Pricing with Purpose: The Art of Balancing Mission and Profitability
Your pricing strategy is not just about numbers; it's the art of valuing your mission and impact, a harmonious symphony of purpose and profitability.
As an entrepreneur, you already know that properly pricing your products and services is critical to the successful growth of your business. As a social entrepreneur, you also understand the difficulty of striking a balance between generating revenue and delivering on your desired social or environmental impact. This means your pricing strategy has to factor in not just the actual cost of doing business but the cost of creating the impact.
In this blog post, we’ll explore the various considerations, challenges, and best practices that you can implement to develop an effective pricing strategy that aligns with your mission and drives sustainable success.
Understand Your Triple Bottom Line
For social enterprises, pricing decisions go beyond profit maximization. The Triple Bottom Line, a concept coined by John Elkington, a British entrepreneur, author, and sustainability advocate, in 1994, adds an additional layer of complexity as you seek to balance your mission-driven objectives with financial viability and environmental responsibility.
These three dimensions shape the way your social enterprise engages in pricing strategy:
The social impact dimension requires you to assess and quantify the positive change your enterprise creates.
The environmental dimension pushes you to consider the environmental impact of your operations and offerings.
The financial dimension revolves around ensuring your social enterprise remains financially viable and sustainable.
Understanding the relationship between pricing, financial goals, and social and environmental impact metrics is the first step toward developing a purpose-driven pricing strategy.
Analyze Your Costs and Impact Metrics
Know your numbers. This may seem like a trite and overused phrase, but when it comes to purpose-driven pricing, it’s absolutely essential. Having a thorough understanding of your costs, including production, distribution, and overhead expenses, enables you to ensure that the foundational expenses are accounted for.
In parallel with that initial cost analysis, you have to identify and measure the impact metrics associated with your mission. Impact metrics are quantifiable indicators that demonstrate the positive change your social enterprise creates and are specific to your enterprise's social or environmental goals. Understanding these metrics allows you to consider the financial investment required to deliver the intended social or environmental impact.
Once you have a handle on both the cost analysis and impact metrics assessment, you can then integrate that information into your pricing model.
Leverage A Value-Based Pricing Model
Value-based pricing is one of my favorite ways to think about pricing. I learned about this a few years ago, and it’s been a game-changer for me as I’ve moved away from a dollars-for-hours model. This approach to pricing involves setting prices based on the perceived value customers receive from your products or services while ensuring that your costs are covered.
From a social impact perspective, value-based pricing allows you to highlight the unique social and environmental benefits and impact delivered through your products, programs, or services and allows you to justify higher prices to clients who understand and appreciate the social impact created through their purchase.
Conduct Market Research
I’d be remiss if I didn’t mention market research here. It’s important to understand your potential client’s preferences, their willingness and ability to pay, and overall purchasing behavior. With that said, there’s a big push right now to adopt flexible pricing models to accommodate customers with different economic backgrounds, where appropriate. This might look like tiered pricing, pay-what-you-can models, or subsidizing products for certain beneficiary groups to broaden your reach and make your offerings more inclusive.
One word of caution: Market research gives you data points, but it doesn’t tell the whole story. YOU, as the leader of the organization, have unique skills, talents, and expertise. That has its own value, and it, along with everything I’ve already mentioned, has to be factored into your pricing equation.
Be Transparent
Transparency is a core value in social entrepreneurship. Being open and honest about your pricing structure, the breakdown of costs, and the allocation of resources builds trust with customers and stakeholders. You don't have to give all the details, but when a client wants to understand how their investment in your products or services is being used, you have to be able to give them an answer.
Your transparency regarding the social impact (costs and benefits) achieved through their investment reinforces their belief in your social enterprise's mission and motivates them to keep supporting the cause.
As you can see, developing a pricing strategy for your social enterprise is a multifaceted process that requires a balance between financial sustainability and social and environmental impact. If you’re struggling to develop a really solid purpose-driven pricing strategy, let’s dig into this together. Taking the time to craft a well-thought-out pricing strategy will drive revenue, instill confidence in your sales process, and empower you and your enterprise to make a lasting and positive difference in the world.
