Is your business, the business of value deduction?

by Ashvini on December 5, 2012 · 7 comments

in My Personal Thoughts

It is hard to work with a business entity on which your business depends upon and which seems unreasonable.

A number of banks in India levy a large number of charges. So for example , one could be charged because he has gone to the bank for a transaction while another could be charged for not maintaining a minimum balance.

Before Indian economy was liberalized, the most difficult thing was to navigate through a bank that had umpteen files blocking the way. The process of banking was slow and clumsy. However it still worked and the banks were more socially oriented and lesser inclined to fleece the customers  with various fees and charges. With privatization one thinks things would become better. It did for a certain extent. No longer one needed to stand in the queue. A person could log in from his home and conduct all his business online.

However slowly charges started appearing. You can be fined if you do comply with often unreasonable demands of banks. http://articles.economictimes.indiatimes.com/2012-12-03/news/35568808_1_development-fee-new-charge-library-charge talks about various charges that are levied when you interact with banks or many other entities.

The most irrational charge that is levied by a bank, according to me, is the “Prepayment penalty” when a person availing the loan wants to payback his/her loan much before than agreed time period. To me it is a risk reduction for the bank when buyer wants to payback the amount early as the money can be utilized somewhere else. To bank it is loss of money in the form of lost interest.

Leaving the banks aside, the situation is same for other industries where people are charged small amounts as a percentage of the transaction value. A ticketing company charges “convenience fee” for ordering tickets online even though the cost of delivering the ticket online is almost zero.

In a few restaurants, stealth service charges ( whether you got the service or not) have crept it. Even though Indians are not knows as good tippers, tipping should not be forced on anyone.

The value of business does not grow if you own a business that increases the cost of transaction for your customers. Hidden charges often appear later ( or are located in a really fine print) and the customer definitely notices an increase in the bill. Customer may reduce either the transaction amount or transaction volume ( times transaction is done). Or the customer may be disinclined to do business with you. ( Like one bank deducted my money for not keeping a minimum balance). I would not do business with that bank again. Its their loss.

Hidden charges without any value addition are “value deductors”. They not only appear unfair and one sided but also do not do anything to make customers spend more and willingly. Instead customer avoids doing business and look for alternatives.

There are better ways to make customer pay rather than penalizing them for small infractions. Adding value is far better than deducting value by means of penalties.

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