When Will Companies Learn? How to Avoid a Verizon-Style Fee Frenzy

Posted by Tim Fernholz


Thanks to social media, consumers have a force multiplier to help them combat corporate policies they see as unfair, especially fees. In the last year, we’ve seen the defeat of a $5 debit card fee at Bank of America and the mass rejection of Netflix’s attempt (since cancelled) to split into two different services. The latest victim of this wave of minor consumer revolts was Verizon Wireless, which chose the week between Christmas and New Year's to announce a $2 fee for consumers who aren’t enrolled in an automatic payment plan. An avalanche of consumer complaints—and word of an investigation by the Federal Communications Commission—led the company to reverse its position. How can out-of-touch companies stop alienating customers with messy p.r. battles and embarrassing reversals?

Talk to users first. “Why not post it on your Facebook page?” Ron Shevlin, a business analyst, suggested to The New York Times. “Maybe the feedback would have been just as bad, but then you’re seen as heroes for listening to feedback ahead of time. These firms are not reading the mood or living in the real world.” It’s hard to believe that Verizon didn’t anticipate any backlash from this decision, but apparently they’re that out-of-touch. Their troubles are compounded by the reversal, which gives the impression that the wireless giant’s execs got caught with their hands in the cookie jar.

Make a coherent argument. Verizon told users it needed the new fee to cover the costs of processing certain kinds of payments, but couldn’t—or wouldn’t—break down the specific costs it faced. People can be pretty reasonable about paying for a service, but if you ask them to cover costs that you can’t explain, they'll smell a boondoggle.

Don’t use fees as marketing. The implicit purpose of the new fee was to get more Verizon customers enrolled in automatic payment plans by creating a price incentive to switch to a plan that is cheaper for Verizon and guarantees a steadier stream of revenue. Rather than bullying your customers into a new product, sell them on the benefits of your service.

Don’t go after low-income customers. Verizon’s fee was targeted at customers who use cheaper phones or who pay irregularly because they don’t regularly have enough money in their bank accounts to cover the charge automatically; Bank of America’s $5 fee would have applied to customers who didn’t meet certain balance requirements. While companies may think that these customers are the least likely to be able to object, it’s clear they’ve found ways to use the internet to make their voices louder, and even customers who aren’t affected by the fee don’t want to do business with a brand known as a chiseler.