though. One of our city
officials used "niggardly" in a public event a few months ago, and a bunch of
people got in an uproar. Were those people ignorant about this word? Yes.
Would it have been better for the city official to have avoided it? I think
so. Not every instance of language use is necessarily an opportune moment to
enhance the vocabulary of others.

That said, I would like to think that on this particular forum such concerns
ought to be minimal, at best.

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lsc
eh, it seems to me like more for-profit companies should put more of their
marketing budget into charity. Now, I mean, not just any charity, but a
charity related to their field, something that their customers care about. I
mean, I know I've donated prizes to a few programming contests to good
effect... and I pretty regularly see my competitors names as mirrors when I go
to download open-source products.

And really, how many banner ads would it take to gain the credibility of
getting on the EFF "thanks" page? (I'm not there just yet... but I do have,
for example, a LOPSA member discount.)

The other advantage of taking it out of your advertising budget is that the
legal status of the entity you are giving to doesn't matter. From the for-
profit corp's perspective, they are buying advertising.

I mean, when I do it, at least, I don't write off the retail "value" of the
thing I gave away as some sort of charitable donation; I think that's scummy,
'cause it cost me some fraction of that to provide. I give away the service,
then whatever it costs to provide that service, obviously, is part of the cost
of running prgmr.com and is written off against any income, just like what it
costs to run the for-pay domains; except these don't have any money coming in.
I'm getting good (and usually pretty cheap) advertising; I don't need to run
some tax scam, too.

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msabalau
I imagine the reason the reason why many non profits ask about a discount is
because it's common to grant one. It seems likely that the firms offering
those discounts are doing so not "out of the goodness of their heart" because
their experience is different than 37signals--that their "for profit"
customers can and will pay a much higher price for their product or service.
Offering a non-profit discount is a way to capture what money the the non-
profits are willing to pay. Why leave money on the table?

It's not clear to me why market segmentation would be described as "unfair or
dishonest". Does Jason go through life gritting his teeth at the immorality of
senior citizen's discounts at the movie theatre? Does adding a few minor
differences to a product, business class seating for example, transmute an
"unfair and dishonest" practice into an acceptable one?

To be clear, I can imagine cases where having "a clear price that we stick to"
is an effective policy. Saturn seemed to do well with that policy for quite a
while.

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antidaily
Non-profits take forever to make decisions. Don't waste your time with them.

