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Should dealers get into a “fee-spirit?”

These days, add-on fees are providing a way for businesses to generate extra revenue.

In today’s world, when we hear “fees” we immediately think of airlines. Carriers are flying high with billions from fees for: checked bags, changing flights, picnic packs, meals, a seat assignment, extra legroom, unaccompanied kids, even the family pooch. Thank goodness Ryanair hasn’t gone with its plan for pay toilets . . . yet!

Airlines aren’t the only “fee-spirits” these days. Checked your latest hotel bill? If, for example, you just stayed at Nassau’s Atlantis Hotel, your bill likely included a “housekeeping gratuity and utility service fee” of $22.50 per guest per day. Lots of others, for example hotels along Miami Beach, have “activity fees” or “resort fees” on their bills now.

In a different move, some hotels allow the guest to opt out of having their room serviced. That reduces the hotel’s labor costs. Some even offer guests a discount if they opt out of daily cleaning. But, knowledgeable observers believe this is really the precursor to making room cleaning fees a hotel industry standard. After all, right now, guests just opting out of housekeeping may cut some labor costs, but it doesn’t bring the hotel a new revenue stream like airline bag fees or extra legroom surcharges.

As the airlines have modeled so well, the key to successfully generating a revenue stream from fees is quite simple. Take something that is now included in the price of a product or service, unbundle it, and make it a mandatory fee. The truth is, as consumers we’ve become quite accustomed to surcharges and fees. We’ve paid fuel surcharges to FedEX, UPS and cruise ship lines. Gas stations charge us a higher price per gallon if we don’t use that oil company’s credit card. Ticketmaster has made a business model of “convenience” fees.

Even in our dealerships, for some time now, our customers have become accustomed to paying add-ons for environmental disposal charges and/or a fee for shop supplies. In a personal experience, I cruise my boat to a nearby dealership for scheduled outboard service. Until recently, the basic package price for 100-hour service included lifting the boat from the water with their forklift, etc. Recently, the dealer unbundled the lift-out and a mandatory fee of $30 now appears on my bill.

It’s a fact that fee-for-service has become an accepted standard business model in which services are unbundled and paid for separately. Moreover, I suspect in virtually every dealership’s operations there are new income stream opportunities. These days, it’s worth taking time to examine all parts of a dealership to determine if and where unbundling might generate new revenues.

Comments

9 comments on “Should dealers get into a “fee-spirit?”

  1. dave

    Until the dealers look at customers as people who own boats and not “revenue streams” or “unbundled revenue” it matters not what they put on the final bill.

    People will vote with their feet as long as they can; they already have at hotels, with the airlines, with mortgages, bank fees, credit card fees, etc. I resent having to pay an EPA disposal fee, shop fluids fee, rags fee – as it is now. That was and still should be a “cost of doing business”, your business. As a customer, I do not care nor need to know that you used 2 rags on my engine, or that you used 1/10th can of WD-40.

    Will you then charge me for the newest socket, wrench or diagnostic patch to fix my problem, or will you expect the mechanic to pony up his money for the proper tools? As with the airlines, where does it stop or does it?

    Your business will suffer if you follow these foolish business practices that some MBA, with absolutely no real world experience with people and business, came up with.

  2. Bpante

    To Dave your dream dealer has already been run out of business.

    The dealer has to survive too. Before you ever walked in the door the government is raping them. The customer wants everything but to pay the bill. YOU buy their parts and accessories on line (many times the wrong or faulty part) and expect the dealer to install and warranty them for nothing. YOU don’t take care of their stuff and it is the dealers fault. YOU voted for the fool that gave us ethanol, now Ethanol is the dealers fault. As a technician, YOU come to me to do side work (if you want to screw my employer, you will screw me too). After you messed it up trying to fix it yourself you expect me to sort it all out in flat rate time.

  3. tigerpilot

    When I get a quote I expect it to be inclusive. Additional fees mean the last time for work at that location. A local marina I used to frequent lost 10 years of winter storage business over a $10 finance charge because I was a week late on a bill.
    Providers who think they are the only game in town usually are not and pay the price for gouging customers in the loss of future business.

  4. Doug Reimel

    I myself have added a $5 hazardous waste fee to all my work orders. It has 2 purposes; one is to collect for the disposal of oils and related items, second it keeps me from burying that charge in a higher labor rate. Everones customer base is different so it may not work for you.

  5. KC

    To Tigerpilot

    I’m sorry, but It’s very simple. Does your credit card company cut you any slack when you are 10 days late? In fact they charge you a $35.00 late fee plus interest and you gladly pay it. Marina’s are not banks. Pay on time and you won’t pay any extra charges. If you can’t afford it call them and work out a plan or consider a different hobby. I don’t think the average consumer has any idea what it costs to operate a marina. The business is down 80% and we have a 5 Month window to make it work. Leet me know if you want to buy one.

  6. Bpante

    I’m not choosing one business model over another, that is my employers job. I hate ‘SPIRIT AIRLINES’ they are the worst in the world. I was commenting how the dealer is getting squeezed from all sides. Not to mention boat builders that don’t back up their products, see the manufacturers resisting a clear franchise contract. Now we have a website that is telling people dealer cost (and lowballing it at that). Who pays the trucker or holds the owner’s hand? People think the higher price of marine fuel is going in the marina’s pocket, the states take that.

    I will add a story. As I said I’m a Marine Technician (Mechanic). Among other boats, I own an inflatable boat, that last year needed repair. I had it done by a local ‘inflatable’ shop. I customer came in looking for inflatable repairs. I referred him to the inflatable shop. He then asked me what I did, I said “I paid him”. He said I’ve been there he was too high. My response was “I messed it up the first time with the wrong glue and paid extra to get the wrong glue removed.”

  7. Chris Foster

    Norm,
    You’re way off here. If you do something to earn my business I’ll gladly pay for it. But fees based on what should be part of the business are weak management and poor service. What’s next, are restaurants going to charge extra for a knife, fork, spoon, and a napkin?

  8. CaptainA

    If you have to charge these fees to make a profit then sell your business. Customers will say good-bye. Airlines that charge fees lost my business. I fly internationally often and I use the airlines than don’t charge fees–usually european based carriers now. I did use Continental however they were recently bought out so if they implement the fee structures I ‘ll say “ADIOS”. Instead I’ll fly Lufthansa, British Airways, Air Italia, and EL Al–they don’t charge fees.

    I’ll tell you if my marinas/dealers start charging fees they will lose my business period.

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