Why Nobody Smart Charges for Wi-Fi

Walk into any bookstore, Starbucks, or Panera, and you can count on Wi-Fi. Sure, you might have to click a button that says that you are giving up all rights to privacy, but most of us press that button without hesitation. Remember the debate about privacy vs. convenience? (Hint – Convenience won). When I travel, I still encounter businesses that have not figured out that we see Wi-Fi as our G-d-given right, not an option. This is why nobody smart charges for Wi-Fi.

Who Charges, And Why

Remember when you’d check-in to a hotel room, and the TV would be on to the pay-per-view advertisement? Hotels used to make a ton of money on two things they could count on: Telephone service, and pay-per-view movies. Enter the smartphone and its companion, the tablet or laptop, and hotel guests rarely have a need for the hotel telephone or TV. If you are a hotel chain or airline trying to make-up for the lost revenue from phone and movies, Wi-Fi seems like a good place to get it.

Of course, in the early days, a hotel or airline could charge just about anything it wanted to charge for Wi-Fi. Similarly, online retailers used to be able to charge a premium for shipping. Once Amazon and Zappos started offering free shipping, everyone else had to follow suit. Similarly, once other hospitality businesses started providing free Wi-Fi, we felt violated when we would see a charge for access.

Leading The Way

Why do coffee shops and lunch restaurants offer free Wi-Fi? Well, it’s the same reason why retailers offer free shipping. Free shipping attracts customers… and so does free Wi-Fi. In 2014, many of the most popular hotel chains offered free Wi-Fi to their top customers – those who hold elite status (typically gold or higher) with their frequent traveler program. In 2015, Marriott International just announced that ALL of its Marriott Rewards members, regardless of status, enjoy free in-room Wi-Fi when they book directly through Marriott. As an elite member, you still get free enhanced Wi-Fi (and in many cases free local and domestic long-distance calling). Marriott figured out that building brand loyalty is more important than charging what many guests might see as nuisance fees for something customers expect to receive.

Late Adopters

If hotels can charge or not charge based on your level of loyalty, clearly airlines could, right? Last week, I was flying to Seattle to deliver a keynote address. My preferred airline charges $9.99 for Wi-Fi – a reasonable fee for a coast-to-coast flight. In order to purchase Wi-Fi, I logged into my account. This means that the airline immediately knew I was a Platinum member of their frequent flyer program with a paid first-class ticket. By charging the fee, they demonstrate that the $9.99 is more important than the potential to improve their impact on customer loyalty. If I had been flying this airline for the first time on a discount ticket, I would have paid the same $9.99. What message are they sending?

Since so many other hospitality businesses offer free Wi-Fi, the ones that charge are seen as un-friendly. Being a late adopter can certainly have a negative impact on your brand.

Avoid Nuisance Fees

In your business, be sure not to try to make up for lost revenue by charging your clients what might be perceived as nuisance fees. Nuisance fees show up in areas where your customer can’t clearly see your added value. For example, I’ve seen companies charge a fifteen percent surcharge on the expenses they incur on behalf of their customer. It’s tough to make an argument for added value in that case.

I recall switching law firms in my prior business because the firm we were using billed us for the administrative time and photocopies associated with sending us their invoice. The total came to $114. When we switched, the senior partner called me and said “You’re spending hundreds of thousands of dollars per year and you are switching over $114? That’s crazy!” I replied, “Exactly. It is crazy that you’d have the audacity to charge someone $114 to send them a bill for hundreds of thousands of dollars.” Don’t be THAT vendor.

Here is a simple pair of questions you can ask to know if you should charge for that additional service:

  • Do you add value that justifies the premium you charge for that service?
  • Would the value of incremental revenue outweigh the potential impact on customer loyalty for NOT charging?

If the answer to EITHER question is “No,” then stop charging your customers for that so-called service. Charge for areas where you add value, and pass-through other items at cost.

Business can easily look at revenue through the accounting lens. Recognize that every customer interaction might impact revenue, but will certainly impact retention and customer loyalty. Companies like Zappos and Starbucks have built wildly successful businesses by charging a premium for where they add value. They clearly consider the impact of each decision on the customer experience. I suppose accountants could show how Starbucks could service more customers by allowing the barista to serve more than one customer at a time. Accountants could also determine how much additional profit Zappos could collect by charging for shipping or working to reduce the length of customer support calls. Thankfully, both companies have proven that the accounting lens might overlook the importance of customer experience… kinda like with Wi-Fi.

It’s Your Turn

What nuisance fee(s) do you see that impact your loyalty? Tell us about it. Post a comment or take the conversation to Twitter, LinkedIn, or your favorite social network.