Are Nonprofit Discounts Eating Your Profits? - August 3
I was cruising through LinkedIn posts recently and one particular post caught my eye. A gentleman from the project management website, Basecamp, asked, "Why should I continue to give discounts for my business to nonprofits?" In his case, the discounts were beginning to affect his bottom line. His point was this: there are a wide range of nonprofit organizations. Some are mega corporations with multi-million dollar budgets; others are not.
In this issue of Promotional Consultant Today, we shared these tips on how your business can support nonprofit organizations.
Requests for nonprofit discounts come from all organizations of all sizes. Some are huge multinational charities, some are small, local volunteer organizations, others are somewhere in the middle.
The fundamental difference between a nonprofit business and a for-profit business is the use of profit. Nonprofits can generate a profit—called a surplus—but it's reinvested back into the organization. For-profits can take the profit and distribute it to their shareholders, owners or anyone else they'd like. Also, in many cases, revenue for nonprofits comes from donors, grants or other fund-raising efforts, whereas for-profits obviously rely on revenue from customers.
To show support for nonprofits without having to discount your pricing, consider these options:
- Budget for a specific amount of "free product" annually. This is a common practice in the pharmaceutical industry. These manufacturers will set aside a specific amount of product to be used as "free drugs" for patients who are either having issues with insurance coverage and need temporary access to therapy, or for patients who qualify for free product.
- Set up qualifications standards. Just because your customer is a 501 C 3 business does not necessarily mean it needs financial support. Set up certain standards that make a business or individual qualify for the free or discounted product. You can also set a limit on how often these organizations can utilize their free or discount status.
- Create a scholarship program. Rather than give away free product, set up a scholarship fund for which nonprofit customers can apply. Again, this allows you to control the amount of funds donated as well as the requirements for the application. With a scholarship program, you get the added benefit of promoting the program and receiving the PR exposure.
- Adopt a charity. Instead of providing discounts to multiple charities, chose one charity to support and gain exposure through this program. You could even have your employees nominate and vote on the charity of choice. Choose a charity that benefits from your industry.
Source: Cassandra Johnson is a tech-savvy marketing communications consultant and freelance writer. She reports on the latest trends in the promotional products industry, public relations, direct marketing, e-marketing and more. She supports clients in a variety of industries, including promotional products, hospitality, financial services and technology.