Robert Putnam’s bestseller Bowling Alone needs little introduction, not to mention another review. Yet despite its publication a decade ago, the volume remains highly relevant for thinking about community as the social aspect of sustainability.

In the 20th century’s final four decades, the vast majority of civic engagement indicators – political, civic, and religious participation, workplace connections, informal socializing, altruism, philanthropy, reciprocity, honesty, and trust – declined in the United States, eroding community and social capital. Americans now do less with others and more by themselves, turning from joiners to observers, from doers to watchers, and from schmoozers and machers to loners.

The reduction in social capital and community involvement is attributable, in the increasing order of influence, to pressures of time and money, including “the special pressures on two-career families”; suburbanization, commuting, and sprawl; TV entertainment and its privatization of leisure time; and generational change, with a more detached and individualistic generation of baby boomers and Gen Xers replacing “the long civic generation”.

If you consider that “social capital makes us smarter, healthier, safer, richer, and better able to govern a just and stable democracy”, we’d be well advised to take action to replenish the stock of social capital in the American community. Putnam’s “agenda for social capitalists”, a set of recommendations for increasing social capital, reads a lot like solutions for maximizing social sustainability:

• increase participation in collective activities and actions
• make workplaces more “family-friendly and community-congenial”;
• foster electronic communication that reinforces community engagement (social media does that only to the extent that it encourages face-to-face interaction);
• engage in spiritual communities of meaning;
• use the arts as a means “for convening diverse groups of fellow citizens”;
• design built environments to encourage more integration, walking, and spaces for socializing with neighbors (and less commuting);
• participate in public life.

Putnam suggests that periods of social decay and civic engagement come in cycles. With its focus on community and social responsibility sustainability may be just the right reaction to hyper-individualism of the post-modern era. The cycle plays into every sustainability practitioner’s cards.

It took me unusually long – two weeks – to finish Bowling Alone. While it reads well, like a social science mystery, I found myself unable to skip any of the interesting, valuable, and well-researched detail populating every densely-printed page.

If you’re a sustainable business owner or marketer aiming to improve your company’s social bottom line, read this book. To make informed decisions in encouraging community involvement, you need to take stock of available information. Bowling Alone provides enough of it to occupy you for a few lone evenings.

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Robert Putnam, Bowling Alone: The Collapse and Revival of American Community, Simon & Schuster: New York, 2000.

Charging nonprofits lower rates than businesses for the same service is a common way of B2B price discrimination based on customer type.

I recently ditched nonprofit pricing – I now offer the same rate structure to nonprofits as to businesses. Here’s why (in random order).*

1. Tax status

Nonprofit rates equal price discrimination based on tax status, which is a poor criterion for such differentiation (in fact, logic would command charging higher prices to organizations that don’t have to pay the income tax). When nonprofits purchase products on the market, they typically pay the same price as everyone else.

With the exceptions of taxes and industry-specific issues, both businesses and nonprofits are corporations that must adhere to the same laws and regulations. That nonprofits are “public benefit corporations” – most of them, anyway – doesn’t exempt them from the one rule of business: revenues must exceed expenses. A bankrupt nonprofit is no good to anyone – “not for profit” should not equal “for loss”, as my old boss used to say.

I believe that if nonprofits would run more like businesses (”more like” not “exactly like”), particularly sustainable ones, they’d be more efficient and effective in pursuing their missions. Nonprofit rates undermine that belief by setting a different operational standard. Because of their public benefit characteristic, I actually hold nonprofits to a higher standard than businesses, and I want my prices to reflect that.

2. Signaling

Price is a crucial market signal, especially for services. A lower price suggests lower quality; a higher price increases the perception of quality. In turn, the customer’s belief about quality affects her subjective, service-related enjoyment and satisfaction. Lowering your price for nonprofits is likely to signal a lower quality service.

Every one of my clients, regardless of tax status, gets the same level and quality of service. In fact, because nonprofits tend to achieve a better People bottom line (my focus in sustainable marketing), I aim to provide more to nonprofits for their investment. Though you could consider providing more for the same price as discounting, there is no reason to charge less for more.

