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Published on January 14, 2009

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Creating a Pricing Policy for Your AgencyA Game Plan for Success : Creating a Pricing Policy for Your AgencyA Game Plan for Success Presented by: Mary Beth Thaman Director Bill Tschirhart Business Services Manager City of Kettering Parks, Recreation and Cultural Arts A Game Plan for Success : A Game Plan for Success 3rd Quarter Formulating a Pricing Strategy Cost Recovery vs. Subsidy Direct Cost Recovery vs. Indirect Cost Recovery 4th Quarter Best practices for instructor payment Putting it all together Implementation 1st Quarter Why do I need a Pricing Policy? What is a Pricing Policy? Key Elements of a Pricing Policy 2nd Quarter Cost of Service Slide 3: Kick Off Why do I need a Pricing Policy? : Why do I need a Pricing Policy? Creates a standard for staff to use Objective review of expenditures Outcomes What is a Pricing Policy? : What is a Pricing Policy? Guidelines for determining cost of programs Addresses resident/non-resident fees Looks at usage trends (peak vs. off peak) Establishes clear goals for program staff Must have clear understanding of what the service costs to provide Key Elements in a Pricing Policy : Key Elements in a Pricing Policy Create value and price accordingly Know your costs (Direct/Indirect) and level of cost recovery Understand where your prices fall in the market place Price services correctly the first time Use differential pricing based on participant, product and times Price to a unit Educate elected officials, boards, staff and volunteers Develop pricing models that can be tested Communicate price and your cost to users Eliminate entitlement pricing (most important) Slide 7: End of 1st Qtr. Cost of Service Model : Cost of Service Model Identify the true costs of providing a service Price services based on delivery costs Make informed decisions about the cost/benefit of a service Direct Costs vs. Indirect Costs Cost of Service Model Example : Cost of Service Model Example Sample Cost of Service for Aquatics Cost of Service Model Example : Cost of Service Model Example Sample Cost of Service for Aquatics Slide 11: Time Out Cost of Service Model Example : Cost of Service Model Example Sample Cost of Service for Drop-In Swimming Cost of Service Model Example : Cost of Service Model Example Sample Cost of Service for Swim Lessons Slide 14: Time Out Cost of Service Model Example : Cost of Service Model Example Sample Cost of Service for Facility Rentals Cost of Service Model Example : Cost of Service Model Example Sample Cost of Service for Youth Basketball Slide 17: End of 2nd Qtr. Slide 18: Halftime Fight Song 1st Half Recap : 1st Half Recap Key Elements in a Pricing Policy Create value and price accordingly Know your costs (Direct/Indirect) and level of cost recovery Understand where your prices fall in the market place Price services correctly the first time Use differential pricing based on participant, product and times Price to a unit Educate elected officials, boards, staff and volunteers Develop pricing models that can be tested Communicate price and your cost to users Eliminate entitlement pricing (most important) Formulating a Pricing Strategy : Formulating a Pricing Strategy Guidelines for pricing classes Based on several factors including: time of day season location age segment incentive pricing facility cost recovery civic groups Cost Recovery vs. Subsidy : Cost Recovery vs. Subsidy What’s the difference? Actually opposite statements Cost Recovery Example I give you $1, you earn $.40 Your cost recovery is 40% Subsidy Example I give you $1, you earn $.40 Your subsidy is $.60 Direct vs. Indirect Costs : Direct vs. Indirect Costs Definition – Direct Costs Specific expenses which are incurred by the department in conducting a program or operating a facility. Examples of Direct Costs Instructor pay + benefits Supplies for program Programmer time in setting up program Publicity/promotions Direct utilities, maintenance personnel Special and general insurance Direct vs. Indirect Costs : Direct vs. Indirect Costs Definition – Indirect Costs Expenses which are not directly incurred by the program or facility but may be charged to it. Examples of Indirect Costs Office Support Staff Supplies & Other Costs Facility & Park Maintenance Costs Administrative Costs & Supervisor Salaries Direct Cost Recovery : Direct Cost Recovery Programs that can recover Direct Costs only usually: provide benefits to the individual and public in general Kettering Drop-In Play Groups Special Pops Day Camp Pools (drop-in) Kettering Children’s Theatre Ice Arena (drop-in) Youth Sports Leagues Park Rentals Senior Adult Recreational, Social and Educational Programs Direct & Indirect Cost Recovery : Direct & Indirect Cost Recovery Programs that can recover Direct & Indirect Costs usually: have limited enrollment/availability provide high quality instruction or experience benefits of program are exclusive to participant Kettering Sports Classes Cultural Arts Classes Fitness Classes Adult Sport Leagues Ice Skating Classes Concessions Swim Lessons Classes Tot Lot Preschool Merchandise Sales Membership Activities Subsidized Programs : Subsidized Programs Programs that are subsidized (do not recover direct costs) are usually: equally available and beneficial to all citizens in a community supported through local tax system Kettering Senior Adult Trips Sports Field Reservations Youth Special Events Special Needs Programs Art Gallery Citywide Special Events Slide 27: End of 3rd Qtr. Instructor Payment : Instructor Payment What are the options Per student Encourages instructor to fill class Acts as additional marketing for programs Provides greatest flexibility to affect bottom line Hourly Little incentive for instructor to fill class Flat Rate Little incentive for instructor to fill class Exact expense is known Instructor Payment : Instructor Payment Which way is best? Considerations Will classes be full with waiting lists? How are similar instructors paid for similar classes? Employee or independent contractor? Instructor Raises Price to participant must increase Putting it all together : Putting it all together Must examine lifecycle of program introduction, growth, maturity, and decline Price by market going rate survey Implementation : Implementation Important to get staff buy-in Training Follow-up Slide 32: End of 4th Qtr. Question & Answer : Question & Answer How to reach us: : How to reach us: Mary Beth Thaman 937-296-2454 (v) marybeth.thaman@ketteringoh.org Bill Tschirhart 937-296-3279 (v) william.tschirhart@ketteringoh.org To receive an electronic copy of this presentation or the Pricing Policy, please email Bill or leave a business card with your email address. Creating a Pricing Policy for Your Agency : Creating a Pricing Policy for Your Agency Presented by: Mary Beth Thaman Director Bill Tschirhart Business Services Manager Slide 36: Time Out

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