In the global gathering today (or yesterday depending on where you live), we realized that lots of people/instances are figuring out pricing. As far as I can tell, there is no strict requirement that instances charge (or not), or how much, or using what mechanism, and no built-in structures to manage/track user payment. I thought we could share some of our thoughts on it. I’ll start.
Among the things an instance has to consider when determining pricing:
1. Why are we asking for money?
For us, there is no expectation that user fees will pay all operating expenses, including paying for people, as well as a contribution to the global pot - not for a long time, anyway. Instead, the rationale for us was:
- Covering our personal out of pocket expenses
- Engaging users as active participants in the platform, rather than passive, unresponsive consumers of what they considered to be “free” and apparently delivered to them as a result of magic or unspecified benevolence from George Soros or something
- Building in a little headroom financially to help us cover emergencies. We have way too many single points of failure now, and looming expenses like trademarking
- Allowing us to start contributing to the global pot
- Establishing ourselves in the marketplace as a player similar to venture-funded and other competitors, hopefully creating the perception of value that unfortunately is often directly associated with cost
- Having tangible evidence of user support for people like impact investors, people who give grants, and foundations to see that we are relevant to and supported by our users - this one is one of the most important, because it opens doors to funding at a level that actually does cover operations and let us contribute significantly to the global pot (and allows us to keep supporting our user base affordably). This kind of funding also allows us to compensate people who don’t have the class-based luxury to volunteer significant amounts of time, so it’s really important in terms of equity.
We wanted to be sure to keep our values centered even while asking for people to give us money for something they had been getting for “free” (mostly because we did not have the logistical capacity or organizational maturity to do billing). The US instance has had a path that one might almost refer to as “the drunkard’s walk” and it has taken us way too long to get to this point - your path will likely be straighter.
2. How much money should we ask for? How will we ask for money?
The choice we made was to adopt a model based on Canada’s well-considered one, and we looked at some different pricing strategies used by other instances, as well as brainstorming with others. We looked at what people’s other options in the US market were, what they cost, and what they got, and we looked at how much money was going through OFN - last year that number was about $720,000 and the donations we received from users was about 2 tenths of one percent of that, or $1500 or so. Some other instances shoot for about 2% (in fact this is in some user-facing documents), which for us last year would have been $14,000-ish. We put all that together, put it on a web page, and checked in with a few users and our board. We used Transifex to change the text in the emails that new enterprises get, to set the expectation that they would be asked for money, and then announced it (with a 30-day buffer) in our newslettter to users and on Social Media. People either ignored it or pushed back right away (see below). We announced the pricing today and about 36% of the 550 enterprises we wrote to opened the email. No one has contributed yet.
3. What will we do with the money we get? How will we track it, and how does it fit into our entity type (NGO, coop, etc)?
We are a nonprofit corporation, waiting on Joe Biden to (personally) give us our tax exemption. Til then, we have a fiscal sponsor, the Social Good Fund, who provides us with a platform for collecting money (they take 8%). All money we get counts as a donation, not a fee for service, but that’s a tricky line to walk. In order to collect information about the users and enterprises who were paying (and sneak in some demographic questions), we link from our web site to a google form, which then links to the payment platform. It’s pretty ugly right now. We really don’t know how much money we will end up getting, but we know we have several “buckets” it needs to go in: to get more money, to contribute to the global pot, to start paying people, especially from communities of color and other historically excluded communities, to cover basic operating expenses, to grow and strengthen the organization (including things like trademarks), and for emergencies. We don’t fool ourselves that this will be a short process to solvency and stability, and we have a lot of catching up to do in every area, really.
4. What’s the process for collecting money, tracking payments, and what’s the policy for users who can’t or just don’t want to pay?
This step is our opportunity to tell our story, and to help users connect their ethical practices with our ethical practices, rather than being stuck on “getting a good deal”. We do not have a good process for tracking who has paid and not. I am assuming we will come up with a spreadsheet or airtable to help us with that until we can get something that resembles a good CRM and a good accounting setup (and they are linked to each other and both linked to OFN - it might be a minute). This is an important question that we really have yet to tackle completely, and we will definitely be working on streamlining this part of the instance management process. This seems like a great opportunity for collaboration between instances.
We are just getting started, but we mention lots of times that we are happy to talk to users about different ways to contribute/participate/pay that really are helping us out - this is alternative payment, really, not charity. Sometimes these are things people are already doing and should be recognized for, and some of these things represent an invitation to grab an oar and start rowing. The email response when people ask about alternative payment is basically in the form of
- Welcoming and encouragement: we get it
- Explanation of the need to get some money, followed by acknowledgement that we only exist because we want to support strong local food systems, which are made up of creative, caring human beings
- Suggestions for ways people can engage beyond the “waaah you are charging us for it and it used to be freeeeeee why isn’t it freeeee”/“if you don’t pay we will pull the plug on you you freeloader” type of transaction. The suggestions we make, asking if any of them would work are:
- Help us be more responsive and stay alive by helping to advise us on product direction (that means every 4-6 weeks we would ask you 10 questions or so about your experience) and reaching people who could benefit from OFN.
- Pitch in your knowledge and experience locally, and help others do that too by sharing the best ways to reach people about OFN on our discourse forum, by sharing on our weekly call, or make a little Youtube that could help others be successful and avoid any pitfalls that you have run into.
- Support OFN with a contribution that fits your business - [pay what you you think is fair here] (The Open Food Network - Open Food Network USA). (this is a link to our funding platform)
- Something else that contributes to the OFN community - graphic design? grant writing? coding?
After that, really, if someone chooses not to engage with any of the above or pay our very-reasonable prices, I think we say “goodbye, we wish you well, if you like you can have a profile for free” and not worry about it.
Phew! I am realizing that this question is really a nontrivial part of our job! It touches money (so power, scarcity, fear, and thus trust), culture, psychology, our ability to engage and inspire, marketing, systems integrations that make sense, financial due diligence, and market intelligence.
I would love to learn about how other instances are taking this on (or thinking of it)!
Yeesh, another long post from Laurie, huh?