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7 types of service pricing

by The NonProfit Times - March 15, 2013

When thought about on its basic level, price is nothing more than a barrier to service. Those who have mastered the art of pricing know how high or low to set that barrier. While it is usually thought of as a tool of the for-profit world, nonprofits do actually sell things.

Whether they are shirts or other such memorabilia, organizations often sell products to raise revenue for their mission. As Thomas A. McLaughlin noted in the second edition of “Financial Basics for Nonprofit Managers,” the prices for nonprofit services have been kept low thanks to two factors: Decision-makers at organizations tend to be professionals, and professionals need people identified as service recipients to perform professionally; and, since most people used to erroneously believe that being a nonprofit meant making no profit, price in the sector came to be equated with cost.

There are many different names and descriptive phrases applicable to payment arrangements, McLaughlin noted, and they vary by locality and area of service. They are:

  • Fee for Service
  • Cost-Based Reimbursement
  • Unit Reimbursement
  • Class Rates
  • Fixed Price or Project-Based
  • Vouchers
  • Standard or Market Pricing

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