3. Differentiation

Because price is the most tangible element of your service, your clients will use it to compare you with your competitors. In my experience, that’s exactly what nonprofits do, primarily for budgetary reasons (the first question out of my mouth as a fundraiser/purchaser was, Do you have nonprofit rates?)

Price often becomes the primary – sometimes the only – criterion for deciding between service providers. When purchasing B2B services, nonprofits tend to see the dollar sign instead of the quality of service or delivered results. I’m taking myself out of that game.

As a sustainable marketer, I also advise clients against differentiating themselves on price. I’m following my own advice – I compete on delivering value to sustainable organizations.

4. Expectations

Nonprofit rates reinforce the “tyranny of low expectations”. Offering lower rates to “poor nonprofits” perpetuates the lower standards we as business people place on the nonprofits’ performance and that they place on themselves. Nonprofits can and should do better because we can’t afford to lose them and their good work in the community.

I believe there is enough capacity in nonprofits to allocate their existing resources to areas that move mission and generate ROI. Doing more doesn’t require more funding – it requires better allocation. Nonprofit rates encourage resource misallocation.

Because of budgetary and overhead considerations, nonprofits often end up cutting corners. Lower rates encourage such behavior, or at least fail to prevent it. Charging market rates puts nonprofits and business service providers on a level and transparent playing field. I have high expectations of nonprofits, and I want my prices reflect that.

5. Law of attraction

Like attracts like. Lower rates attract less attractive clients and projects. Higher rates work the other way.

More attractive nonprofit projects generate a better ROI for the community and its stakeholders, and come from more attractive clients. I’m going beyond the financial standpoint: I’m talking about the quality of the project and the organization as a client. It’s the difference between an organized, confident, and reliable client and one that’s anything but.

I want to make a difference with my work and believe I can do that best with high ROI projects and organizations. I want my prices to attract that kind of work.

6. Financial sustainability

This one is personal. My triple bottom line includes prosperity. If I can’t make a living with my business, I can’t help my business and especially my clients achieve their triple bottom line goals. And I also can’t share with my community the resources arising from being a profitable business. A bankrupt business, too, is no good to anyone.

P.S.: Yes on pro bono, donations, and volunteering

I aimed to outline the case for dropping discounted nonprofit rates. None of the above is to say I will cease offering pro bono services, donating money, and volunteering, whenever possible.

What do you think? Do you charge nonprofits and businesses differently or the same? Why? What are the benefits and drawbacks of nonprofit rates?

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* I’d long felt uneasy about nonprofit rates. Lots of thinking, events, and experiences led to this decision. Many conversations with fellow B2B service providers contributed as well, and I’m thankful to everyone for their input and sharing.

Image credit: Niemster

Of all marketing mix elements, price seems to generate the most anxiety among small business people. I’ve had a number of conversations about pricing with my fellow service providers and I raised my prices in September: what a perfect time to take a look at pricing of business-to-business services. After an overview of B2B service pricing models, I’ll explore price discrimination – charging different prices to different customers based on various factors (with a bias toward marketing and consulting). Tomorrow I’ll offer a position on nonprofit pricing.

First I want to make one thing clear. Not only is it okay to make money, it’s even better to make a lot of money. What matters is not quantity, but why you’re in business, how you make that money and what you do with it. That’s why you’re a sustainable business adhering to the triple bottom line, right?

Pricing business-to-business services

Your pricing should 1) integrate with the rest of your marketing mix and 2) satisfy your client’s needs. Having said that, you can price your business-to-business service in a number of ways (the list is from Guerrilla Marketing for Consultants):

• Hourly rate or fee-for-service. The billable hour still reigns in B2B services. As any pay-as-you-go service, it’s easy to understand and track. The longer the project, the more you make. Hourly rates are also easily used to compare competitors and negotiate down. Worse, the hourly rate bears no relation to the outcome of your service, which is what you’re hired for.

