Fees vs. Price…What’s Going On Here?

As with my last post, I want to start this one by saying that I have absolutely no idea what I’m talking about on this subject, but it interests me.  I’ve formed my own opinions about the subject, and I’ll share them, but they’re opinions, not fact.

I recently had to go to the Men’s Wearhouse to rent a tuxedo for my son for my brother’s upcoming wedding, and I was perplexed by how the costs were presented.  It reminded me of the fees that I incur at my gym, and several other places that I do business.

It was simple.  The tuxedo rental was $99, plus tax.  On the invoice, however, there was an additional $7 “rental charge.”  It was described as a non-refundable fee to cover any wear & tear on the garments, and that it’s standard across all of their rental agreements.

At my gym, I pay a monthly fee.  Let’s call it $35/month.  However, in the membership contract, there is also two $15 charges.  One in January and one in June.  They are “club maintenance fees.”  They were described to me as a separate fund that is used to keep the equipment new and up-to-date, and to modernize any portions of the facility that needed to be updated.

What am I paying for?

In both the tuxedo rental and the gym membership, what am I paying for?  I understand that there is overhead to running a business, and that you need to pay your employees, pay for utilities, cleaning crews, etc.  Those costs should be part of the fees that I pay you for your service. Additional, line-itemed fees should be optional charges that are above and beyond the base services.

For example, my hosting company charges me $12.95 a month for hosting, and $5 a month more because I added a second SQL server instance.  That makes total sense to me.

If you need to charge me $7 for wear and tear on the garments, why isn’t that just part of the cost of the rental?  Why are you calling it out as a special fee?  I’m sure there’s a reason, but it’s just not clear to me as a consumer.  What does my $99 cover, if not the wear and tear on the garments?

For the “club maintenance fees", are you telling me that all of the membership dues don’t contribute to the overall appearance and maintenance of the health equipment?  What does my $35 a month pay for?  It’s certainly not customer service or knowledgeable staff.

I’m sure you’ve encountered fees like this as well, and I’d love for you to help shed some light on this for me.  I really don’t understand why these fees are called out seperately.

Is it a marketing tactic, so that they can say their rentals are under $100, or their membership dues are lower than they appear?

Is it an accounting practice, because fees aren’t taxed, so they have to do them seperately?

5 thoughts on “Fees vs. Price…What’s Going On Here?

  1. Completely a marketing maneuver.

    Witness the airlines. They now charge for a carry on bag. I realize that some people don’t carry a carry on but it is very rare. So is this practice to cut charges for the few people who don’t? To relieve weight on the plane? Make more space?

    No.

    It is totally because of the flight finding services online, which sort by price. If you make the ‘price’ $239 with a $10 fee, then you appear higher in the search than someone who just sets their price at $249.

    Same thing happened in shipping on EBay. Companies would buy crap, then put it up on EBay for a buck, with $12.95 in shipping. Looks – initially – cheaper than the person who just puts their item up for $13.95.

    It is just the latest incarnation of putting the little 9/10 of a cent by the gas prices – just a way to look cheaper.

  2. The same goes with tips on US: if you must pay the tip, why not include it directly on the ammount of the service? In Portugal you only tip the waiter if you want, if you feel he deserves, and you give him as much as you want, starting from zero!

  3. +1 to Bill Sempf’s comment. The $99 limit is a psychological one. People consider $100 to be significantly higher cost than $99 (though we all know it’s a one dollar difference).

    Once they get you in, you’re more likely to accept the $7 fee, simply because it isn’t being factored as part of the $99. Psychologically, you’re still getting a $99 tuxedo. This is also why they have structured the wear-and-tear fee to be less than $10. That’s another psychological hurdle.

  4. I agree that it is a marketing move. It is easier to sell the same product at $99 than to present customers with the true cost of the item. I have noticed that it varies on the popularity of the item as well (i.e. Something consumers buy frequently often have a single price while the hidden costs tend to be related to the >6 month purchases).

    I loath these types of hidden charges as I see them as a form of lying and why would I want to give someone my business when they start out the relationship with a lie. But with some goods & services there are very few options and if the competition is doing the same thing then it is just something we just have to live with it.

  5. It is totally because of the flight finding services online, which sort by price. If you make the ‘price’ $239 with a $10 fee, then you appear higher in the search than someone who just sets their price at $249.

    Same thing happened in shipping on EBay. Companies would buy crap, then put it up on EBay for a buck, with $12.95 in shipping. Looks – initially – cheaper than the person who just puts their item up for $13.95.

    It is just the latest incarnation of putting the little 9/10 of a cent by the gas prices – just a way to look cheaper.

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