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Best Practice Makes Perfect

A collaboration with Domino developers about how to do it and how to get it right in Domino

Just by coincidence, recently I've run into a few different examples of organizations giving me a reason to not do what you'd think they'd want me to do. For instance:

  • The federal government charges people money to file their tax forms electronically. You've gotta figure it costs the IRS a lot more to process a mailed-in return, which requires an IRS staffer to re-key the information into their computer (or at the least, check an OCRed record for errors). They want to charge me, what, $15, to save them a bunch of work? I should get an e-filing credit, instead.
  • My cell phone company charges $.20 per text message (and some similarly outrageous amount for internet access), even though the bandwidth requirements of a text message are several orders of magnitude less than a phone call.
  • My bank charges a monthly fee to do electronic bill payment, even though it costs them less to process such a payment than to process a check. Ditto transferring money electronically to another institution.
  • I get various bills every month, and many encourage me to sign up for their "convenient" electronic statements. They're not convenient for me, because my wife insists on keeping a paper copy (what are we supposed to do if we switch providers? Go on their website and print out every past statement before they close our account? How far back do they keep them?). So I would just have to print them out anyway, at a cost of roughly $.07/page and a minute or so of my time. I save time and money by letting them mail me paper statements. It must cost at least $1 to print and mail a bill, so where's my e-billing discount? (One company did offer a one-time $5 credit for switching to electronic statements, but that's not enough -- especially considering their statements tend to be 15 pages long).
  • Electronic payment of those same bills. This is one case where it really is more convenient for me, and saves me time and postage, so I don't need an extra incentive to do it. Of course, given the choice to use a credit card, I do that rather than authorizing them to grab the money from my bank account -- because my credit card gives me some piddling percentage rebate, and in case of a dispute they have a sensible process for challenging a transaction. But the credit payment must surely cost the company more than the bank account transfer. So, where's my bank account transfer discount?
  • Media mail. Who wants to send media through the post without an attached note, invoice, what have you? Yet, the post office declares that a book with a note tucked inside costs several dollars more to send than a book with no note. It costs less to send a separate letter explaining the book -- or to put the note or invoice in anyway and lie about it. Assuming a law-abiding customer, the P.O. doesn't make $.15 profit on a first-class letter. So why not raise the media mail rate $.15 and remove the restriction on additional enclosed papers? The P.O. would make more money and customers would either save money, or cease to feel a need to break the law. The fewer stupid laws you can have, the better; they encourage lawlessness by leading people to believe that other laws are probably equally stupid, if the reason for them is not obvious.
  • Speaking of the post office, there has been this practice for many years of periodically raising the price of postage and requiring everyone to buy sheets of one and two-cent stamps to make up the difference with any old postage they haven't used. It seems like they might finally have gotten the idea that it would make sense to sell a first-class letter stamp, valid forever despite any price increases. Because really, how much does it cost to print a two-cent stamp? Round about two cents, I would think, if not more, on that nice glossy paper with the peel-off wax paper backing. Of course people would stock up just before a price increase -- which gives a nice cash infusion just when the P.O. needs it (why did they raise the price? Because their costs had been going up, so the cash reserves are low). And people would take a long while to use up their hoarded stamps. Say it takes them two years to use them up -- that's (on average per stamp) a year's worth of interest-free loan they have made to the P.O. Worth 4% at least, I would think.
I assume there are reasons for all these things. In the case of the government, the perverse incentives are built into the system, because managers of government departments are rewarded for hiring more people and spending more money. In other cases, where it really is more convenient to the customer to do it the way that's more convenient for the company, I suppose companies charge more because they can get away with it; but it's surprising to me how long they are able to get away with it. Haven't they got enough competitors who can steal away their customers by offering the same "service" free? In the case of utilities, I suppose not, but you would think cell phone companies and banks compete enough for someone to get the idea. It's a mystery

Andre Guirard | 18 March 2008 04:37:00 AM ET | Home, Plymouth, MN, USA | Comments (8)


1) Perverse Incentives
Nathan T. Freeman | 3/18/2008 6:55:13 AM

Because the cost of supply only determines the floor of a price. Demand determines the ceiling. And information is not perfect -- so people don't move between providers because the savings that might be provided by discounts for electronic transactions are eaten up by the transaction costs in actually switching providers.

However, here's a nice tip: Call your cell phone provider and tell them that you think $.20 is ridiculous for a text message rate. Tell them you want a promotional discount that allows you text messages for free, or you'll switch providers, and they'll get ZERO from you.

I bet they'll come up with a plan.

