Photo Credits: Kevin H
I recently went online to buy a couple of tickets for a show and got slapped with a $7.75 per ticket “convenience” charge. If I had bought the tickets at the theater’s ticket window I would have avoided the convenience charge.
That episode let me thinking: who’s convenience are you really paying for?
Let’s see: by ordering online you do all the work (you don’t need an expensive human to interact with you), and the theater receives your payment hassle-free through your credit card company. If you buy from the ticket window, on the other hand, the theater has to pay an employee for several days, balance the cash register at the end of each day, deposit cash payments in the bank, etc.
Yet, those who buy online are the ones paying the convenience charge…
Why is that so? I think it is in part because most people still consider buying from the ticket window the normal thing to do-the way things have always been. It is probably for that same reason that banks are still reluctant to charge customers for conducting business through a teller, but instead have no problem charging outrageous fees to those who get money through an ATM. Without going out on a limb, we could also argue that governments act the same way when they decide to raise taxes instead of finding ways to spend less and more productively.
For those who apply that logic, in the short term everything looks fine: convenience charges increase the theater’s revenue per guest, banks can “invest” the ATM fees in expensive lobbies and nice desks for their officers, and government bureaucrats can get easy money to finance ineffective social programs.
In the long term, however, things won’t necessarily look that good. Theater operators may start to wonder why are there so many empty seats, traditional bankers may finally start to pay attention to those pesky online banks that are stealing their business, and politicians may soon find out that the same people who pay their salaries can also boot them out of office.
Businesses should use pricing to reward the most desirable customer behaviors.
If a customer interacts with you in a way that reduces costs and results in a more efficient operation, that behavior needs to be rewarded. For example:
- You could charge less for an ebook than you do for a real book (which requires paper, ink and complicated logistics).
- You could offer free shipping to those who increase their order size.
- You could offer a discount to those who put your service on automatic payment or pay you in advance.
- You could give a better price or an internet-only freebie to those who purchase from you online.
- Etc.
Incentives drive behaviors. Make sure you reward your most profitable customers.
What’s your take?
I can’t agree more.
I offer discounts depending on how much one spends on my online store. This way, most purchases are for over 6 units rather than single units.
I love the idea of giving your biggest spenders incentives or promos that keep them coming back, like having free shipping if they spend over a certain amount and now with UPS flat rate shipping you can determine your price before hand.