Rethink customer fees

Last year I wrote about guidelines for charging extra fees on internet purchases. In that post I recorded some practical tips about how to explain additive fees on the internet in a customer friendly way. Fees have been on my mind again this week in large part because they are now an intertwined part of our society. Wikipedia defines a fee as “the price one pays as remuneration for services.” Yet not all fees are positioned this way.

No Choice Fees

Some merchants add a fee to a customer’s purchase process with no ability to opt-out. The fee is part of the requirement for a purchase. Ticketmaster is good example of a merchant using this technique with their infamous “convenience fee” on each purchase.

Fees for service

This type of fee is charged to a customer in exchange for providing an additional level of service. Customers have a choice whether or not they pay this fee. Airline baggage fees are a good example of this.

Hidden fees

Hidden fees are those that customers don’t see coming because they are stated in the fine print, overview of services, or some other hard to spot location. Handset upgrade fees for a cell phone are my favorite in this category. Apparently it’s not enough that you secure a new phone in exchange for a two year contract.

So how do we rethink customer fees?

Let’s first consider the paradox of fee charges. Customers hate to pay fees yet they are willing to pay for extra services if they understand and value the exchange.

With that in mind, it comes down to a simple rule:

If the fee is optional for the customer then allow them to pick the service during product selection and itemize the charge. If the fee is not optional for the customer then include it in the product price.

The focus of this rule is on the customer. If the fee is not optional then don’t surprise the customer by adding it to the total at the time of payment (checkout). If its part of the cost to provide the product or service then include it in the product price. In this way, the customer knows clearly what the expected price is for the service. The customer doesn’t really care about the fee, for their convenience or not. They just want to know what it’ll cost them to purchase.

If the fee is associated to an additive service or feature then itemize it by making it a selectable item during the purchase process. In this way, the customer agrees to and isn’t surprised by the fee. If the service is valuable customers will choose it!

Oh yeah. My disclaimer: Fees that are not part of a purchase process such as bank overdraft are obviously not covered by this rule. That’s more of a penalty fee and really an entirely different discussion.