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Verizon Payment-Fee Flap Offers a Cautionary Tale

The online backlash against the carrier's plan to charge for online payments illustrates for small businesses the real power of social media feedback.

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In case small-business owners had any doubt over the influence of social media as a business communications mechanism, they would do well to consider the case of Verizon Wireless's year-end communications gaffe.

Word emerged Thursday that the wireless carrier was planning to institute a new "convenience" fee, effective Jan. 15, 2012, for anyone making a one-time payment on the telephone or online. The revelation sparked outrage, not only for the spirit in which it was adopted but for how it was communicated during the "off" week between Christmas and New Year's Day.

After all, virtual every telecommunications company has been fervently encouraging customers to move billing and payments online, cutting out paper statements. The rationale is that it would streamline the process for customers. It also happens to be more cost-effective for carriers, because they can cut substantial printing and mailing costs. Then, Verizon Wireless apparently turns around to penalize customers who don't choose to automate those payments.

In fairness, the $2 fee is really aimed at those paying late. If customers sign up for automatic deductions or payments, they should be in immune. But that subtle nuance was buried in the backlash.

Verizon Wireless's move puzzled many observers, and it has turned into a customer service nightmare in the waning days of 2011. While it might make sense for the carrier to try to pass on fees for late payments over the phone, the Internet is perceived as a more cost-effective payment-processing mechanism.

"That's the one that surprises me, because most people won't charge you for paying on the Internet," Gerry Purdy, principal analyst with research firm MobileTrax, told The New York Times. "When you book a plane ticket online, you don't get charged a fee."

So it is easy to see why the move is being construed by customers as a sneaky way for Verizon Wireless to gouge them for extra money.

The way in which Verizon Wireless communicated its new policy apparently was confusing to many customers, and sort of under the radar, according to the various articles covering the situation. After all, this new policy takes place in less than three weeks, which doesn't seem like a lot of notice. What's more, it was apparently communicated during a traditionally quiet news week.

That is another reason Verizon customers took to Twitter to complain. Some have even taken to the Change.org Web site to start a petition against the fee.

There are two reasons small-business owners should watch the Verizon Wireless situation and its aftermath carefully.

First, while the fee that Verizon plans to adopt very well may be justified from an operational cost standpoint, it is probably ill-advised to try to pass that expense along to customers in the current economic climate. The Netflix customer service fiasco earlier this year, in which the retailer tried to raise prices, should have given Verizon Wireless pause before it decided to do something like this.

Second, if your company absolutely must raise prices or fees for some specific business reason, it should be as transparent about the whys and wherefores as possible.  

The fact that Verizon Wireless' fee came to light during the holiday week implies that it was trying to downplay the policy and sneak it through without much notice, even if that was not really the case. That strategy completely backfired.

The world of social media requires absolute transparency and honesty. For small businesses that aren't used to doing much marketing, it will take some time to get used to this. Why not make 2012 the year when your small business decides to try?



Heather Clancy is an award-winning business journalist with a passion for small businesses, green technology and corporate sustainability issues. Her articles have appeared in Entrepreneur, Fortune Small Business, The International Herald Tribune and The New York Times. Follow her on Twitter or on Google+.

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