A couple months ago I was managing an event for a nonprofit I work
with. Prior to the event our speaker indicated he did not need a screen
or projector for his presentation. Then, at the event, (an hour or so
before his presentation) he changed his mind and asked for a projector
I understand last minute changes can be a hassle. And the hotel we
held the event at has fantastic catering staff who handle these
situations like they’re no big deal. And that’s how it should be.
That’s a big part of their job.
But the hotel management sees these situations as golden
opportunities to make money. So instead of charging us the regular fee
(which I believe was under $100) their “11th hour special” price was
This is TOXIC REVENUE.And if you’ve ever
planned an event, you’ve probably dealt with this. It’s an industry
norm. It’s like a bank charging you $35 because you’re 1 day late on
your credit card payment. They do this for two reasons:
1. Because they can – it’s legal and it’s within their policies.
2. It’s an easy way to generate revenue. And it’s fluffy rich revenue
with very little cost associated with it. (Or so it might seem.)
So it SEEMS like a good deal to the hotel (or bank or whatever
company does this.) No doubt, their number crunchers are thrilled with
this type of revenue.
But it’s a bad deal. Here’s why:
It will drive customers away. You don’t need a Ph.D in psychology to
see why either. Just ask yourself, “how much do you enjoy being ripped
Because that’s exactly how it feels. When you pay something and you
get nothing of value for it, you feel ripped off. The extra $350 we
paid for the projector and screen was ridiculous. It cost the hotel
nothing extra to set it up at the event compared to setting it up
earlier. And we got nothing else for it. We got exactly the same value
and benefit as we would have for $100 if we had requested it earlier.
Just because you can legally take money from a customer does not
mean you should do it. Anytime you take money from a customer and you
offer nothing of value in return, you risk driving them away. And
remember, the “value in return” is in their eyes, not yours. If your
customer feels ripped off, they will not feel compelled to continue to
do business with you.
Ask yourself, how important is the extra revenue today compared to
the lifetime value of that customer? Then add to it the damage to your
reputation from all the bad word of mouth advertising that customer
will create. Is it really worth the extra few dollars? Probably not.
On the other hand, if you find yourself in a situation where you
have the ability to take money from a customer in this way, what if you
chose not to? What if the customer expected it (because it’s the norm
in your industry) and you told them “no, that’s not how we do business.
We value you as a customer and we’re not going to abuse our
relationship with you.”
This gives you a huge opportunity to show your customers why they
should continue doing business with you. Rather than generate some
short term, toxic revenue, you generate a boat load of goodwill and you
increase customer loyalty.