Magazine

The Tricky Business Of Fees


"Fees! Fees! Fees!" documents the movement down the path toward mediocrity. On one hand, businesses feel that they have to bribe customers to accept their products and services. On the other hand, they will take advantage of the transaction to hit us with an array of fees. In the midst of all of this, they continue to cry that they can't raise prices. If all they can offer the customer is game-playing, they don't deserve to charge higher prices.

Perhaps this troubled model of their customers is what led to their products and services being priced as commodities. How can we ever expect transparency in corporate reporting if we must struggle to get transparency in pricing?

Philip E. Howe

Lehigh Valley, Pa.

As a state government attorney representing Maine's telecommunications consumers, I regularly hear from customers who are furious about the number of indecipherable surcharges on their phone bills. While you mentioned that fees typically add 15% to the cost of long-distance service, you neglected to mention that fees and hidden rate components on local phone bills typically add over 50% to the total price. "Anatomy of a phone bill" on our Web site has an explanation of each phone surcharge (state.me.us/meopa/phoneanatomy.htm).

Wayne R. Jortner

Senior Counsel, Maine Public Advocate

Augusta, Me.

Adding fees to a company's revenue model is the equivalent of incremental cost-cutting on a company's cost structure. What seems like an effective way to improve margins and profits usually results in lost revenues and added costs after the initial benefits are realized.

Fee-based pricing tactics ignore the economic value of quality customer relationships, as well as the high cost of customer churn and added process complexity. Besides, most companies targeting revenue growth appreciate that their existing customers are their best candidates for new service offerings that drive up revenues without price increases.

John G. Carlson

Andover, Mass. The problem with bank fees goes way beyond their being assessed. I have found on behalf of clients (and personally) that most of the time an error is made, such as an assessment on a closed account, that: 1) the collection department will not respond to letters of explanation; 2) telephone collectors never have authority to correct an error, only to demand payment; 3) the fact that letters have been written is not even entered into the collectors' database; and 4) the same person never calls twice. And when the account is turned over for collection, the banks never furnish to the collection agency or lawyer the letters previously written to try and correct the error.

Lowell N. Hawkes

Pocatello, Idaho

You say Bank of America (BAC) has stopped charging fees for online banking. However, they hold payments you make for five business days before forwarding them to the payee, allowing the bank to use the float as a source of funds.

Robert Grass

Des Moines, Wash.

Contrary to their claim in your article, Providian Financial Corp. (PVN) now charges $12.95 to make a same-day online credit-card payment, a service that was free last year.

Glenn Daley

Torrance, Calif. Good article, but you tell the story from only one side. Take Best Buy's (BBY) restocking fee: I would rather have them charge a fee to someone who "bought a camcorder for the weekend" than raise the price to cover the loss of not being able to sell the opened box as new. The same for other products and services mentioned that I may not need or want, such as food on the airline or extra housekeeping at a hotel.

Bob Oswald

Chandler, Ariz. Fees, charges, penalties? I can top that. How about being whacked when the vendor cannot provide the service? I recently moved two blocks away, and Earthlink, (ELNK), my DSL supplier, claimed that it could not provide service at my new place, so they socked me $150 for "early termination." No amount of reason or abuse would shake them from this shakedown. Happy coda: I signed up with my local cable monopoly. No complaints so far.

Ian Keay

Palo Alto, Calif.

In recent years, software publishers have hit consumers with a double whammy that very likely escapes the consumer price index. First, many have stopped providing user's manuals, triggering the emergence of the "Missing Manual" and "Dummies" series of self-help books.

Second, they have virtually eliminated free real-person telephone tech support. Currently, after one or two "courtesy calls," users typically must pay $30 to $45 per help incident or $2 to $3 per minute using a 900 number.

Bill Steinbicker

Minnetonka, Minn. Here is an additional issue that should have been addressed: overcharges, "accidental" charges, and just plain erroneous charges billed by companies with access to consumer credit-card information. At least twice a year -- sometimes more often -- America Online (AOL) Inc. charges me in one month for 12 months, adding $200 to my bill. When I call to report this, I am told that the charge was an error and will be credited back to me in 60 days. In effect, AOL gets an interest-free loan while I am being charged interest by my credit-card company.

Kelly Gutensohn

Stafford, Va. American Express charges me nothing for paying online or having near-real-time access to my account online, and they have a bevy of helpful people reachable via phone. Merchants can gripe about American Express (AXP) charging them a higher rate, but hey, they don't get my business.

Lewis Perdue

Sonoma, Calif.

I have learned that companies typically respond well to good customers. As an example, I got my long-distance provider of the past 15 years to give me a "goodwill" credit for the "regulatory access" fee recently added to my bill.

Timothy E. Cheek

Coppell, Tex. You ask: should you time the market? Of course you should (BusinessWeek Investor, Sept. 29). You hope your mutual fund managers do it. Timing is what drives executives to sell stock options. Had Americans ignored the propaganda with their 401(k) statements, they would have timed the market and reduced their losses as the Dow fell from 11,000 to 7,600. If you don't time it, "invest" becomes code for "hold the market up while others cash out" or "everybody took their profits but you -- now help push this market back up!"

Roger Johnson

Leclaire, Iowa Would you care to tell relatives of those who lost family members in the World Trade Center, the Pentagon, or the planes, or tell parents of troops who gave their lives, that $87 billion is too much for the U.S. ("The high cost of war," News: Analysis & Commentary, Sept. 22)? Is the new battle cry "Let's roll it up?"

Dean Munson

Rockford, Ill.

I do not believe the U.S. can afford any more of President George W. Bush's tax hypocrisy and suggest that he fund his war with a $1- or $2-per-gallon surtax on gasoline rather than his $87 billion increase to the massive deficit he already has created.

Milton D. Rosenau Jr.

Bellaire, Tex. I can add anecdotal evidence to your analysis of the challenges facing Abercrombie & Fitch Co. (ANF) ("No longer big brand on campus," Marketing, Sept. 29). I work at a university that just welcomed its latest freshman class. Into the dining hall, escorting his freshman son, came a dad wearing a crop-top, sleeveless garment emblazoned "Abercrombie" -- the dad! The end is near.

Does anyone else remember A&F as the posh brand of old-money, big-game-hunter types?

Bruce Holgers

Santa Cruz, Calif. In "What's an MBA really worth?" (Cover Story, Sept. 22) it is very interesting that of the people on your short list of "most-admired business leaders," only Warren Buffett actually has a business education. Herb Kelleher studied law, Michael Dell and Bill Gates dropped out, Jack Welch got a PhD in chemistry, and Oprah Winfrey [studied speech and drama]. An MBA is not a prerequisite to starting a great business, but the three letters look very nice on a r?sum?.

Ankur Parashar

Boston


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