What Entrepreneurs Can Learn from the Backlash to Hotel and Resort Fees

What Entrepreneurs Can Learn from the Backlash to Hotel and Resort Fees

Being upfront with customers about pricing will create a customer for life.

Every January, I go to the Consumer Electronics Show (CES) in Las Vegas. CES is a cavalcade of “what’s next” in consumer electronics, from televisions to smart refrigerators. And robots. Lots of robots. Some of which are really creepy.

With how expensive hotels tend to be during this event, I book months in advance to secure a still unreasonable but not eyeball-gouging rate. But this year was different. To my surprise, a $54 resort fee was added to my bill upon checkout, thus adding a total of about 20 percent to the cost of my stay. Inquiring to the hotel, I was told that the fee was “mandatory” and that it covered such generous amenities as water bottles, a chocolate bar and an airport shuttle that is “currently down because we are short staffed. So sorry.” Fed up, I vowed to never stay at that hotel again.

I am not alone in feeling cheated. According to a survey conducted by Atmosphere Research, 91 percent of customers think resort fees are egregious, and many customers feel that they are not disclosed adequately during the booking process. In Las Vegas, where some hotels average $25 a night during low season, a resort fee of $50 can double the cost of the room. Naturally, the Attorney Generals of both Nebraska and the District of Columbia are suing Marriott and Hilton for unfair and deceptive practices.

And yet, it doesn’t need to be this way. Transparency in product pricing and offerings can make or break a business. According to the Journal of the Academy of Marketing Science, customers are more likely to purchase an expensive product and even repeatedly patronize a business if they feel the complete price of a product has been adequately and fully disclosed. In order to ensure a loyal customer and not have pricing issues get in the way of success, entrepreneurs should seek to disclose pricing as clearly as possible (even if it means losing possible business), justify any price increases with a concise fact base and even introduce dynamic pricing options. Let’s break that down step by step.

Disclose Pricing Transparently and Clearly

At my hotel stay during CES, the resort fee was not clearly and transparently disclosed during the booking process. In fact, it was hidden. This contributed to sticker shock, or the feeling a customer gets when the price for a product is radically different than as earlier quoted or expected. Sticker shock can be extraordinarily damaging to a business, so you’re better off disclosing the entire value and price of the product before purchase. Make sure a customer clearly understands what that price encompasses, including any ancillary or secondary fees that may occur. And while some entrepreneurs may shy away from full disclosure out of fear of losing business, an angry customer with a complaint always costs more time and money in the long run. The opportunity cost is not worth it.

Justify Price Increases

A few years ago, I was dining at Union Square Cafe in New York when, again, I was shocked at my bill. Instead of arriving with the opportunity to tip my waitress, the pricing of each item was higher in order to pay employees a living wage. And yet, the bill also came with a message from the founder and owner of Union Square Café, Danny Meyer, stating why gratuity was automatically included, where the money will go, when it was enacted and how any customer can contact the restaurant to discuss their opinion on the matter. Contrast this with my experience at another restaurant in Los Angeles that just added the tip automatically and justified it by effectively saying, “It’s good for everyone.”

If you are going to materially increase the price of your product, follow in the footsteps of Danny Meyer and state, in detail, why you are increasing the price, where the proceeds will go, when it comes (or came) into effect and how the customer can reach out if they have any comments or concerns. A good example of a company that does this is TargetCW, which provides contingent workforce solutions but breaks down pricing by line item so it is more transparent before customers make a purchase decision.

The overwhelming majority of customers want to see businesses they love be successful, and by offering clear and concise facts on pricing, you are making them ostensible partners in your business and future success.

Introduce Dynamic Pricing Options

Earlier this year, Disney World introduced dynamic ticket pricing options for admission to its theme parks. Dynamic pricing is a consumer cost model that adjusts to the supply and demand curves of the market at any given time without having a set flat rate. So for example, if you visit Disney World on Christmas Eve, expect to pay more than if you visit on a rainy day in October during the off-season. Disney justified the change by saying that the increased demand in busy seasons, coupled with resource strains, meant that they needed to put a premium on pricing.

Disney is not alone in introducing dynamic product pricing, the most notable, and controversial, being Uber. But if entrepreneurs are to introduce a dynamic pricing model, they must ensure that the terms of the price, the reason behind any increases and the time it lasts are clearly and legibly disclosed to consumers before the purchase is made. Consumers must be given the option of paying more for a product they want at a specific time period or waiting for the price to drop when demand may be lower. The goal is to shift the decision on price to the consumer rather than having the business arbitrarily set or increase prices themselves.

If there is anything that the resort-fee debacle teaches us, it’s that honesty and transparency in customer service is one of the most important assets to building a successful business. And when it comes to price, entrepreneurs should aim for transparent and clear disclosure, provide concise facts and introduce dynamic pricing to shift the responsibility for making a decision over to the customer. Hopefully, they’ll become customers for life.

