By Eric Hollenbeck
Imagine going to a favorite restaurant and discovering new surcharges have suddenly been added to the bill, but you don’t know why. While companies may view these fees as necessary to stay afloat, many customers see them as unfair cost-shifting without added value.
To explore customer responses to surcharges, Jeff Joireman, professor of marketing, led a study examining customer response to pandemic surcharges.
“It turns out that much of a customer’s reaction boils down to whether they believe businesses are trying to take advantage of them,” Joireman says. “This perception not only reduces a customer’s willingness to tip but also their likelihood of returning.”
The study, published in the Journal of Business Research, highlights the importance of clarity and specificity in maintaining customer trust, particularly during crises like the COVID-19 pandemic.
Joireman and his coauthors conducted three experiments with nearly 600 participants between March 2021 and August 2022, examining their perceptions of restaurant motives, tipping behavior, and likelihood of returning. In these experiments, participants read various scenarios about pandemic-related surcharges at restaurants and shared their views on the business’s motives, how likely they were to tip and return, and whether providing clear justifications for the surcharges made them more understanding.
Findings suggest businesses that added surcharges during the pandemic could have reduced customer mistrust and negative reactions by being more transparent about what the fees covered and why they were necessary.
“If a restaurant decides to impose a surcharge, especially in response to a crisis, they need to clearly communicate what those fees are covering,” Joireman says. “We found customers are more understanding and likely to return when surcharges are linked to heightened cleaning costs or added safety protocols brought on by external causes.”
Navigating the surcharge economy
Joireman and his coauthors note that while their study focused on pandemic surcharges, the findings have broader implications for what they call the “surcharge economy”— where businesses add extra fees to cover unexpected costs.
“Anytime a business imposes a fee related to a societal crisis, whether it’s a health pandemic or something like climate change, they need to be aware that customers’ reactions are closely tied to how they perceive a business’s motives behind the surcharge,” he says.
In response to growing consumer backlash, some states have stepped in to prevent such surcharges. For example, California recently banned certain surcharges, prohibiting businesses from charging “junk fees” or passing increased costs to customers through added fees, such as for concert tickets or hotel rooms.
Joireman says he and coauthors Ismail Karabas (’18 PhD), associate professor at Murray State University, and Pavan Munaganti (’20 PhD), WSU assistant professor of marketing and international business, plan to explore how consumers respond to surcharges in other contexts, such as surcharges to address climate change.
“Understanding how consumers respond to surcharges designed to address societal crises has significant implications for how businesses navigate the challenges of a rapidly changing world,” Joireman says.
