March 21, 2023

Industry Trends

5 Ways in Which Businesses Get Surcharging Wrong ... and How to Do it Right

Industry Trends

Surcharges are common in many areas of business, and yet they are also a controversial issue because so many organizations misuse them.

To prevent this from happening at your company, let's look at some common flaws in surcharge policies, and discuss how you can find a better way forward.

Don't keep surcharge information hidden -- make it obvious and transparent

The sooner a customer knows that a surcharge will apply to their purchase, the more willing they will be to accept it.

If you only throw up the surcharge on the final invoice, or when they reach checkout, then this will cause consternation and frustration. For brick and mortar businesses, using signage to warn of surcharges is sensible. For online transactions, surcharge information can be supplied on product pages.

Don't use surcharging just to improve your profits, try cutting expenses instead

You could see surcharges as a way of increasing the profit margins of your operations, but this is neither efficient nor exactly ethical. Boosting profitability is better done by reducing costs elsewhere. For example, by ordering used equipment from Revelation Machinery you'l make a significant saving over the price of new equivalents.

Don't apply surcharges indefinitely‚ make changes over time according to market conditions

It's fine to introduce a surcharge in order to account for temporary spikes in the price of providing a particular good or service to customers. For instance, in periods of high inflation when fuel costs ramp up rapidly, you might want to take this step.

However, you also have to be just as responsive when external pressures are eased, rather than sticking with a surcharge for good, long after the initial issue that necessitated it has gone away.

Don't ignore local regulations, make sure surcharges are allowed before implementing them

Laws relating to surcharges differ from region to region, most notably in terms of whether or not you can charge a fee for transactions which customers carry out using credit cards.

There's no top-level law against this practice, but certain states such as Connecticut and Massachusetts do have local laws which prohibit this.

If you operate your business across multiple states, you have to take such variations in the rules into account. It may prove less of an administrative burden to just remove surcharges across the board and instead tweak pricing in other places to absorb any costs you incur from payment platforms for certain types of transactions.

Don't be ambiguous about why a surcharge applies -- explain its purpose in full

Customers need to know that businesses aren't levying extra fees for the sake of it, and yet there's often a lack of detail in the way that surcharges are outlined.

It's far better for building relationships with customers to be thorough in explaining the purpose for a surcharge. If they know the reasons behind it, they won't be as put out by having to pay it.

Final thoughts

Sometimes surcharges are unavoidable, and sometimes they can be sidestepped if it is strategically sensible to do so. The trick is to know the difference, and to ensure that your business is managing them in the right way, rather than putting them in place and forgetting about them.

If you're unsure about the impact that your surcharges are having, seek feedback from customers on their experience of them, and how they feel about encountering them when interacting with your business.

You might learn some interesting aspects that alter your decision-making going forward, and such insights are valuable from a growth perspective.