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APPENDIX B: DEVELOPING A PRICING STRATEGY <br />As the final step in the development of the Comprehensive Service and Financial Sustainability Study, <br />pricing strategies were considered. This discussion should continue in the future, and the following topic <br />areas should be included and applied. <br />1. UNDERSTANDING FINANCIAL TRENDS <br />The increasing complexity and resulting shifts of our society's economy have led to what can be deemed <br />as constant fiscal change in government. Public sector administrators and managers must be prepared to <br />respond to the fiscal realities that have resulted from these economic shifts. Trends impacting fiscal and <br />pricing decisions include: <br />• Increased governmental accountability <br />• Increased demand for people's "leisure dollar" <br />• Ongoing or increased demand for services with no/limited additional funding, or decreased funding <br />• Disinterest in service reductions or increased fees and charges <br />• Increased operating expenses (utilities, fuel, personnel, supplies, etc.) <br />2. UNDERSTANDING THE BUDGET PROCESS AND FISCAL YEAR CYCLE <br />Budgets are viewed as annual financial plans and include planning and forecasting, establishing <br />priorities, and a way to monitor fiscal process. This overview allows for an abbreviated look at the <br />process and how it is impacted by pricing. <br />3. UNDERSTANDING THE COSTS OF SERVICE PROVISION <br />Prior to making pricing decisions, it is important to understand the different types of service provision <br />costs. Having knowledge of the various types of costs allows staff to make better informed pricing <br />decisions. The different types of service provision costs are as follows: <br />• Direct costs <br />Fixed costs <br />• Changing fixed costs <br />• Variable costs <br />• Indirect Costs <br />4. UNDERSTANDING THE PURPOSE OF PRICING <br />There are many reasons to develop service fees and charges. These include, but are not limited to, the <br />following: <br />• Recover costs <br />• Create new resources <br />• Establish value <br />• Influence behavior <br />• Promote efficiency <br />5. PRICING STRATEGIES —DIFFERENTIAL PRICING <br />Differential pricing is grounded in the notion that different fees are charged for the same service when <br />there is no real difference in the cost of providing the service. There may be many reasons the Divisions <br />may wish to consider this pricing strategy including: <br />• To stimulate demand for a service during a specified time <br />• To reach underserved populations <br />• To shift demand to another place, date, or time <br />g <br />49 <br />6513-53 r-'= <br />