• Fixed fee or price-per-project combines your hourly rate with the anticipated time for the project. It offers a predictable revenue, but you get paid the same no matter how long the project actually takes.

• Contingency pricing brings in a percentage of the project result, e.g. increased revenue or reduced cost. This success-based pricing can be very motivating  – the better the result the more you make. But, if your efforts fall short, you can make little or nothing.

• Value-based pricing. Your fee depends on the value it generates. This model is potentially the most profitable for B2B services, and it seems the marketing industry is moving in this direction. However, with value being highly subjective, it’s tough to estimate and measure.

• Retainer. You can charge a set amount for a set number of hours, or charge a fixed fee for a fixed fee. Retainers are best suited for advisory services rather than projects – you’re charging for availability.

• Equity-based pricing. You get paid with stock or stock options instead of cash. This pricing is most common among startups.

Combinations of these pricing models can yield their benefits and eliminate their risks. For example, you can combine a fixed fee with a contingency bonus, a prepaid-service retainer with fee-for-service, or charge differently for different services or project phases. For the right client, you can also trade for products or services. Possibilities abound in composite pricing – do your research and opt for the combination that works best for you and your client.

With my company, Semiosis Communications, a sustainable marketing consultancy, I usually combine my basic hourly rate with an estimated price per project, while leaving some flexibility to ensure delivery of project deliverables. For a few months now I’ve been offering a variation of the pay-what-you-want method: every invoice comes with a satisfaction guarantee, where the client is free to pay either the billed amount or any other amount they deem adequate to the service and benefit provided. (I have yet to see a client pay less than the billed amount.) I’m also exploring value-based pricing, though that’s a long-term project.

Price discrimination in B2B services

Price discrimination refers to charging a different price for the same service depending on circumstances. It aims to take advantage of the consumer surplus – the difference between what the consumer is willing to pay and what she actually pays.

While price discrimination may seem to render your pricing unpredictable to clients, it allows tailoring the price to each client’s specific needs. Note I’m talking about both lowering (discounting) and raising prices.

As a B2B service provider, first consider the triad of speed, quality, and price. In the fast-good-cheap pricing method, you can only maximize two at a time: delivering a high-quality result fast will be expensive; delivering high quality at a low price will be slow; and delivering fast at a low price will likely be lower quality.

Next consider these factors to decide whether to charge different prices:

• Time. You can offer seasonal or cyclical prices depending on the time of year – for example, charge less when businesses is slow to attract business; charge more when you’re busy to move projects around your priority list. You can offer special pricing around events and observances. You can offer limited-time-only prices.

• Location. A B2B service is not necessarily tied to a location. You can still charge a different price if you have to travel over a certain distance to your client’s location (charging for travel time or mileage falls under this category). You can charge differently for face-to-face and phone/email service delivery.

• Quantity. Similar to bulk discounts, you can offer different prices for smaller projects and for ongoing projects, repeat business, or long-term clients. Teaser or incentive pricing also falls into this category; you can offer a lower initial price to lure a client in, or you can offer to lower your price after performing a certain amount of services.

• Customer. This entails charging a different price to different clients based on their type (segment) or willingness or ability to pay. A common method is charging differently to for-profit corporations and to nonprofits (more on that in tomorrow’s post). A bigger organization means more complex projects, so you can charge by business size – revenue, market capitalization, employee count, etc. You can also differentiate by industry, stage of development, or other characteristics.

The pricing for Semiosis Communications consulting services varies by business size, and I also have a special, lower price for startups and microenterpreneurs.

How do you price your business-to-business services? What examples of price discrimination have you implemented or encountered?

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Image credit: mag3737

Funny how some articles can trigger memories and associations. The OregonLive.com interview with Myron Orfield about the need to assure social justice alongside sustainable development in Portland, Oregon made me think about freedom and equality in marketing.

In a political philosophy seminar exercise back in graduate school, I was paired with my friend Farah from Jordan to argue for our favorite political philosophy. At the end, the instructor asked us to summarize, in a single word, the principal reason for our selection. I said, Because it’s more free (as in liberty). Farah said, Because it’s more fair.

