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Charging for services

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Advice for charities on charging for services.

Since the financial crisis of 2006–7 there have been widespread cuts to charity-sector funding, and many voluntary organisations have been forced to think about charging for some of their services.

Although it’s a good idea for any organisation to take a sustainable funding approach and develop a mix of income sources rather than relying on one or two funders, many voluntary organisations are still hesitant about charging for services that have previously been free.

Why charge for services?

There are lots of benefits to charging for some or all of your services.

Generating income

Perhaps the main reason is that charging for services will give you unrestricted income.

Building relationships

Charging for services can help you to build relationships with new or different customers. For example, you could start providing services for local business or organisations, as well as just individuals. This will help you to grow your organisation’s reputation.

Showing people value

Beneficiaries may not realise how much the service is worth if it has always been free, and may attach more value to it when there’s a cost. People are less likely to miss appointments or activities if they’ve paid for them.

Finding new opportunities

Moving to a charging model can help your organisation think about new markets – could you sell the same product or service to a different market, to help subsidise the cost to your target beneficiaries?

What are the challenges?

Changing relationships with your beneficiaries

A changing relationship with your beneficiaries may require careful management. Prepare them for any new charges and try to explain why you need to charge. This will help avoid any damage to their trust in your organisation.

Cost

Cost will always be an issue for some beneficiary groups. If you work with people who have little or no income, you may need to think laterally about who will pay for the services – is there a different customer (for example the local authority, a corporate partner or a partner organisation).

  • Selling goods and services may require new skills, and some existing staff may not feel comfortable about doing this. Think about how to support your staff to manage the change, or whether you need new or different job roles altogether. You may also need to bring in new skills in marketing, financial planning, for example.
  • Charging could change your whole organisational culture. If you’ve been used to delivering subsidised services with a grant, it can be a bit of a culture shock to have to start talking about sales forecasts. Talk to your board and your staff about how this may affect both your working culture and your organisation’s brand.

Where to start?

1.  Talk to your staff and volunteers - ask for their thoughts on the culture change and how they think your beneficiaries might respond.

2.  Think about how charging will affect your mission. There may be some services that you will never charge for as a point of principle. For example, some organisations will never charge to help people in crisis, but may charge the same people for services to help them manage once they are more stable.

3. Work out who could and who would pay for your services. It may be that some beneficiaries can pay, whereas others will need to be subsidised. You may find that another organisation or a local authority will pay for their beneficiaries or clients to access your services.

4. Do an options analysis. What would happen to your beneficiaries and your organisation if:

  • you charged the full cost of the service (or more)
  • you subsidised the cost with some of your other income (would this affect your other activities?)
  • you stopped running the service altogether.

Weigh up the pros and cons of each option. There may not be a clear answer, but you should try to get as much information as you can to help you make an informed decision

5.  Engage with your beneficiaries. Talk to them about what they value about your service, and what they would do if it wasn’t there. Would they have an alternative and would they be prepared to pay for it? You could do this as part of your normal meetings, or as a focus group or special feedback event – whatever makes your beneficiaries feel comfortable and confident in giving feedback.

6.  Think about whether you could work with partners to run your services more efficiently (for example, sharing overhead costs) or deliver a package of services to beneficiaries, rather than charging for each individual service. This might be easier to sell to beneficiaries, as they will see you working together to make the process easier for them.

7.  Get to know your market. Does anyone else do what you do and, if so, why do people come to you or go to your competitors?  What are the other products and services, and who are the customers, suppliers, competitors and collaborators in your marketplace? Remember that your competitors may not always do the same thing as you – customers may be choosing between different services as they have a limited amount to spend.

8.  Differentiate yourself. How do you differentiate yourself from your competitors?  What can you offer that others don’t? How are you communicating this to potential customers?

9. Think about different payment options. If you have to charge, you could use a pricing scheme to help those on lower incomes to access your services. For example, you could offer discounts, or you could set up a membership scheme, with a free or lower-rate membership that is subsidised by the higher-rate payers.

10.  Think about how you want to take payment. Do you want people to pay at point of sale (ie when they walk in the door?). Or could you charge people by monthly direct debit, on account, or through membership? If some people are paying more, you may not want to take payments at the point of sale - this will avoid people being embarrassed by having to pay less or getting upset at having to pay more.

Changing perceptions

When you start charging, much of the challenge will be about changing perceptions. It’s important to set out a careful marketing plan to get people used to the idea of paying for your service. Think about the best way to reach your customers (how, when and what you communicate with them).

Try to do some market testing – start with one service and get some feedback on how people felt about paying, the payment process, and whether they think you’ve valued it correctly.

It can be useful to think about the difference between cost, price and value.

  • Cost – the amount that the product or services costs you to deliver.
  • Price – the amount that you are selling it for.
  • Value – the amount that the customer perceives it is worth. If you’re offering a life-changing service, the ‘value’ could be limitless.

Get more help

 

Page last edited Mar 29, 2017

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