We’ve all been smacked with hidden fees at check-out. We’re all familiar with the frustration of watching your total at check-out spike when things like “service fees” get added on. In fact, when it comes to buying concert tickets, most people have come to expect those fees. Especially when they’re buying through StubHub or Ticketmaster.
Well, new research has revealed that those fees are actually squeezing customers for more than they’d otherwise pay. When fees get tagged onto checkout totals at the end, buyers are more willing to accept higher prices than if they’d seen those fees from the beginning.
The experiment went like this: US customers on StubHub were randomly assigned to an experimental back-end, where half only saw the ticket list price until check-out, and then fees were added; while the other half saw the full price the entire time.
The result? Buyers who were surprised with hidden fees at the end of their purchase, spent on average 21% more than those who didn’t, and were 14% more likely to complete their purchase.
Berekeley Haas’ professor Steven Tadilis co-authored the study, and he believes that the reason people accept these fees has to do with the time and energy they spend on the purchasing process.
“There is no reason to expect new visitors to a site to have correct beliefs about fees, and once they have their sights on an item, letting go of it becomes hard—as scores of studies in behavioral economics have shown,” Tadelis told NewsWise in an interview. “People end up making purchases that in hindsight they would not have made.”
Which isn’t fair to buyers, Tadilis says. They’re being played to pay more than they need to — more than they would if they’d known the price all along.
“I can’t think of a good reason to allow this practice in any country as the harm to consumers is clear from our study,” Tadelis said.
However, the practice of hiding fees until checkout likely to be going anywhere anytime soon. This isn’t a bug, this seems to be a feature of the market — one that’s wringing customer for all we’re\ worth, and lining the corporate pockets of companies like StubHub and TicketMaster.
So next time you’re buying a concert ticket (or any kind of good or service) online, and you see fees being slipped into your cart as you check out, ask yourself: would you have spent that much, if you knew the price from the get-go?