And if they don't... then switch.

2) Perverse Incentives
Mick Moignard | 3/18/2008 8:41:24 AM

Here in the UK we get most of these, too. However, we don't pay extra for an electronic tax return filing, but we do get a later final submission date, and our post office started selling 1st and second class stamps a few years back.

The real issue here is how thick-skinned companies are: there's columns in every weekend paper here where readers write in with their experiences with customer services that is anything but, and where the paper's contacting the press office usually magically generates a solution, but nothing else actually seems to happen.

I even read of a phone-based concierge service available that will deal with these issues for you. Imagine it - one call-centre in India or wherevere contacting another one in India or whereever to try and sort out whatever problem the first one has landed you in. Laughable, isn't it?

3) Perverse Incentives
Timothy Briley | 3/18/2008 9:16:36 AM

My favorite is TicketMaster. They charge extra to allow you to print your tickets at home instead of forcing TicketMaster to mail them to you.

4) Perverse Incentives
Kerr | 3/18/2008 9:44:20 AM

@2, From what I can see, here in the UK, companies and the government are keen to get people using electronic versions of almost everything and are willing to give discounts to achieve this. Sometimes this can be seen as more stick than carrot, i.e. we're going to charge you for doing it the old way, but it's "free" to do it electronically. Sometimes it's a one off incentive to get you to try it. Company tax returns got a couple of hundred quid off at least once. Of course there are other incentives. Companies house used to pre-print your annual return form for you, so that if there were no changes you just needed to sign and post it with your cheque. If you do it electronically they still do the equivalent, it's all just filled in and you click OK, but the paper versions make you fill it all in from scratch. Sneaky bastards.

5) Perverse Incentives
Vitor Pereira | 3/18/2008 1:37:42 PM

Here's how it works here in Portugal:

1) I will get my tax return earlier than those who don't fill it electronically and I don't have to buy the forms or stand in line.

3) My bank charges smaller fees for transactions made online and some banks drop account maintenance fees.

4) Most companies make one-time offers and some others give discounts if you switch to electronic billing.

5) When using the bank account transfer payment method companies will usually drop one-time fees they usually charge up-front. Due dates are also extended and I can also easily challenge any transaction or establish maximum amounts.

6) & 7) Don't know how it works here but I agree with you.

Thanks for making me notice some things that are working as they should here. Most of the rest just plain sucks.

6) Perverse Incentives
Brian Miller | 3/18/2008 1:40:58 PM

I was a customer of HSBC bank here in the US for something like 11 years - ever since I'd started college. I decided that I'd had enough of their nonsense when they started charging me a $2/month fee to send my checks back to me instead of scanning and incinerating them. I switched to Washington Mutual, and they've done well by me thus far.

7) Perverse Incentives
Corey | 3/18/2008 5:00:55 PM

@3 Yup! I had to deal with Ticketmaster earlier this week. $2.50/ticket to print them yourself, or $0 to have Ticketmaster mail me tickets that they print. Hmmm.....which to choose? Boggles the mind.

8) Perverse Incentives
Kendall | 3/18/2008 10:22:24 PM

My electronic/online bill-paying is free (at least, if they can do it electronically--if they have to mail a check, I'm not sure...). I'm a member of a credit union. I suggeste looking for a credit union you're eligible to join that has a similar deal. Banks overcharge for everything, not just electronic bill paying; credit unions are generally better.

The U.S. government doesn't charge for e-filing, but e-file providers (who no doubt have to pay to be an authorized provider...) may do so. At least, if I'm reading this right:

{ Link }

9) Perverse Incentives - Found One
Steve | 4/4/2008 5:29:45 PM

I'm a bit late to this, but I came to it looking for information about templates and replica id's. A little off on that one, eh?

Last December I signed up with S****t for wireless broadband to use on the train back and forth to work. Their plan was $59.99 a month for unlimited usage, but a two month contract. The first bill was indeed for $59.99 plus an additonal $11+ for taxes and fees. Fortunately, I heard about a company ( { Link } ) that resells the bandwidth on the same towers for $49.99 a month, no taxes (they're in Oregon), no additional fees and NO contract.

Here comes the incentive. To cancel my service (within the allowed thirty days) I had to speak with a "customer retention" agent somewhere out in the cloud. When I told her what I had found, she asked if I would be keep the account for $29.99 a month and a one year contract. Does this support Nathan's strategy? I think it's worth a try.

10) Perverse Incentives - Found One Edit
Steve | 4/4/2008 5:31:15 PM

Edit - they wanted a two YEAR contract.

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