I spoke in Austin last week and while there, I rented a car to visit my youngest in San Antonio. I stopped at Dollar’s counter and the agent told me that, if I wanted, I could skip refilling the gas for $27. I didn’t have to decide right then – I could just bring it back without refilling, and they’d fill it up and charge me the flat fee.
That may not sound like a big deal to you, but it blew me away. Most rental agencies require you to decide up front whether you’ll refill the car. I always say no.
What happens when you forget to refill? Last year I rented with Enterprise and rushed back to the airport, forgetting to refill. As I checked in, I was told it would be $9 a gallon – $36 for four gallons of gas! I told the attendant, “Forget it. I’ll just go refill it,” but the car was already checked in. Finally he gave me a $5 rate, but it certainly frustrated me.
Why do they do this? Clearly to change my behavior. “If you make us do extra work, we punish you.” It’s not that unusual – but it’s unnecessary. Dollar used choice architecture to accomplish the same outcome without the punitive nature.
Think back to the early days of Netflix. One problem with rentals was the late fee, designed to make sure you return the video so the next person could watch it. While Blockbuster threatened you, Netflix architected it so there was no threat. If you were too busy (or lazy) to return the video, it was no problem – just a choice you made.
This punitive mentality isn’t restricted to B2C experiences. We worked with a global manufacturer who implemented fees to “nudge” their customers. If the dock wasn’t ready when their truck showed up, they charged you $100. It made their customers furious. First, if the truck was late, the manufacturer didn’t pay a fee, but the company had no problem slapping one on their customer. Second, the manufacturing site typically didn’t pay invoices (that was done at corporate), so it took 4 to 5 people hours to pay the invoice, which became a rounding error in the financial relationship.
Take a Different Approach
Imagine if, instead, the manufacturer had a non-financial scorecard showing how each manufacturing site performed on a timeliness factor and used this as part of their allocation decisions. Or they could bring it to the annual contract negotiations and use this as part of the discussion. Rather than frustration, this would drive joint planning on how to avoid the problem. It would drive the same behavior – probably more effectively – without the punitive feeling the current experience created.
Look at your own experience. Are there fees you’re charging meant to “change behavior?” Should you be charging them?
Industries from banks to libraries are starting to recognize that fees are more effective at frustrating customers than they are at driving behavior. Fees are a band-aid put on a problem. Wouldn’t it be better – for your customers and yourself – to fix the root cause instead?