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.
Enhanced by Zemanta


  1. Hi Mike,

    These fees, once discovered, do have an affect on my purchasing decisions. It's the old "fool me once,..." scenario. But even more egregious than the add-ons you mentioned, where we have options, I experienced an instance were I was locked into paying bloated fees.

    My daughter got a traffic ticket. The penalty for the offense was around $25. However, there were four fees tacked onto the ticket, some of which appeared to have nothing to do with the violation. I think one was a library fee or something unrelated like that. The total due ballooned to $80.

    It's a shady practice, at best.


    1. Another great example Ray.

      This practice is becoming increasingly prevalent. :-(