Sliding Scale Pricing: Why I Don’t Recommend It
I have several colleagues and clients who offer sliding-scale pricing. Some of them advocate for it, so it’s touchy for me to disagree with that strategy, but I feel it’s important to share my point of view about it. I don’t feel that sliding scale and pay-what-you-can is supportive for most businesses, and it puts too much burden on customers.
Even if there are a few people who are doing it effectively, I think they are exceptions. Most of us would have a more sustainable business if we have simpler pricing.
Burdening the Buyer
Pricing with a sliding scale or pay-what-you-can puts the burden on the buyer to figure out the right price. It seems to me that the buyer is already burdened enough with making the right decision to buy, and once they decide to go for it, now they have to ensure that they also pay the right price?
For clients (like me) who are sensitive to the well-being of the business owner, it gives us (the client) the pressure of deciding what is right for them and for us. It passes the obligation of pricing onto us.
Sliding Scale Resentment
Sliding scale is a bit better than pay-what-you-can, since it is often based on the client’s income level. Still, it can easily create negative feelings:
- What if the client’s income is higher, but they love a good deal? They would feel that it’s unfair to pay a higher price when there’s a lower price option. This is especially true for some cultures. Yet, with a sliding scale, you’re requiring that the client align with your politics to feel good about buying. (In my view of a better world, commerce brings together people of varying political beliefs and creates more opportunity for cross-cultural understanding, rather than forcing one’s politics onto one’s own client.)
- If you as a business owner finds out that one of your clients used the lowest price on the sliding scale because they technically have very little income — and yet it’s because they retired, having already made lots of money — how would you feel about them taking advantage of the sliding scale? Or maybe they have an abundance of family support but are themselves making no income? I’ve noticed that wealthy people are some of the best deal-hunters and savviest negotiators, and least willing to pay full price. (A colleague recently told me that her wealthy clients are those who drive the hardest bargains with her sliding scale… yet those without a financial safety net are sometimes willing to spend the most.) Truthfully, some (or many) of your clients won’t tell you the truth of their financial situation, whether it’s high or low.
- How would your other clients, who are paying more, feel about others paying less, and vice versa? It’s fraught with misunderstanding and emotional entanglement. It’s too complicated for me to recommend to solopreneurs and small business owners.
A Healthier Alternative
Instead of sliding scale, my recommendation (to help small businesses stay viable and thrive) is to have multiple tiers of services/products. For example, you might have a 1–1 service that’s $150 per hour, and also have a group program that’s $50 per month. This way, your business can easily serve people at different price points, making your work more accessible to people of different means… all the way down to your free content which you can provide generously for all.
Read more: Authentic Solopreneur Business Model
Additionally, if we can connect with more of our niche mates, we can form an ecosystem of service providers at different price points and thereby be able to refer clients to one another depending on their alignment, including willingness/ability to pay.
To those who say that it reinforces inequality if we create lesser offers for those with lesser means, I ask: would you also ask your own service providers to receive less, just because some of their customers can (or want to) pay less? I would love my service providers to be paid well and thrive financially.
I applaud and honor your compassion. Yet, I hope we can apply that compassion in a sustainable way, because we need to model and teach each other whatever helps to keep our small businesses viable.
I recommend keeping pricing simple and clean, with no room for misunderstanding and hard feelings. This way, we spend less time and energy about the transaction (not having to make the customer decide the right price for sliding scale) and instead, have more time and energy to spend on providing a great service, as well as providing free content that serves everyone regardless of financial circumstances.
Rather than sliding scale or pay-what-you-want, here’s what I try to aim for: giving back as much of the profit as possible. I pay myself a sustainable wage, and then share the profit with clients and students through my affiliate program. Sharing profits is one of the favorite things I do in my business. If interested, see George Kao Affiliate Program.
by the author.