Asking for Too Much, Too Soon

I finally succumbed to one of those ubiquitous on-line banner ads from

Classmates.com and registered to see where people in my high school class ended

up. I clicked on a button to send a note to a long-lost friend, and up popped a

message saying I had to pay $29.50 a year to become a "Gold" member.

For one lousy e-mail? No, thanks. So I surfed over to 555-1212.com to find his

e-mail address myself. No dice. The once-free service now costs $9.95 for 100

lookups. Hey, I only wanted one!

Look, I’m not greedy. I’m willing, if not eager, to pay a reasonable

amount for something I want. But when I walk into a restaurant for lunch, I

shouldn’t be handed a check for the lobster plate before I even sit down–especially

when I just want a salad. That’s how the recent rush to charge for everything

on the Web feels. Classmates Online’s CEO, Michael Schutzler, admits that he

warned nonpaying members of a coming fee hike early last year largely to goad

them into signing up. It worked, raising the paying members to 1.2 million–and

saving the company from going under, he says. Well, congratulations. But threats

aren’t exactly the stuff of a sustainable business model.

It’s not just dotcoms employing brute-force techniques, either. Consumer

Reports’ website has been a great success, with more than 560,000 paid

subscribers, but even it has let some opportunities slip. Anthea Stratigos,

president of information-industry market researcher Outsell, recently wanted to

buy a Consumer Reports article on washers and dryers. But all she could find on

its site was a $24 annual subscription. Instead, it got zero dollars from her.

Likewise, my bank has the gall to charge me for on-line bill paying, even though

the bank saves money. If it offered the service free, the bank could save way

more than its $5 monthly fee by cementing my loyalty–and keep me from looking

at Citibank, which does offer it free. "Consumers who do on-line bill

payment are even more likely to stay with that bank," says Forrester

Research analyst Ron Shevlin. "It’s a huge retention tool."

What many of these on-line businesses fail to understand is something their

customers already know: A website isn’t just a cash register. It’s also a

research center for uncertain customers. It’s a brand builder. A focus group.

A showroom to attract new customers. A tool to forge individual relationships

with existing ones. And a way to drive them to new services or other products in

stores.

None of those missions involves prying open customers’ wallets and purses

from the get-go. Yet they all have tangible value to companies. Too many on-line

businesses have forgotten that free samples and loss leaders have always worked

well to gain and keep customers. On-line, they can provide a foundation to

profit from the website’s many other functions.

Even when sites do charge, smarter pricing would help a lot. To their credit,

Classmates.com executives are planning to offer single services, such as

e-mailing or reunion list management, for less than the full annual fee.

Similarly, to reach people who don’t want to subscribe, Consumer Reports in

June teamed with Yahoo! to offer pay-per-view product reports on the Web portal

for $2.95 each.

The key, of course, is to offer something that’s not available a click

away. But as companies cut staff in these dark days of e-commerce, it will get

much tougher for them to create unique content and services. Look at me: To

skirt the fee at Classmates.com, I just did a search on Google.com and found my

friend’s e-mail address for free. Now living in Hawaii, he says he’s doing

well. Which is more than I can say for a lot of the sites that keep asking me

for money.

By Robert D Hof 

in BusinessWeek. Copyright 2001 by The McGraw-Hill Companies, Inc