We're back from the winter break and we have a big one for you today: Lots of interesting articles from around the web, awesome community news, and a deep dive into a simple pricing model that will allow your business to champion economic justice! Enjoy this month's newsletter!
Across the world, people are struggling to make ends meet: 40% of people across 28 countries expect their disposable income to fall this year and many people are reported to cut down on spending: 27% of people are cutting back on general expenditures, 26% look for promotions,and 22% shop in cheaper stores, amongst other things.Oh and with many expecting a recession to occur this year, we have likely just started to scratch the surface here. 😬
And even if there were no cost-of-living crisis, there would still be a crisis. Income and wealth inequality is reaching levels never seen before whilst our current economic system isn't doing enough to combat economic injustice – it's rather doing the opposite, to be frank. 😅
So, how can we change that? 🤓
How can we create new business models that champion economic justice?
Let's dive in!
Boosting Economic Justice with Sliding Scale Pricing
The sliding scale is a tool that allows for a product or service to be obtained at multiple price points based on the circumstances of the purchaser.
Simply said, the better you are off, the more you pay, while those who struggle to make ends meet get a more affordable, fair price. In practice, this usually comes down to setting three different price levels: one low, very affordable price, a medium price, and a high price. How you set these is basically up to you! Another common system is the pay-it-forward scheme. Here, a minimum price is established, but a customer can choose to pay less or more.
We essentially use a sliding scale system all the time when it comes to paying taxes or insurance (higher income = higher taxes), so why not implement something similar within the world of business, right?! What's more, in a sliding scale model, oftentimes, it's not only income that determines the price to pay but also other factors such as home ownership, education level, the existence of savings, etc. (see the image below).
And in many cases, it's also a voluntary action, meaning customers themselves take an inventory of their situation and decide what price level aligns with that. A sliding scale is thereby used to encourage people to pay according to their available resources.
So, why should you care?
Here are a few clear reasons for diving more into a sliding scale model:
A New Perspective
Let's do a bit of what-if, out-of-the-box thinking! In our current business models, there is basically only one factor determining what someone can afford: income! The problem is that income itself depends on a lot of, often uncontrollable, factors: skin color, cultural background, gender identity, (dis)ability, or simply location, and many more. So, what if we pioneered a new way? Behind a sliding scale pricing model is the idea that material and social resources, including income, are not and should not be the only determining factor in whether or not someone can access services, products, care, etc.
Accessibility & Inclusion
Ever had customers say: "I love your product but I cannot afford it"? Well, sliding scale pricing can not only solve the material obstacle that these customers have but at the same time also acknowledges their situation and values them, no matter their income level. That's so important in a world where most of the economic system is still predicated on exploiting low-income labor and thereby people's worth. And then better access to say high-quality products and services (e.g. a good hiking shoe, a fast laptop, a top-notch online course) can be extremely empowering and even eventually help lift people out of material (and social) poverty.
Capturing New Customers & Income
Yep, there's also a clear "business benefit" for you here. As high prices do not necessarily equate to greater profits – many potential customers may look at your price and go: "....ehm nope!" –, using sliding scale pricing, you can expand your customer base to all income ranges, while maximizing profits made from sales to customers who can afford the full price.
Community Building or "We're in this, together"
You're probably thinking "but what if high-income customers simply select the low level price?" and we get it, it's hard to trust the rich these days 😅. But the truth is that 99% of people aren't assholes (trust us on this 😉) and many have experienced their fair share of cost-of-living challenges at some point in their lives. And if you have an amazing, super-valuable product you'll most likely already have a group of customers who would pay more for it. Lastly, and even more importantly: Creating a system where your customers can see the communal benefits of them paying the higher (but fair) price is what this is all about. The message is not "the rich have to pay more" but "let's champion affordability and access, together".
Inequality - The Next Business Challenge
"Over the last decade, the richest 1% captured half of all new wealth. Since the beginning of the 2020's, this has accelerated to almost two thirds." Yep, you heard that right! As income and wealth inequality becomes even more severe, businesses will increasingly want to (or have to) step in and help out. So, you can view the current cost-of-living crisis (and a potential recession) as the main trigger that will finally make inequality-reversing impact initiatives by businesses mainstream. The time has come!
Privilege Check & Conscious Shopping
One other way of avoiding people taking advantage of a sliding scale model and at the same time helping them reflect on their situation is clearly explaining the concrete price and situation levels to your customers. By making people reflect on their own situation (or privilege), compared to others in their community, you not only provide a sense of communal perception but also help people make more conscious shopping decisions in general.
So, that's all we have on this interesting concept of Sliding Scale Pricing! If this got you all excited and you wanna dive in deeper, then check out the following resources which we also used in our research for this article:
For-profit and for-purpose: The world can become a better place with more Zebra startups
COMMUNITY | News
Marcello Angione and Ida Svenonius from Becoming are conducting interviews with founders, CEOs, and CMOs from purpose-driven companies. Reach out to them via LinkedIn to participate (and receive a little thank you)
Russel Vaughan's EcoSend podcast has been listed on ProductHunt
Moh Al-Haififrom Zebra Growth is looking to speak to managers or directors from sustainability or social impact focused banks, investors and certification orgs. Connect with them here (and receive a little thank you)
Luca Jakob from Given shared their new podcast episode on "Using purpose to drive growth"
Karn Malhotra from Neol shared an online event invitation to a conversation with Paul Bennett, Co-Chair & Chief Creative Officer of IDEO on February 8th
Amanda Stassen has launched the next season of her Purpose Powered Brand podcast with some exciting new guests
Alexandra Rupp from Purpose + Motion launched their MOTION newsletter "for gamechangers committed to bringing motion and inspiring others to change the world"
Want us to feature your project here in next month's newsletter? Reach out!