The trade-off between liberty and equality remains the core debate in Western political philosophy. Freedom versus justice is just another way of contrasting individualism and community: too much equality among community members may undermine individual freedom, and too much liberty may undermine community ties.

Because the pursuit of individual fulfillment and the desire to belong are among the primary human motivations, the fair versus free divide relates to sustainable marketing as well. Negative externalities aside, can an individual’s purchasing to satisfy her needs impinge on the freedom of others to satisfy theirs and thus degrade community? Can community building suppress individual expression and generate intolerance toward outliers?

At first sight, freedom and fairness (liberty and equality) are two opposite paths you can take in defining the meta-level benefit of your product.

• Freedom / liberty / individualism: Will your product help your customers achieve what they want to achieve? Will it help them become who they wish to be?
• Fairness / equality / community: Will your product help your customers achieve what others have achieved? Will it help them become a member of a group?

There’s no value judgment on either option – both are aspirational and useful in their own right. There’s also no prescription as to what option to favor with your product – successful brands help attain both individual expression and belonging.

However, the third piece of the French revolutionary motto may throw all this out the window. After reading Robert Putnam’s Bowling Alone (watch out for the review Friday), I am convinced that individualism versus community is a misleading dichotomy to focus on. Conceptually, both individuals and communities are static units of analysis. The connections and relationships among individuals and the networks within communities inject dynamism into the equation and actually matter more. Without relationships to other people, we as individuals are nothing; without connections among its members, communities fail to materialize and thrive.

Sustainable marketers should opt for the third path and aim to build social capital. The power is in the networks and in the relationships they promote. The questions then become:

Will your product help your customers connect with other people? Will it help them cultivate meaningful relationships?

***

Image credit: waywuwei

Among the three pillars of triple bottom line sustainability, the social bottom line – People – tends to be the toughest to implement (and not just because it’s the toughest to measure). Donations, grants, or sponsorships represent the low hanging fruit. Building social sustainability into your business model is a whole another story.

Yesterday I attended the Portland Real Estate Industry Social at the Tanzamook Townhomes. The meetup took place in one of the 3-level 3-bedroom townhomes located at NE 11th and Tillamook Street. At first sight, the Tanzamook is just another infill development, albeit built to the Earth Advantage Gold standard. But as its name indicates, the complex has another dimension.

The sale of each townhome pays for a dorm room at a girls school in Iringa, Tanzania. Ten units equals ten dorm rooms; the price of a unit in Portland incorporates (about 1%) the cost of a unit in Iringa. I did get a chance to chat with one of Tanzamook’s architects, Ben Hufford. “These are 4-bedroom units,” he said. “Except you can’t use the fourth bedroom because it’s in Tanzania and there are six African girls living in it.”

In fact, each residential project of Ben’s firm, Design Department, builds a school dorm room in Tanzania.

Beyond cause marketing

The primary characteristic of cause marketing is a company’s “public association with a social or charitable cause or organization to promote the company’s product/service and raise money for the cause or organization”.

While Tanzamook does raise money for a specific purpose, the association with the cause features less prominently in its marketing (most people I talked to at the Meetup had no idea about the Tanzania connection). Rather, the social benefit is built into the business model. In cause marketing, both company and cause would function without the association. By contrast, in social (or social-like) enterprises, the company and cause are inextricably linked – they’re two sides of the same coin. There is no Tanzamook without Tanzanian dorm rooms, and there are no dorm rooms without the townhomes at Northeast Tillamook.

Social sustainability and PR

The Tanzamook has attracted decent press, both on- and offline, positive and negative, before and after completion. Unique among the Tanzamook’s aspects, the development’s social benefit – Tanzanian dorm rooms – passed the public and media scrutiny without controversy. Social sustainability thus comes with a tangible in-bound benefit as well.

• OregonLive.com
• The Oregonian
• Portland Architecture
• Coroflot
• Portland Mercury – Blogtown
• Jack Bog’s Blog
• Global Greenie
• Daily Journal of Commerce
• Neighborhood Notes