Pricing models that irritate me

I am a pretty reasonable consumer.  I don't mind paying for quality services or goods, but I really hate "hidden charges" or charges cleverly disguised.

Last night we were having dinner at one of our favorite restaurants which will remain nameless.

We ordered our normal items and as we like to do these days asked if we could substitute steamed vegetables for french fries.  The waitress said no problem, and that was the beginning of the problem.

The main items we ordered were fine and our veggies were not quite as good as usual, but they were okay.  However, when we got our bill I noticed we had been charged an additional 99 cents each to switch from fries to vegetables.  We had ordered the same meals a dozen times in the last six months without being charged extra.

I questioned the waitress on the charge, and she said it was the new computer system which automatically added the charge.  She offered to have management come talk to be about it.  Since I know the owner, and knew he wasn't around, I said not to bother.  However, I wrote him a personal note about it this morning.

This irritates me almost as much as the restaurants that don't tell you how much their beverages are unless you ask and find out they are charging $2 for a glass of tea.

I have gotten irritated at some lawyers charging inflated prices for every fax that they do.  I recently sat through the presentation of a lawyer who is doing real estate closings for a flat fee.  It makes sense to me.  He will even come to our office so the customer is in more familiar circumstances.  I may give him a try.

Next on my irritation list are car dealerships with their surcharges on your service bill.  You would think with rates as high as they charge, that they could cover waste disposal some other way than tacking it on to your bill.

Then there is the whole mess of cable TV pricing and Internet access.  I thought someone was going to protect us from these highway robbers.  Our cable bills are ridiculous considering how little television we watch.

Yet the only solution seems to be bundled services.  The trouble is I want a high quality land line and good internet access.  They're both in different bundles where we live.

I am not willing to go with DSL or live all the time with Internet challenged telephones.

The idea that we can be sucked into some bad services with good pricing on one good service just isn't going to work for me.

It all reminds me of the Apple Computer model of business.  We will give you the best operating system around, but the only way you are going to get it is to buy our over priced hardware.

Perhaps that explains why I haven't bought a Mac in two years.

Comments

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First, let me say that I have been lurking on your site for months, and so enjoy your musings that I check daily for new posts. In all these months, despite a number of topics that have resonated with me, I have not replied. I had to reply to this one, though, and see if I could help explain the horrible pricing structure that most attorneys have.

Pricing is a sticky subject for professionals. When you a hire an attorney, you're really hiring their knowledge and expertise. The only thing professionals have to offer is their knowledge and expertise, and putting an appropriate price on that is very difficult. Contractors do it every day, and regardless of how little time they spend on your problem, they are charging by the hour for their knowledge.

In NY (and probably many other states) we are ethically constrained from charging on a percentage basis for some types of cases. While it would be appropriate to charge a 30% fee against the award obtained in a successful personal injury case, we are not allowed to charge similarly for a matrimonial or family court matter, because we are unable to guarantee an outcome favorable to the client. Family law usually consists of highly emotionally, highly contested cases - we have to come up with a pricing strategy that offers the client the best bang for their buck, while still appropriately compensating us for our time and knowledge.

Sadly, the prevalent way of compensation for attorneys is to charge by the billable hour. Our office elects to charge in increments of 6 minutes (1/10th of an hour) of the professionals' hourly rate. Other offices have a minimum policy of .2 or .3 as a charge even if it only takes them "2 minutes" to write the fax, which is spelled out in the retainer agreement in NY (and should, in my opinion be spelled out in a retainer agreement, regardless of state of residence).

Incidentally, it never takes "just two minutes" to do anything in a law office, in my experience. First, the attorney or paralegal has to stop what they are working on, to attend to your question, which usually involves a minimum of a 3-5 minute phone call with you, the client. Sometimes, we have to pull the file and refresh our recollection, so that when we prepare an answer to the question, we do it accurately. Then we have to write the responsive fax, which takes approximately "two minutes". Then we have to receive confirmation that the fax was received, and file the fax and receipt confirmation in the file, and put the file away. "Two minutes" to write the fax is now suddenly 10-15 minutes of billable work time on your problem, which is taking time away from the matter the attorney or paralegal was initially working on when you rang. Their time and expertise hasn't changed, simply because they were composing a fax on your behalf instead of arguing your case in court. The base of knowledge and experience is the same, regardless of what function they are serving.

While this may seem unfair, it has the effect of appropriately charging the clients whose matters take up the bulk of our time for the services they are using, and not punishing the clients whose matters are less time-consuming. Most of the attorneys I have worked with delegate as much as possible to their paralegals, in an effort to save the client some money. (My paralegal rate is less than half of what my attorney charges by the hour).

In our office (which is a small, 3-person office), we have chosen to offer a flat fee in standard, personal real estate transactions. We charge $450 for sale, $500 for purchase; $900 if we represent you in both. The bulk of this work is delegated to the real estate paralegal, who is closely supervised by the attorney. We have streamlined the process of closings to the point that we are able to offer the reduced savings to the client. Unless we run into a serious problem, we do not charge on an hourly basis for closings. When we have run into a serious problem, we generally add a charge (which we discuss with the client prior to closing) in a flat amount, representing the "additional" time spent by the attorney and/or paralegal. This amount, and whether or not we charge the client for our additional time, is entirely at the discretion of the attorney.

It doesn't sound fair, but we have to put a price tag on our services somehow. The system is probably broken, but our pricing schemes still seem as fair as we can make it to the individual clients.

To put it another way: You wouldn't walk into your dentist's office with a cavity, and expect to not be billed if they look at it, confirm it is a cavity, and set you up for a filling at a later date. Your attorney is no different.

[ocracokewaves]

An impressive response. Glad to see you are charging a flat fee for real estate.