Tuesday, August 21, 2012

Fee's Are Feeble (Short Take)

Fee's are not new but they seem to be increasingly common in situations where they weren't previously.

I recently took some trash to the local dump and got sticker shock. I hadn't been in awhile and apparently prices have gone up... a lot. On my bill were three seperate lines. First was the per cubic foot charge. Then there was a "Fuel recovery fee" and finally some other fee that I've forgotten the name of. The fees were a minority of the bill but they still added a significant chunk to the total. I was not amused, particularly by the fuel recovery fee. I hauled the garbage to the dump on my own dime and unloaded it as well. Why did they need a fuel recovery fee?

Hotels have started doing the same thing; "Resort Fees" is generally what the extra charge is called. Apparently you're only renting the room and not the right of way to actually get to it when you pay the room rate at those places.

Many airlines are doing this as well with baggage fees which leads to all sorts of fun if you aren't one of the first people to get on the plane since the carry on bins are even more stuffed full these days than they've been in the past.

The point of these fees  is to obscure the actual cost of the product. The problem is that people aren't stupid. After my experience at the dump I started looking for legal ways to avoid those extra fees in the future. I now look for those resort fees any time I'm thinking of staying at a hotel as well and figure them into my decision both in terms of determining the cost and deciding where to stay. All things being equal I'd probably pay a small amount extra to stay at a hotel that didn't have a resort fee. In short, businesses that do this aren't fooling anyone for long and they are annoying customers with their antics.

Pricing theory tells us that the customer experience is based off of perceived value. It is not a good thing if a fee pushes the price of something beyond where a particular customer is happy with the product. They will almost certainly pay up the first time but they are going to quickly adjust down their preferred price to account for those fees in the future.

Fees like the ones I've described above fall into a category of things that I refer to as "Stupid MBA tricks". They sound good on the surface but the end result is a net negative for the customer which is in turn a negative for the business.
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Saturday, August 18, 2012

Death To The Advertising Driven Internet (App.Net)

advertising saturation

OK, so maybe the title of this post is a bit extreme. In the abstract I don't have any problem with advertising. It's been a perfectly legitimate way for companies to get their story out and has provided a means for media outlets to pay the majority of their bills and make a profit for hundreds of years. Having said that, I'm not very happy with the advertising driven Internet. Primarily because of the impact it has had on privacy.

Demographic data has been available to advertisers for a long time now. Knowing the socio economic background of the readers of a particular type of media provided advertisers with the ability to target their advertising campaigns in a way that was likely to maximize the return on the dollars they were investing. The problem comes in when that infomation goes from being based on groups of people and starts being available down to the level of individuals. The Internet makes gathering and inferring that kind of data much easier than it has ever been before.

Google has made a fortune providing advertisers with the opportunity to target ads towards very specific types of customers. Sometimes I find that useful but there are also times I find it creepy which is why I've been hoping some sort of alternative to the advertising driven Internet would emerge. I like having options.

All businesses have customers and most people would probably assume that people who use Google's search and other services are their customers. This is not the case. Google's customers are the people who provide the revenue that allows them to maintain and grow their business; in other words, advertisers. Companies that want to stay in business need to keep their customers happy. Generally this isn't a problem. Where the issue comes in here is that there is a financial incentive for Google to make their advertisers happy and making advertisers happy can lead to a place where most of us feel our privacy has been violated.

Google is not unique and I don't mean to pick on them. I could say the same things about FacebookYahooTwitter and many others.

Given all that I was excited to see there is a new social networking site that is in the early testing phase that is being built on a totally different business model, one in which developers and users are the customer rather than advertisers. Listed among their core values is the following...

We are selling our product, NOT our users.

We will never sell your personal data, content, feed, interests, clicks, or anything else to advertisers. We promise.

There are several more statements along the same line that point out the value of having the customers be the end users and developers who create extensions to their core platform rather than advertisers. More can be found at https://join.app.net/

It's hard not to see Twitter as the first potential victim of this effort given the look and feel of the current early alpha interface along with the changes Twitter has been making and the developer discontent those changes have caused.

App.Net seems to be doing well in the early going and has raised over eight hundred thousand dollars in a very short period of time. they are also getting some press which is always a good sign. Ultimately though the question is will enough people be willing to pay for such a service in large enough numbers to make their business model viable? I certainly hope so but time will tell.
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