Customer Retention vs the Nickel and Dime

Recently, I had two separate encounters with "company policy" that were, in my opinion, bad business. In full disclosure, I was on the losing end of each of these situations, so maybe the presence of bias exists. However, it brought to my attention a bigger question that many businesses have likely pondered; does one protect itself by creating policies that add extra fees in certain circumsliInces (I.e. ceasing to be a customer,late payment fees, etc. .. ) or does one practice appreciation for their existing customer base and forego such extra revenue in exchange for the hopes of  retaining the customer or getting them back at a future time?

Encounter number one was with a credit card processing company to remain nameless. After being a loyal customer of anonymous credO card processor for several years, it came to my attention that competition was now in existence that charged a materially less fee than I was paying at the time. This was in large part due to the seemingly endless number of fees for unnecessary or unexplained "services" I was receiving. The decision to switch was, in my mind, obvious. After calling to break Ihe news to anonymous, I was told that my services would be canceled during the next cancellation cycle, which would be in three months, there fore requiring monthly fees or the next three months. Outraged at th is revelation, I was told that this was "company policy' and I had agreed to said policies. Maybe my outrage was unwarranted. Maybe I should have read the fine print more carefully. Nevertheless, the situation and how it was handled left a bad laste In my mouth.

The argument for anonymous credit card company's position: "We need to charge all of these extra fees to cover our internal costs, otherwise, how do we make a profit? And if they cancel, we are losing this customer anyway, so why not protect ourselves against this lost revenue and charge a cancellation fee?" Argument for my position: "In the quite possible instance that I have issues with my new processor or become unhappy with my new service, the odds of taking my business back to anonymous credit card processor are now zero."

Encounter number two was with a parking lot management company to also remain nameless. Parking is precious in any urban area, therefore, parking lot owners in these places enjoy what amounts to a monopoly of sorts. Therefore, prices are steep and spaces are hard to come by. There is one lot in particular that I patronize on a weekly basis. It is the most convenient lot to my client's office. However, one day I came to my car at the end of a long day to find a boot on the front wheel. Shocked, I looked around the lot to find the attendant walking the lot.  He came over and pointed out that my parking time had expired a mere 8 minutes ago and that I was to pay 9 times what I previously paid for 10 hours of parking to have the boot removed. Outraged at this revelation, I pleaded with the attendant that this could not be correct I was only 8 minutes past due; I got carried away with work; There must be something we can do to work this out! He then pointed to the sign proclaiming their policy and noted that I was in fact, a proper candidate for a boot.

In their defense, I was parked directly in front of this sign and I was late. However, the assumption I falsely made, was that this company would take into consideration that my tardiness was negligent, the fact that circumstances during a workday can easily cause an individual to run a few minutes late, and that this company values the regular nature of my procurement of its services.

The argument in favor of anonymous parking lot company's position: "The policy was clearly posted and if you violate the policy, you must adhere to the said rules. And if you don't like this policy, feel free to park somewhere else. My lot is always full, and I know that someone else will park here if you don't." Argument for my position: "I will no longer park here because I will be worried of going 1 minute over my time. If this happens to enough people, maybe there is a decline in the use of that lot in general."

If you asked an economist they would probably say that a business only exists to maximize the profits for its ownership and should go into every decision with only this incentive in mind. Which for he most part is hard to argue With. So the question that remains: does a decision that maximizes profits in the short term hinder profits in the long term? There's no crystal ball that can answer this question; there's no right or wrong answer. Each company has to determine for itself the best strategy. For me, I'd rather err on the side of the customer.