Address Ancillary Fees as Personalizing

Your customers might not recognize what the marketing term “drip pricing” refers to. However, they sure know what it’s like. It’s when a seller announces additional fees after the customer makes the initial purchase decision. It could be that your customers first encountered drip pricing when booking air travel. Want to check another bag? The price of your ticket just went up. Want more leg room? Sure, that’s available, but it’ll cost you. Or it could be that your customers learned to avoid retailers who tempt them with an unrealistically low item price and then quote a succession of fees to make the item usable. Drip. Drip. Drip. This is the malevolent form of what’s called “partitioned pricing.”
     Avoid the trust-busting of drip pricing by announcing your menu of ancillary fees before asking the shopper to commit to the purchase. That’s the research-based advice from an international team at California State University-Long Beach, Macquarie University, Seoul National University, and Gachon University. The advice is accompanied by news of a way to develop appeal of the menu: Present it as a way for the shopper to personalize their purchase. Consumers like personalization.
     With this approach, the researchers found that the degree of acceptance was as high for multiple added fees as for a single added fee. It didn’t come across as drip, drip, drip. However, the cost of each surcharge does matter. Research findings from Adelphi University, University of Alabama-Huntsville, and University of Dayton indicate that each fee should not exceed 20% of the base item price.
     Still, this approach won’t work in all cases. Your customers may have had eyes opened up to drip pricing while settling up the hotel bill. What’s this resort fee, never mentioned when the room reservation was made? The fee is not an option.
     The answer here, say the researchers, is to foster in buyers an appreciation for the seller deserving fair compensation. This happens when buyers trust the seller. Provide an explanation for the fee and, if possible, the way in which the basis for the fee benefits the buyer. Researchers at University of Pennsylvania and University of Florida found that customer anger is most likely when a retailer's explanation for a surcharge is something like transportation or insurance. They concluded that the explanations most likely to head off customer anger center on the cost of goods to the retailer from the supplier.

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