Should I Impose a Covid-19 Surcharge?

Covid-19 surchargeMay 21, 2020

I recently fielded this question in the Q&A of a presentation, and it’s timely. Some businesses have either initiated or are considering "Covid-19 surcharges" which help pay for the added costs arising from supply chain issues and the cost of implementing pandemic-related processes and procedures.

Problems with surcharges arise when customers view them as a way to simply make more money, particularly when the rationale feels a little dishonest. (Airline junk fees, anyone?)

If you’re a small business, you have a natural advantage in implementing such a charge. Small businesses are one of the few sectors of our society which enjoy a significant trust factor. Don’t blow it!

Give plenty of notice. This Chicago-based restaurant, apparently with no warning, instituted a 26% surcharge. The publicity they’ve received has obviously been terrible.

When you communicate the surcharge, communicate with transparency. You should be exceptionally clear about the rationale behind your move. Give customers a peek behind your curtain. Let them know the issues you are dealing with. Most of the rationale for a surcharge involves the safety of employees and customers, as well as keeping employees. These issues are important to most of your customers, particularly your raving fans.

Be visible and don’t hide. Be human. Talk to customers directly and tell them what’s going on. Thank them for their support and understanding.

When you do communicate to your email list (and you do have an email list, don’t you?), don’t just send out one notice and leave it at that. Remind your customers, at multiple points along the buying journey, of why you are forced to implement this charge.

Don’t implement a charge which has a “gotcha” feel to it. Waiting until the bill is presented to disclose the surcharge is not just bad form. It may be illegal and get you sued.

Finally, the value of a Covid-19 surcharge is that it is temporary, hopefully. You can point out that as a business owner you’ll be delighted when you can reduce or hopefully eliminate this charge.

Implementing such a Covid-19 surcharge isn’t easy. To be clear, you will lose some customers over it. Some of these customers, though, are price-sensitive and a pain for your and your employees to deal with. They are typically your lowest margin customers anyway.

Focus on your regular customers and particularly your raving fans. They’re the ones who are going to keep your business alive.


Photo by Charles Deluvio on Unsplash

©Ray Business Advisors, LLC and John Ray


About me:  I’m enthusiastic about how changes in pricing strategy can significantly change profitability for a business and enhance life choices for business owners. I live this passion through Ray Business Advisors, my outside CFO and business advisory practice, in which my pricing is exclusively value-based, not hourly. I work with business owners on how they can change their pricing not just to increase their profits, but better serve the wants of their customers. Click here to learn more or call me at 404-287-2627.

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