Charging for Product: Why Price Matters, Even For Non-Profits

By Karen Zeller (Contributing Writer, Women 2.0) Let’s say you create a new innovative product for the masses, which will change the way people live and change the world. That doesn’t sound strange for most of us working in technology here in Silicon Valley; that’s the ambition of many around here.

What if your ambition is to help the four billion people in the world who get no stock options, free snacks, let alone health insurance.

Imagine you want to create products that dramatically improve the health and productivity of those who make four dollars a day or less. Why not raise grants or get government money -- and then just give it away for free?

To answer that question, I spoke with the very engaged, articulate Krista Donaldson, the CEO of D-Rev, and came away with some valuable insights that should apply to all businesses. D-Rev is a design incubator creating products that improve the health and income of people around the world. They focus on populations of 1 million or more, leverage emerging technologies and work together with regional entrepreneurs and for-profits to make their customer healthier and productive. Krista is design engineer with over a decade experience in Africa, India and Iraq, and is currently a Rainer Arnhold Fellow as well as lecturer at Stanford University.

I asked her: "Why charge a price when we’re talking people who are making very little money?"

Krista replied: "The way we work is that we raise grant money and use that money to do the product development. Once the product is developed, we build in profit margins so that we can leverage the private sector so it is sustainably made, distributed, sold and maintained. For example, with Brilliance, our phototherapy device for urban hospitals, we licensed it to a partner in India who sells it to customers and pays us royalties. It seems counterintuitive at first, but here’s why you charge for product -- accountability -- it keeps the people responsible for creating and manufacturing the product accountable for the product’s quality and meeting customer needs. Once a product or service that has a potential market is given away for free, people who develop or deliver it can head down a slippery, subconscious slope of getting more and more lax in their efforts."

About the guest blogger: Karen Zeller is software professional, holding progressively responsible positions in technical communications, program and product management. Most recently she has been working in a 75% legal and administrative position at Stanford while raising a young child. She volunteers for non-profits including RailsBridge and Women 2.0. Karen holds degrees in Anthropology and Finance from UC Berkeley and a J.D. from Stanford University School of Law. Follow her on Twitter at @karenzeller8.