I’ve long had thoughts about fees charged by service providers but a recent experience annoyed me enough to want to write about it.
I booked a trip to Boston to be with family up there over the 4th of July (which always gives me mixed emotions). Owing to the holiday, flights were fairly expensive, so I opted for the cheapest ticket which happened to be with Spirit Airlines.
I was happy with Spirit, having nabbed a reasonably-priced flight over the holiday weekend and everything was going well until it came time to check in.
During the check-in process, Spirit let me know that there is a fee for checking a bag. Okay: that’s to be expected given the current climate in the airline industry and the fact that this is a budget airline. However, what I was not prepared for is that aside from a free, small personal item, they also charge you for your carry-ons. And they’re not cheap.
If you’re lucky enough to have booked directly with spirit.com (as opposed to Kayak, Expedia etc. as I did) and you pay for your carry-on at the time of booking, it’s only $35! If you wait until you get to the airport, it’s $55 and if you wait until you’re at the gate, it’s $100.
Now, this pricing is in place for a reason and to an extent, it makes sense. However, this approach just ends up giving customers a bitter taste in their mouths.
How fees kill brand loyalty
Ideally, you want your customers to have a good perception of you at their first transaction and then to continue to improve that perception over time. This gives your customers ever-increasing confidence in you, makes them see you in a positive light and means that you’re their first port of call when they need a service that you offer.
On the contrary, fees start to dampen the perception of your company from the outset. Customers think they’re getting something for one price and then at the last minute, you slap on a $55 carry-on bag fee.
If I complete the transaction, I do so grudgingly and I’m already reluctant to give you any more money.
Other types of companies that do similar things include cell phone companies and banks. This is exactly why I bank with Schwab, because there are no hidden fees. I know what I’m getting into and they have my utmost trust.
This is in comparison to my former and very short relationship with Bank of America where I was charged for cheques, needed to maintain a minimum balance and got hit for little fees here, there and everywhere. If I have to consult a hard-to-find fee schedule or worry if I have enough money to cover my transaction and any associated fees, I’m not only wary of using the service, but I’m also having to think every time I have to conduct a transaction which doesn’t give me much faith in the company providing it.
The way it should be
Fees are there for a reason: the main reason is that they cover an element of your business that incurs additional costs and you want to pass those costs on to your customers. Makes sense. In some cases it’s also a case of getting a few more bucks at every opportunity, but that’s a different matter.
The cost of doing business or providing a service includes certain expenses. You should know what these expenses are.
In my opinion, these fees should be included in your cost to the customer. So, for instance, a cell phone company should include their 911 fee, their local government fees, their convenience fees and any other fees in your monthly service cost. A bank should either provide your account for free and make their profit on investing your cash, or charge a flat monthly service fee which includes everything with no catches. Lastly, an airline should provide all the amenities that are considered standard for a flight in the cost of a ticket, including a fair baggage allowance, credit card transaction fees and wi-fi.
There are downsides to removing these fees of course:
- Fees can help train customers and direct behaviour. For instance, charging a fee for paying your utility or bill by mail encourages people to pay online, which is greener, and more efficient for everyone.
- Including these services in the cost means that people use them more liberally and you might expend more effort or money to address all the requests. Customers who pay a fee “have skin in the game” and are willing to sacrifice something to get what they need, rather than just expecting everything from you.
With that said, I think it’s still more worthwhile to include these fees in your cost. Yes, you want to recoup the cost of services provided but this should be done in the overall cost.
How would you feel if your accountant started outlining various fees from his business? What if he charged you 25¢ for his internet service? What about $20 for rent? They’re costs that he incurs in the course of doing business with him, but you fully expect the cost of these to be included in his fee.
Keeping all of your costs in your main fee makes it simple for the customer to do, and keep doing, business with you. And if your costs go up because people are using your services more liberally, that’s ok: put your prices up to cover it and people will pay it, knowing that you’ve got their back.
By making the barrier to entry low and only improving your customers’ perception of you, you’ve got a winning combination.
That’s why there are no hidden fees in my own WordPress maintenance business, The WP Butler: my clients pay their monthly fee and that’s it.
How I do it
If I really wanted to, I could charge a fee for restoring from a backup for example. After all, it’s not something routine and it requires extra effort on my part. However, to me, it’s part of the service. I’m setting myself up as my clients’ go-to, trusted WordPress resource. If their website goes down and in their hour of need, I’m charging them a fee just to get their site back up and running (which they’ll always pay because they’re over a barrel), they don’t see me as the person who helped them out of their situation: they see me as a money-grabber that took a perfect opportunity to screw them out of a little more money.
Some companies are starting to realise this and changing the industries around them. Charging fees in most situations is a sure fire way to kill any relationship with your customers or potential customers.
Think twice before starting to charge fees for additional services that you might offer. You could end up alienating your existing customer base and turning off any potential customers.