Monday, November 26, 2007

Hidden Charges

I am not sure why consumers put up with companies like Ticketmaster that heap on additional charges at the checkout counter.


I truly believe that Ticketmaster adds a lot of value when purchasing tickets for an event. As a consumer, I like going to their site and viewing just about any event I want to attend. The site is user friendly and ticket purchases are very easy (assuming you are not looking to buy for Radiohead, U2, etc). Given this value add and their near stranglehold on the market, I am not sure why they hide the true cost of the ticket.


Here is a recent example from a Hawksley Workman ticket purchase.


The tickets were advertised as $32.50.


However the final bill comes to over $41.00 per ticket with all of the additional charges applied.

Here was the breakdown:

Advertised: Full Price Ticket CA $32.50 x 4

+

-Total Building Facility Charge(s) CA $2.50 x 4
-Total Convenience Charge(s) CA $5.50 x 4
-Order Processing Charge(s) CA $2.25 x 1
-Regular Mail = No Charge

TOTAL CHARGES CA $164.25


Final individual ticket cost = $41.06, a 26% surcharge over the original cost.


What gives?


As a consumer, I am more than happy to pay $41.06 to see Hawksley Workman. This is more than reasonable. Why not just be up front from the beginning?


Companies who employ this sneaky strategy typically do this for the following reasons:


1. They don't want to look expensive in the market place, so they lead with a cheap price and then add to the price once the customer is at the checkout counter when the chances of walking away are slim. This practice is also fairly common in the online promotional products space where some companies advertise products without decorating charges, thus making them look inexpensive compared to other companies.


2. They want to disclose to the consumer all of the individual components of the sale so as to elicit sympathy that Ticketmaster is really only making peanuts on the transaction.

As far as I can tell, I think most people don't really care where the money goes so long as they value what they are buying at a given price. An additional convenience charge or a building facility charge is just annoying. Be upfront about this from the start. Sure, tell me at the end if you must, but don't heap on the additional charges as I click through the checkout process. This only serves to irritate.

I relate the following example in our business.

Imagine the following scenario. A $10.00 T-shirt advertised on our web site as:

$1.00 T-shirt!

+ $2.00 printing cost
+ $2.00 transportation charge
+ $1.00 thread match charge
+ $1.00 employee lunch fund charge
+ $0.50 company profit
+ $2.00 computer server cost
+ $0.50 dye charge

= $10.00 total.

I understand that it costs money to produce a product, but you shouldn't be in the business of annoying your customers with hidden charges. Note that hidden charges are different than extra charges. To be fair, extra charges are legitimate when they advertised clearly as such so the consumer is aware of what they are getting into. (ie. the cost of buying a book on amazon.com excludes freight if under $39, or the cost to print this mouse pad excludes a $50 setup fee).

A famous quote in business says that "in the absence of value, companies can only compete on price." On the web, companies should not be afraid to post the fair value of their products without resorting to shady practices like tricking the customer at the end of the process with random charges. If your product/service is worth it, people will always line up to buy it.

Sunday, November 11, 2007

Green Swag




Every industry has their 15 minutes of fame, and I believe that the promotional products industry is about to have its Andy Warhol moment.

Promotional products are everywhere. Last year, North American businesses purchased 18 Billion dollars worth of advertising specialties. Everything from branded toasters that sit on kitchen counters to wacky magnets that cling to office filing cabinets. The street terms for these types of promotional products include swag, trinkets and trash, thingamabobs, and doodads. While most have a love affair with swag (it's typically given out free), I don't think that companies would believe they are doing the environment a favor when they buy promotional products.

Until now.

Over the past few months, our industry has joined the environmental crusade and once tired products are now enjoying a resurgence in popularity. Here are a few examples:

Yesterday's stainless steel tumbler is today's disposable coffee cup killer.

Yesterday's convention tote bag is today's must have fashion accessory at the grocery store checkout counter.

Yesterday's nylon lunch bag is today's styrofoam container killer.

Yesterday's ceramic mug is today's hottest desktop promotion.

Yesterday's notebook is today's 100% recycled cardboard journal.

Yesterday's plastic pen is today's biodegradable conference writing instrument.

Who ever said that swag could not save the earth?

We are asked all the time about the latest and greatest products in the swag business. People are typically expecting us to tell them about the toaster that can brand your logo into toast or the latest lava lamp. These are the trinkets and trash - the suspect items that simply end up in the land fill without serving any useful purpose.

Historically, there was no quicker way to bring a cocktail party conversation to a standstill if you mentioned the stainless steel mug or recycled journal as being the next best product based advertising medium. But this has changed in the last 9 months - companies today are demanding that their promotional marketing purchases now serve 2 purposes:

1. The product serves a useful purpose and will not be thrown out immediately.

2. By using the product, the consumer is reducing their environmental footprint.

As little as one year ago, a promotional product purchase was typically deemed a success if it met the first objective. Now marketers can now double their investment return if their promotional spend achieves the second, and arguably more important, objective.