What is Privilege-Based Pricing?
Privilege-Based Pricing is an innovative pricing structure designed for social justice.
Unlike sliding scale systems which typically have no guidelines or simple income-based guidelines for how much to pay, Privilege-Based Pricing takes clients through a rigorous self-reflection and conversation process which determines a discount on services, ranging from zero to 50%.
The discount is calculated to correct for the imbalances of an unjust culture. It’s an experiment in taking all the rules of our society and turning them around 180 degrees.
This is not a scholarship or a charity for people who are less privileged. It's also not a way to punish people who are more privileged. It's a way to make the invisible privileges of our lives visible, bring balance to an unfair world, and spark learning and transformation for all.
What do you mean by privilege?
In one of my favorite books, ”Waking Up White” by Debby Irving, she talks about “headwinds” and “tailwinds” as the forces that make our lives easier or harder each day based on whether we’re in a dominant or minority group.
Factors outside of our control, such as race, gender, access to education, family resources growing up, where we were born, experiences of trauma or lack thereof, etc., profoundly shape our life trajectories.
Where did this idea come from?
As a Business Midwife – someone who helps my clients give birth to their dream businesses – I’ve come to realize that certain clients are poised to make a lot of money from the outset, and for others it will likely be a much longer journey. This doesn’t have to do with their skill or how good a person they are — it had to do with their privilege.
For instance, a white male client with a graduate education, who has already had a successful corporate career, has a lot of money in his bank account, and is connected to wealthy and powerful people, will likely have an easy time getting a return on their investment.
In contrast, a black female client who grew up poor, is supporting 6 family members, has experienced significant trauma in her life, and wants to build a community-focused business will likely have a more challenging time paying for her coaching with me.
My question is, why are these two clients paying me the same amount of money?
In the old “equality vs. equity debate” the idea of privilege-based pricing is to look at a client’s resources and ability to make money based on their life story and privileges they’ve received in order to determine a price that creates equity by stretching everyone equally.
All clients receive the same high-quality service, and I hold all clients to the same Visionary Code – principles for being powerful creators in their lives and businesses. But the place each client is starting from is acknowledged.
How would you respond to people who might say, “Isn’t this reverse discrimination?”
No. It’s about equal opportunity and restoring balance to an unjust culture.
Women make 79 cents for every dollar men make (source). The median wealth of a black family is $6,446 while a white family is $91,405 (source). These are long-term trends and statistical truths, and they won’t resolve themselves without a change in policy.
Why wait for government policies, when we as entrepreneurs have the power to create change by changing how we price our own services?
For legal reasons, the Privilege-Based Pricing Questionnaire doesn’t ask directly about race, gender, sexual orientation, etc., but rather explores how our identities mixed with cultural biases influence our chances of business success, asking questions like, “Do you see other people who look like you leading in your field?” and “Do you have family members who are role models for business success?” and “What’s the most money you’ve made in your life?” These are the invisible headwinds that make it easier for us privileged people to succeed.
Why does this idea matter to you so much?
I'm currently immersed in a 2-year training with Lee Mun Wah to be a diversity facilitator. I've been deeply exploring my own whiteness, having conversations with friends about race and privilege, and have been curious about how I will bring these learnings to my business.
This idea of Privilege-Based Pricing came to me one day, and I smiled. I have a trickster side to me, and this feels like the perfect "trick" to play on all of us (myself included) to challenge the assumptions we have about how business should be done.
I’ve been doing some informal research on the concept with the intention of implementing it in my business in January of 2017. It feels like a big risk, and yet a unique and profound way to practice the social justice values I'm preaching.
I'm happy to discount my services to some clients in order to spark a healing conversation about privilege and, hopefully, have a more diverse and socially-aware group of clients as a result.
How exactly does the process work?
There are three steps to the process. They include:
Step 1 – Education
Because this is such an unusual pricing system, it’s important to give context. The model will be explained to potential clients so they understand what they’re getting into, and the intentions behind it.
Step 2 – The Questionnaire
I send an online survey to potential clients that asks about specific questions about:
Their personal and family story, and the advantages and disadvantages they’ve had from before their birth to the present.
Their existing resources – including financial resources, social capital, and more.
Their potential for future income – based on their vision for their business, who they plan to serve and how they plan to price their services.
The exact questions in this questionnaire are still being worked out.
Step 3 – Conversation + Decision
Then we review their questionnaire together and decide together how much of a discount to give them. There will be six tiers of discount, from no discount up to a 50% discount, with case studies that exemplify each tier. This conversation is held as sacred, and we will take time to process any emotions that come up along the way.
Do you think people will take advantage of the system?
I guess people could lie about their responses, but those aren’t the sorts of people I work with. I handpick clients who care about social justice and have a lot of integrity, and I trust them to answer honestly and pick the tier that best represents them.
Where do you expect to receive the most pushback?
Let's be honest – there's nothing comfortable about this pricing system!
In the testing I've done, just along lines of race, people of color have been pissed ("I don't need your handouts!") and white people have been pissed ("How dare you reverse-discriminate!"). People of color have been delighted ("What a cool way to bring privilege to the light!") and white people have been delighted ("I'd be happy to pay more to support this").
So I realize that what I’m filtering for isn’t privilege at all. I’m filtering for willingness to be vulnerable.
Determining your Privilege-Based Price is an incredibly vulnerable process and brings up the very things we are taught to be most private about – race, class, level of education, etc. I intend to be very tender with my clients as I talk through the questionnaire with them, expecting difficult emotions (shame, grief, fear, etc.) to come up.
Those courageous and open-minded souls who want to be part of a social justice experiment will be drawn to this new pricing system. Those who aren’t open to it will be turned off by it – and that’s just fine!
I’ve found that clients who are most vulnerable with me get the most value out of working with me. They’re able to release shame and reclaim their power, making them stronger business leaders. So filtering for a willingness to be vulnerable can only be good for my business.
What kinds of places could you imagine people using this?
This pricing system is somewhat complex – each client is required to fill out a questionnaire and have an in-depth conversation with a service provider who has the capacity to hold space for such a conversation. So I don't imagine us using Privilege-Based Pricing at vending machines! But I do think it is promising for transformational education and services.
How can I learn more?
You can sign up for my mailing list. I’ll be keeping my subscribers in the loop about PbP and announcing when I officially launch the new pricing system in January of 2017.
Thanks to Ted Hargrave at Marketing for Hippies for letting me guest blog this post on his site.