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Can companies get away with new fees?

Customers have let it be known that they're not going to accept new charges without added value in return.

By MSN Money Partner Jan 4, 2012 8:07PM

This post comes from Matt Brownell at partner site MainStreet.

 

MainStreet on MSN MoneyWhen Verizon announced last week that it was imposing a new $2 fee for paying your bill online or over the phone, it probably thought the news would fly under the radar. After all, the announcement came during that dead week between Christmas and New Year's Day, a time when many members of the media are on vacation and people are preoccupied with their New Year's Eve plans. In that sense, it was the perfect time to drop the bad news with the minimal amount of controversy -- or so the company perhaps thought.

 

Verizon customers revolted, with the news trending on Twitter and an online petition against the fee garnering upward of 50,000 signatures in a single day. The company quickly backtracked, canceling plans for the new fee just a day after the initial announcements.

 

Verizon's timing may have been correct from a public relations perspective, but it badly misjudged the public's mood. Specifically, the public really hates fees, and has the means and motivation to do something about it. We've already seen that once in the past year, when Bank of America canceled plans for a $5 debit card usage fee after weeks of customer outcry and closed accounts.

 

"What we're seeing is an angrier, more defensive, more reactive consumer," says Kit Yarrow, a professor of psychology and marketing at Golden Gate University who specializes in consumer psychology. "And they have a voice now -- they've never had the ability to connect with each other and facilitate change the way they do now." Post continues below.

Yarrow says this new level of consumer push-back extends beyond just fees. But she says that fees in particular -- whether for checked baggage at the airport or for using your checking account -- have become saddled with an extremely negative connotation that should have many companies thinking twice about using fees instead of price hikes to raise revenue.

 

"Fee is now a four-letter word," she says. "Consumers are much more resilient to price increases, as it logically makes sense to them that everything eventually costs a little more money."

 

That doesn't mean that fees should be completely off the table. Companies just need to implement fees in a way that doesn't violate customers' trust -- a test Verizon utterly failed, says business strategist Daniel Burrus.

 

"They called it a convenience fee, and that's a slap in the face," he says. "Now they're charging me to give them more convenience, while I have to do things that are inconvenient for it to cost less."

 

Just as importantly, consumers need to feel that they are actually getting something in exchange for the fee. For example, Burrus points to an ATM fee that is announced alongside enhanced security features at the machines. That's in contrast to Verizon's attempt to charge for a service that had always been free, a move that didn't pass the smell test for its customers.

 

"Companies need to find more honest and transparent ways of explaining why there are different price structures for different products," says Yarrow. "It has to somehow make logical sense to consumers, because they're paying attention now."

 

More on MainStreet and MSN Money:

2Comments
Jan 5, 2012 5:03PM
avatar

The cost of goods, services, etc do increase - we get that. But to slap on some 'fee' (convenience fees - I just love those) for no apparent reason other than the company simply wants more money - especially now while so many people are cutting back and sacrificing.....

 

that's beyond greedy; that's just bone-headed.

Jan 8, 2012 11:39PM
avatar

What do people really expect?  Computers are more ubiquitous than ever.  They have to retain employees to sit there and wait for the phone to ring even if two people call.  We seem to have forgotten that we ARE being provided a convenience.

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