The Price of Value (Gwen Moritz Editor's Note)

I was talking the other day with a small-bank executive who appreciated last week's stories on banking and finance, and we began commiserating about a common problem dogging our otherwise very different industries: Consumers love our services more than ever but don't think they should have to pay for what we do.

Long before newspapers (with the notable and important exception of Arkansas Democrat-Gazette publisher Walter Hussman) decided to give their most costly product away for free on the Web, bankers lured in retail customers with free checking accounts. Then online banking was also free, which made some sense because electronic transactions are cheaper for the banks than paper transactions.

But none of these products is cost-free. These were what retailers call loss leaders, unprofitable gimmicks designed to help capture more profitable business.

Retailers have a long history of knowing how to temporarily discount certain items while not completely devaluing the products. A special price on orange juice this week may encourage us to visit Kroger, and to pick up some higher-margin items while we're there. We come out with the positive feeling of having snagged a bargain; we haven't mentally reset the perceived value of orange juice, and we expect to pay the old, profitable price next week.

There was a time when news consumers expected to pay for the convenience of having important information collected into a useful format and delivered on a regular basis. (I'm proud and grateful that Arkansas Business has maintained and even grown its paid subscriber base during the past few years, but that hasn't been true of the newspaper industry in the broader sense.)

There was a time when bank customers expected to pay a monthly fee for the convenience of having a checking account, and we paid it willingly. Then some bank somewhere decided that waiving the monthly fee would be more than offset by the cheap new deposits and other fees (particularly for bounced checks), and every other bank followed suit. Now free checking is considered a birthright, and making the poor suckers who bounce checks pay for everyone else's checking services eventually started to seem predatory - especially when debit cards made it so easy to overdraft without even realizing it.

So federal regulators required banks to give customers the opportunity to opt out of overdraft protection, an exercise that I still consider worthwhile. People should have to stop and think about whether a "service" that can run the price of a cup of coffee up to $20 or $30 is really in their best interest. But banks really are feeling the squeeze after years of eerily low interest rates have reset the perceived value of borrowed money.

Last fall, Bank of America took the bold and disastrous step of announcing a $5 monthly charge for the convenience of using a debit card. The backlash was overwhelming against the monstrous idea of charging customers for the privilege of spending their own money. BOA backed down post-haste, as did the handful of other banks that thought they would try something similar.

But we love using debit cards, don't we? We love the convenience of not having to carry cash. We've come to expect even fast-food restaurants to accept plastic. But paying for that convenience is unthinkable. Online news delivery faces the same problem: Readers want more news about more things more often and in more formats than ever before, and they love it. But readers think online news should be free, and advertisers think advertising to those readers is worth much less than advertising in print.

So my banker friend and I were talking about this, when he pointed out an amazing contrast between consumer reticence to pay anything for some services that they enjoy and use and their willingness to pay virtually any price for other services. The telecom industry, for instance, has made sure we never question the value of its services.

My family pays $15 a month to have the Democrat-Gazette delivered to our front porch seven days a week. We pay 15 times as much, about $225 a month, to operate four cellphones. Plus another $65 for wireline and broadband. Plus $80 for satellite television. I grumble about data plans and talk about "cutting the cable," but we just keep paying those bills.

I happily pay $5 a month for DVR service so I can watch my favorite TV shows whenever I want. But is that convenience actually more valuable to me than the convenience of using a debit card? No, of course it isn't. Are those cellphones 15 times more important than the newspaper? You know the answer.

(Gwen Moritz is editor of Arkansas Business. Email her at