Is that your hand in my pocket?

Identifying your pricing strategy is a business element that purists will say is more operations than marketing, but I have to tell you, they are wrong.  Pricing is all about marketing.  It is about perception.   It's part of the customer experience.

Let me give you a concrete example.  But first, a confession.

I am annoyed.  I'm actually beyond annoyed.  I am ticked.  And feeling taken advantage of. If you ever have a client express those feelings about your prices, heed the warning.   Bad things happen when you have a customer feeling that way.  This is what the Word of Mouth Marketing Association (WOMMA) will tell you is called bad buzz.  Watch it in action.

I've had a business relationship with an Iowa based bank, Bankers Trust, for several years.  For the past few years, I had a letter of credit with them.  I paid an annual fee of around $300.  I no longer need the letter of credit.  The annual renewal is January 1st, so I wanted to cancel it before I incurred the annual fee.  I got the cancellation confirmation letter today.  With a bill for $115!  When I e-mailed them to inquire why I was paying a fee, since I was specifically closing it to avoid the fee – they said:

“To cancel the letter of credit requires action on our part.  We charge the final fee of $115.00 to cover the cost of issuing the letter, updating our records, following up on retrieving the original after it matures and the cost of the courier fee. “

I’m stuck.  I have no need for the product.  There is no “early cancellation penalty” and yet, even though I paid for the privilege of having the letter of credit, now I am paying for the privilege of NOT having it?

Ridiculous.  And demonstrating a complete lack of customer awareness.  Their pricing strategy is about them, not me.  And they have lost a customer over it.  Worse for them…they have aggravated a blogger, community volunteer, and business owner who is going to tell this story over and over.

The dumb part of this is that it’s an easy fix.  No customer is going to be happy about being double-dipped.  So why not build the cancellation fee into the first year’s annual cost of having the letter of credit?  Call it initial/closing administrative costs and be done with it.

As with most things, it’s not what you say/do, it’s how you say or do that has impact.

Read more about how pricing = marketing at BizMord Search and Marketing Blog.   And weigh in on this:  What inadvertent impact might your pricing have on clients? 

Comments

[Roger von Oech]

What a great example of a really dumb thing to do! Good lessons to be had.

Roger

[Valeria Maltoni]

I worked with a provider years ago who required a hefty payment for sending me PDFs of documents created for my company, which we already paid for.

We had to buy all the original artwork files when we decided to employ another design firm -- a lot of money, but well spent. Not even our agency of record charges for those things.

The price for no transparency in your communications with customers may very well be extinction.

[Drew McLellan]

Roger,

Indeed. Really dumb. And to lose a customer because you just never thought about it from their POV is a crime these days.

But a crime that many businesses commit every day.

Drew

[Drew McLellan]

Valeria,

You make a good point about transparency. With today's new expectations, consumers are not tolerating the same level of what I would call nuisance billing.

Find a customer-centric way to deal with your billing, prices and even change orders etc. or run the risk of having to spend a significant amount of money repleacing your cost effective existing customers with expensive to acquire new ones.

Drew

[Doug Mitchell]

It's truly amazing how companies policies are set up to DAMAGE brands! What you did Drew was provide them the opportunity to expose you to new products, new services, alternatives to your LOC...i.e. to set the stage for a bigger, better, future realtionship. What they did rather was send a shockwage through the blogosphere. This once again highlights how the immediate gratification of a hundred lousy bucks overshadowed your serveral years of relationship in an instant. The management their must not have any clue that associates and friends of Drew McC were looking to put a line of credit in place or search for a new business bank. Didn't they get the memo? I've read about a PR/Brand consulting company that allows their customers to set their OWN prices. Talk about trust in your brand!

[Drew McLellan]

Doug,

One of the realities that most companies have not yet figured out is the new world of transparency they now exist within. Today's consumers have found their voice on the internet. Whether its rating/ranking companies or their products, or price comparison sites or blogs like this one -- they are exposed.

It will be interesting to see how companies react to this new world of consumer controlled communications.

And I agree, Bankers Trust missed the boat entirely. They lost a great deal more than a customer. They lost some public trust. And that isn't easy to replace!

Drew