Reflections on affordability based pricing

We’ve been running open-enrolment psychological safety workshops for a number of years now, and right from the start I wanted to make sure that they were accessible to everyone. There’s an important reason for this: our mission at Psych Safety is to make the world of work a safer, higher performing, more inclusive and equitable place. If the only people who could access these workshops were people in wealthy, developed countries and those working for large organisations with big budgets, we wouldn’t be truly aligned to our mission. Psychological safety training shouldn’t just be for people in wealthy countries and large corporations.

What is affordability-based pricing?

Also known as “Price Discrimination”, we’re all used to companies providing discounts for people such as students, veterans, or pensioners. The intentions behind this are generally noble, although it also often serves as a marketing or data gathering exercise. These categories such as “student” or “pensioner” usually serve as a proxy for what people can afford. Many students have limited earning capacity because they’re busy studying, so providing lower pricing to them means they can access the same products and services as anyone else. It is just a proxy of course – some students may be employed and earning a good income. 

What we’ve tried to do is remove the proxy as far as possible and simply base the pricing of our workshops as close as possible to what people can actually afford. We currently have three tiers, starting with the lowest rate:

• Unwaged or living and working in a low-income country, a subsidised rate for those who would not otherwise be able to afford the course
• Self-funded, where people are paying from their own personal funds as opposed to through their business or organisation
• Organisation-funded, where a business or organisation is funding the place, either through training budget or through the participant claiming the money back from the business

We also have one completely free scholarship place on each workshop, intended for those for whom any payment is out of reach. Preference is given to people from disadvantaged or under-represented groups and those working in charitable or non-profit contexts.

The MBA term for this form of affordability-based pricing would be “direct third-degree price discrimination based on market segregation” 🙂 

The premise is essentially that the higher-priced business-funded option helps us to offer the lower priced options – the more business places we sell, the more unwaged places we can provide.

We aspire to be as transparent as possible about our approach to pricing and in practice, this works very well. Businesses gain tax efficiencies by spending money on training for employees, so we know that in real terms after tax, the cost of the self-funded and business options are roughly the same, and the purchase of these also in effect brings a little equity of access to training for those in low-income countries or who are unwaged.

Lessons from affordability-based pricing

Over the past couple of years, we’ve learned quite a lot from our affordability-based pricing approach, so I thought it would be nice to share these lessons with everyone, and answer some of the more frequently asked questions.

1 – Don’t people take advantage of this pricing model?
Very rarely, as far as I can tell. We believe that generally, people are fundamentally good and want to do the right thing. Evidence, as far as this shows, bears that to be true 🙂 

2 – Will other attendees know if I’m on the unwaged or scholarship option?
No. And to be honest, neither will we. We see sales come in, handle the process and administration of the courses, but once you’re booked on, we don’t keep track of who has paid for which option – there’s no need to. 

3 – What evidence do you need from me to prove I’m entitled to the lower priced option?
None. This is entirely based on trust. And if you don’t fit neatly into one of the categories (let’s say, you run your own business, so strictly you “should” go for the organisation-funded option, but you live in Venezuela and the price is more than your business makes in a month), simply go for the option that makes sense and is affordable for you. On occasion, we may just check that you have booked the option you intended to.

4 – What do I get extra if I pay for the higher priced option?
Nothing. Everyone gets the same experience: the same workshop, the same resources and materials, the same Credly badge, and the same alumni group: there are no differences other than the price paid. This one isn’t actually a frequently asked question – we’ve only been asked it once, by someone who had never come across affordability based pricing before.

5 – Why don’t more people and businesses provide affordability-based pricing?
I honestly don’t know. Maybe it doesn’t occur to people, or they don’t know it’s possible. If they do know about it, maybe they’re concerned that people will take advantage. Or maybe it seems too complex to administer, and there’s a little truth to that. I admit, it’s more difficult to forecast cashflow with affordability based pricing models, because it’s harder to predict how many of each option will sell, but at an aggregate level over a longer term it becomes more predictable. It also means that every “product” we have is multiplied by three in our system so there is an increased administration overhead. And I’m reminded that when I book my local yoga class, there’s an entire page of pricing options – so relative to some of the complex pricing options people deal with in their day-to-day lives, it’s pretty straightforward.

6 – Isn’t this all a bit socialist?
Yes.

7 – Are there tax repercussions?
No more than any other model. Sales tax is a straight percentage of the gross sale price, so it doesn’t make a lot of difference whether it’s a lower or higher option. What really makes sales tax hard is working out where in the world someone is purchasing from (and just because they’re purchasing from one country doesn’t mean they live there), what their local sales tax rate is, and whether our UK business needs to charge sales tax for that sale based upon the UK’s trade agreement with that country. It’s certainly not made worse by a few different prices.

8 – What about your other tools and offerings? The same applies to our downloadable resources and tools. Although these resources are high value, representing years of experience and work, we provide them free of charge to anyone who works for a registered charity, is a full-time student using them to support their studies, or is unwaged. 

Price increases

When we’ve had to raise our prices slightly (because life is getting expensive!), we made sure that we only raised the self-funded and business options, whilst maintaining the lowest price at the same level. If anyone is feeling the impact of inflation and higher prices, it’s people who are unwaged or live in low-income countries.

Further reflections on affordability based pricing.

I find it interesting and a little worrying that sometimes people who purchase the lower-price option email us to ask if it’s ok for them to do so – and this I feel reflects a certain cultural phenomenon that makes people at lower socioeconomic levels feel less entitled to participate in the very activities of society itself. You don’t need to ask permission 🙂

What next for affordability-based pricing?

I’d really like to see more businesses using affordability-based pricing, particularly for products and services that are available worldwide. Global commerce and capitalism in general means that people at the lower end of the socioeconomic spectrum are often excluded from accessing training, products and services that could be the very things that will give them opportunities. The least we can do at Psych Safety, as a purpose-driven business, is to attempt to mitigate some of that inequity.

Links

Psychological safety open-enrolment workshops

Related psychsafety.com articles:

Psychological Safety and Privilege
Psychological Safety, Diversity & Inclusion
Yogic philosophy

Our Psychological Safety Courses

We started off in 2021 with a single workshop, one that focussed on putting psychological safety into practice in the real world of work. It soon became clear that whilst attendees loved the workshop, there was a lot more to get into and a much wider range of topics to address.

Over time, and from gathering feedback from attendees (every workshop we deliver concludes with a retrospective to wrap up and gather feedback and improvements), we’ve expanded the workshops and refined their focus.

They now include Fundamentals, Practices (to learn things to do to improve psychological safety and performance), Leadership (for managers and leaders, or those aspiring to be), Measurement (surveying, qualitative and quantitative methods, analysis and next steps), Advanced (for the nerds and geeks like us), and the last one: Workshop Design and Facilitation (for those who want to share their learning with others).

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