Category Archives: Consulting

Fee-ed up

The family and I went to a concert last night – more about that tomorrow.

CeBIT Home 1998 student day ticket with barcode

(Photo credit: Wikipedia)

In the process of setting up the evening out with the family, I bought tickets online.  I actually bought one too many so I sold it online as well.  If you’ve done either – along with a host of other things – in the last couple of years, you’ve probably noticed that there are fees associated with those activities.  Obviously there is the price of the ticket but there are handling fees, convenience fees, delivery fees, processing fees and who knows what else.  I’m fee-ed up.  Let me explain.

I certainly don’t begrudge anyone from making a buck for providing a service.  My issue is that many businesses seem to have followed the lead of the airline industry in nickel and dime-ing their customers to death.  Let’s take last night.  The face value of my ticket was $118.  On top of that, I paid a service fee of $12.80 (almost another 11%) and a $5 facility charge (another 4%) per ticket.  There was also a $3.25 order processing fee.  The last one is, in my opinion, where the nickel and dime mentality lives.  In light of the $102 they made processing my order for the tickets, do they really need another $3.25?  At least I didn’t get charged to use my own printer to print the tickets out…this time.

Then I sold a ticket.  Since it was an in-demand show, I was able to do so for $225.  Of course, that was before I paid 15% to the site that helped me sell it – $34.  At least that fee was straightforward.  Had I been selling baseball tickets, however, there’s also a $1.50 per ticket MLB transfer fee and a $2 per ticket delivery fee. So while MLB got paid by selling a seat, they want to get paid again (as if the beer and hotdogs aren’t enough) because what might be an unused ticket moves to someone who will be there.

It’s not just tickets.  Looked at your phone bill?  What’s an “administration fee” except billions in the phone company’s pocket and a buck out of yours? Bought a car and paid a “document fee” of a couple of hundred dollars? Bank fees are among the worst and try telling the cable company you don’t want a remote control for which they charge you every month.  Then there are the airlines…

I’ll say it again.  It’s fine to  collect a fee for delivering a product or service.  Be upfront about it (you usually discover most of these fees after you’ve “bought”).  Make them clear and reasonable and in line with what the customer would expect to pay for your service.  The way to lose big bucks in my mind is to collect nickels and dimes in a sneaky way on top of those bucks.  What do you think?

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Love The One You’re With

One of the ongoing discussions I have with clients is the need to balance acquiring new customers with servicing exiting ones.

First customers

(Photo credit: stavos)

Many of the businesses with which I’ve been fortunate to have worked over the last few years place a far greater emphasis on acquisition than they do on showing the love to those who are already in the fold.  One of my mantras has been that it’s almost always more cost-effective and profitable to retain a customer than to find a new one and I tend to work with my clients on finding good ways to service their existing bases while helping along new customer acquisition as a lesser emphasis.

That’s why I was happy to read a recent study of small business owners from the Manta folks.  In conjunction with BIA/Kelsey, they found..well, I’ll let them tell you:

In 2012, BIA/Kelsey reported that small business owners prioritized customer acquisition over customer retention at a 7-1 ratio.  Recently, a new trend is developing as 61 percent of small business owners surveyed report over half of their annual revenue comes from repeat customers rather than new customers and that a repeat customer spends 67 percent more than a new customer  (emphasis mine!). In line with this, small business owners are spending less time and money on customer acquisition; only 14 percent are spending the majority of their annual marketing budget to acquire new customers, and only 20 percent are investing most of their time and effort to acquire new customers.  This is a significant shift in behavior as small business owners have realized that existing customers play a more influential role in business success than new customers.

In other words, existing customers bring in more dough than new customers.  The question then becomes identifying and segmenting existing customers into group that you can address in a manner appropriate to their buying habits.  You need to be having different conversations with the person who hasn’t ordered in 3 months than the one who orders once every 10 days. Maybe you handle the top 10% of your customers differently or maybe you look at spending levels, purchase cycle, or even those folks with an affinity for a specific product you’re wanting to emphasize.

No matter whether it’s loyalty programs, special customer service agents or insider news and information, customer retention needs to be a focus of every business, something I think needs to be placed ahead of new customer acquisition.  You?

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Free!

I got involved in a business model discussion the other day.

geese

(Photo credit: Grant MacDonald)

Someone who has a paid product is contemplating moving to a free model of some sort. The product is fairly unique and I would say has enough demonstrable value that giving it away would cause consumers to question that value.  The main thinking is that in the digital (and many other spaces) people have come to assume that everything is free.  Hello?

First off, nothing is free.  While you as a consumer might not have to lay out any money for the product or service being offered, you are probably giving back something of value.  Your attention (to ads), or your data (to damn near everyone), each of which has quite a bit of value in the aggregate.  Maybe the basic product comes with no strings attached but the really cool stuff requires a payment (freemium).   But that’s not really what was driving my thinking.

People don’t always choose free.  That said people always choose free if everything else is equal.  We call those things commodities, and not all commodities are fruits or natural resources.  Sports scores are commodities, for example.  Why would you pay for them when there are so many free sources (except nothing is free!).

People DO choose to pay for stuff they can get for free.  Bottled water.  Over the air TV.  The real question is this:

How do I differentiate my product so as to add value in the consumer’s mind for which I can charge?

We sometimes lose sight of the fact that price and value, while related, aren’t the same.  For commodities, free (or no price) can be a distinguishing feature.  Where does one go, however, once someone else jumps to free too?  Creating unique products that are clearly better sets up a lot of pricing and business model options.  Being a “me-too” doesn’t.  Make sense?

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