The $64 Penalty — Why Pricing Matters

Monday.  Time for my Monday Rant.  Today…. “Penalty-Based Pricing Models”, or “Why Kessler Hotels Don’t Want My Business”.  Are you ready?

I want you to think about your own pricing strategy when you read this.  What do your prices communicate to your customers?  Are you saying, “buy from me and you’ll get more value than you paid for?”  Or, as I found below, are your prices telling your customers “Pay me for every breath you take… you are just a wallet to me… you want something? Pay more!”

I call this Penalty-based Pricing.  Its like a penalty for being your customer.  At least, that’s how I felt this weekend.  Here’s the whole story.

Tracey and I spent the weekend at a gorgeous hotel in Savannah this weekend.   Not a traditional Southern inn… but a trendy, cosmopolitan ultra-modern uber-hotel called “The Mansion at Forsyth Park“.   (Honestly, it looked like it had been decorated by Lady Gaga.)

I paid 100% for the room when we booked online.  I was excited to have a nice weekend all paid for, and not worry about what it cost.  I really just wanted to enjoy the experience.

My problem is with the Penalty-Prices that the Mansion charged… after I paid for the room.

Like this one:  Before I even got into the building, they had informed me that there would be an additional Valet fee of $40 to use their parking lot.  The option? Park on the street.  Now this is not NY city.  Parking in Savannah is not difficult, and their ample parking lot was just empty asphalt.  So I’m not sure exactly what I was paying for, but it should have been included in the room charge… which I had paid in full in advance.

So now I’m at the check-in desk.  And the woman immediately asks me to sign a form acknowledging that I will  be charged an additional $24 “resort fee”. I have no idea why they deserved this extra $24, nor why I was made to sign a form acknowledging this fee, but it should have been included in the room charge… uh, which I had paid in full in advance.

I’ll skip the part about the fire-alarm TEST in the middle of my nap, and go right to room-service… The $14 bowl of Oatmeal with fruit was laughably expensive, but when I saw that there was an ADDITIONAL $3 delivery fee AND a mandatory 22% gratuity added…  well fuhgetaboudit. I’m a good tipper, but 22% plus $3?  And since when are “gratuities” mandatory?  Doesn’t that defeat the whole purpose of rewarding great service?

OK, enough…

There’s an important business lesson in here.  Customers are willing to pay extravagant prices for awesome service, but when the company’s pricing policy is to add fees on top of fees… well there’s only so much abuse a customer will take.

The Mansion at Forsyth would have been much better served to make all their pricing “Inclusive”. Don’t penalize me with “resort fees”, “delivery charges” and “mandatory tips”.  In fact, why not make the customer (that’s me!) feel happily surprised by throwing in some freebies that I did not expect? How about a free welcome drink at the bar (which I didn’t find for 2 days because they didn’t welcome me!)  How about including parking and wifi in the room rate?  A little goes a long way when it comes to free extras.

It’s sad that for $59 I can stay at a Hyatt Place that includes an amazing FREE breakfast, FREE wi-fi, and FREE parking…  but when I pay 10 times that amount for a “better” experience, the whole fantasy is broken by the constant nickel-and-dime attitude of the Mansion.

Don’t let your business fall prey to Penalty-Based Pricing… Go for a happily surprised customer by providing more — more service, more value — than they paid for or expected.  That’s how I run my business, and I can tell you that it creates some VERY loyal, happy customers.

(Mr. Kessler, you can do better.  I invite your reply!)

Dedicated to your profits — and better pricing models!

David