Read the full article on Entrepreneur.com:
What Entrepreneurs Can Learn from the Backlash to Hotel and Resort Fees

Being upfront with customers about pricing will create a customer for life.
Source: Entrepreneur.com By Alex Gold

The Streaming Wars Are Going To Be Brutal: Here's How To Survive

The Streaming Wars Are Going To Be Brutal: Here's How To Survive

It was just after midnight when I landed in Kuala Lumpur, Malaysia, late last year. After a nine-hour flight, I just wanted to go to my hotel and sleep. Exiting the plane, my phone started to go off wildly — DramaFever, WarnerBros.’ streaming service centered on Korean Drama,  was shutting down .

But it’s not just DramaFever. Over the last year, some of the larger streaming services like Alpha, Filmstruck, and YahooView have all shut down. I believe we are in the early stages of a streaming media war. Unfortunately, we are going to see many more battlefield casualties — including some of America’s top brand names — before it’s over.

The challenge for incumbents and new entrants isn’t about entertaining audiences. Consumers absolutely love streaming video. Rather, the challenge is that consumers are not changing how much they are willing to spend on streaming subscriptions when compared to traditional terrestrial and cable television. On average, consumers spend about $35 a month on streaming services compared to more than $100 a month for cable subscriptions.

Although streaming pricing should increase as cord-cutting itself does, even if consumers are willing to pay a bit more to have a collection of streaming subscriptions, there’s still just not enough room for every entrant to the market.

What if cutthroat competition doesn’t scare you? Here’s how to claim your niche:

Grab A Highly Engaged Market 

Successful streaming services have superfans: a core group of extraordinarily dedicated, engaged and often lifelong fans. By first focusing on a dedicated niche market, such as sports or nature programming, streaming platforms can collect the resources and clout they need to scale.

Take Curiosity Stream, founded by Ex-Discovery Channel Chairman John Hendricks. CuriosityStream showcases real-world, nature-focused and education-driven content to a core base of engaged fans. The platform offers a mix of subscription types that range from $3 to $12 to engage fans at the highest level to those who are more casual. With over 2 million members, it’s clear that this entrant understood the value of pursuing an engaged fanbase.

More importantly, CuriosityStream also iterated and tested different types of content before greenlighting its most expensive tentpole series. Aside from other streaming entrants, this is a lesson for entrepreneurs generally: Test everything using a metrics-driven process.

Another example is MLBAM. After hitting home runs with BaseballChannel.tv and MLB Radio, MLBAM partnered with the NHL, PGA Tour and more to launch 120 Sports, a sports streaming video service.

One sport that has extraordinarily dedicated and passionate fans — but has yet to create a streaming platform — is NASCAR. NASCAR’s fanbase is extraordinarily passionate, maybe even more so than those in any other sport. In fact, their engagement intensity on social media channels like Facebook and Twitter after a race is more akin to the fervor of Tik Tok and YouTube influencer fans than any other professional league.

Go Where Your Consumers Are

Because I’m a millennial without a cable subscription, I can’t watch my favorite Showtime series, Billions. Showtime, like many networks and cable providers, requires consumers to subscribe to traditional cable providers in order to gain access to any online streaming content. Content providers that take such a “walled” approach shoot themselves in the foot, a mistake that often leads new entrants to the market to an early demise.

Never stop would-be customers from paying you for your service. Today’s most successful platforms are accessible to consumers through every outlet imaginable: Apple TV, Roku, mobile applications, social media and more. Don’t be afraid to experiment with different financial models to scale, including a mixed revenue base of advertisers and subscribers.

Try Advertising-Supported Models

Although a mixed model may be the future, there’s a reason broadcast television has stuck around for so long: Viewers don’t like to pay. Cater to them without shutting yourself off to customers who prefer a premium experience.

Iflix, which serves emerging markets like Southeast Asia and Africa, understands that it needs to provide Netflix-like service at a fraction of the cost. If iFlix users watch advertisements, then part of the platform is open and free. But if they want to see an in-demand series, then they pay a monthly subscription fee. Here in the United States, Spotify and YouTube operate the same way.

Advertising dollars are difficult to generate without a subscriber base, though. First, go where your customers are, then use a freemium approach to acquire new ones. Over time, you’ll lessen your reliance on increasingly scarce subscription dollars.

Be Aware Of Your Real Competition

With streaming services, the competition is steeper than you think. Netflix founder Reed Hastings believes that the company does not compete with other entertainment programmers as much as it competes with the likes of Fortnite — or even sleep.

Yes, sleep. Streaming services now have to compete with games, social platforms, apps and every other activity under the sun. Oh, and by the way, he says Netflix is winning.

This points to a key insight: Streaming services are competing to monopolize as much of their users’ time as possible. To make headway, streaming service entrants need to understand that they are competing with other types of entertainment applications, gaming, socializing, work and activities that also seek to both monopolize and even monetize people’s time. If your strategy is focused on competing with a new series on a different streaming service, then it may be time to reevaluate.

Read the full article on Forbes.com:
The Streaming Wars Are Going To Be Brutal: Here’s How To Survive

Source: Forbes.com By Alex Gold