A kiss of death: Charge a transaction fee at your own peril

Let’s talk about customer annoyance crimes. They’re hardly ever deliberate. Most of us come to work each day with the intention of doing a good job and not pissing our clients off.

Yet, sometimes we do things that make customers think: ‘You started out so good and now you are deeply disappointing, what happened?’

It often begins when you start having lots of meetings focusing on internal processes.

Urged on by your finance people, you start believing your customers understand those processes, and don’t mind the inconvenience they bring. Plus, finance has some exciting new ideas on how to boost the ol’ P&L.

That’s where the trouble starts.

The $15K coffee

I used to use an audio studio to do radio ads and soundtracks. They did quality work, and were pleasant to deal with. I would spend about a thousand dollars a job with them, maybe 15 jobs a year.

I turned up one January morning for a record. The studio manager appeared.

“Morning Ian, we’re getting coffee do you want one?”

“Sure, thanks.”

A week later I get their invoice. Four hours of studio time, $880. Coffee, $3.80.

I called up assuming it was a mistake.

“Uh … what’s with charging me for the coffee?”

She switched to ‘adminsplaining mode’, where people snap from their normal personality into schoolteacher tone and rhythm. The first word out of their mouth is always “well”.

“Well, we all had a strategy day for our business going forward. Our feedback was that our customers wanted the lowest hourly rate possible, with any extras charged on an as-used basis. We felt customers would understand that costs have to be recouped.”

Tip: ‘Recoup’ is not a word your clients want to hear. There is no good context for recoup. Also, ‘our customers want us to be cheaper’… Duh. If you ask them, what do you think they’ll say?

“OK, but you didn’t tell me any of that. You just offered it and became the first non-café business in my entire career to charge me for a coffee.”

“Oh. Well, none of the other customers have queried it.”

I never used them again. It just felt so… dirty. An offer of a coffee is the most basic transaction unit of human hospitality. It was like being charged for a handshake or business card.

They recouped $3.80. They lost $15,000 in revenue per year. Not a great ratio. Put that on a post-it note at your next strategy day.

Read your own invoices

Moves like this are basically like a magician in reverse. Magicians distract you with a hey-look-over-there move while they do their sneaky work elsewhere.

Coffee on the invoice says: ‘Hey check this out, sure we did $880 worth of perfectly good work, but forget that! Here’s an unjustified charge that will annoy you a thousand times more than the dollar amount involved.’

Invoice items are such a fertile field for customer annoyance, because it’s their last memory of the whole experience.

Customers don’t really understand the price of what you do, but everyone understands a coffee. If you’re, say, a lawyer, your hourly rate is a mystical synthesis of your skills, experience and reputation. But everyone knows the price of a photocopy.

If you choose obvious everyday items to maximise your job profit, your customers will assume everything else you do is marked up to the same extortionate level. It makes a great story that people can tell over and over again, with your brand as the villain.

Also please stop photocopying and printing everything. What are you, your parents?

Just printing out emails so you can read them.

Don’t screw customers just because you can

You buy movie tickets, which are already expensive. You click to agree to their posted price. Then the last thing you remember is being charged an extra $3 transaction fee.

Per fucking ticket. So it’s $12 or whatever for the sweet privilege of… spending money with them. Like their computer server has to do four times more work than for a single ticket.

I think I’ll just watch Netflix.

Let’s be clear on this: there is no ‘admin fee’, ‘convenience fee’, ‘transaction fee’ or any other name you want to give it, that isn’t a customer annoyance felony. It’s the perception that you had a deal, they agreed to it, and now you want more, just because.

Imagine if supermarkets, whose checkouts are a much higher capital investment than movie ticket websites, charged an extra 15% levy just for paying for your groceries. There would be angry mobs.

As with cabs and their decades of 10% credit-card surcharges. It’s hard to feel sympathy when the disrupters come for industries that have been screwing us for years. I’ll be lighting cigars while I watch them burn.

Burn, Cabcharge, burn.

Getting it right: The magic of restaurant wine lists

Don’t be a reverse magician.

Price signals are complex and counter-intuitive, but if you hunt around for inspiration, it’s really rewarding. And profitable.

My favourite example of business magic is the margin-boosting genius of the restaurant wine list. Watch endearing biz-psychology wizard Rory Sutherland unpack this multi-layered trap, built from peer pressure and status consciousness. You’re caught before you even sit down.

It’s an essential two-minute lesson from a 90-minute preso. You should watch the whole thing when you have more time. (If not, start at 63 minutes.) Don’t be misled by the ‘digital marketing’ title, it’s deep business thinking from start to finish. I’ve watched it three times and the answers to everything are in there.

Also there are not enough keynote presenters in bright red pants and cardigans. More of that, please.

This article was first published on Motivation for Sceptics.

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