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5 Reasons to Consider Charging an Application Fee and 4 Reasons Why You Might Think Twice

At Regpack I’ve seen my fair share of application processes and different solutions for the same problems. In the process I’ve have seen various companies and organization tackle the issue of limited resources in very different ways. The number one resource most of our clients value is their time and more specifically, which applicants are worth investing in. This goes for many different kinds of programs or camps, including those you need to be accepted to, programs or camps that have limited space or events where the event organizer needs to ensure that applicants are eligible to participate and so forth. One of the most interesting aspects of this issue is the question of application fees, whether to require one or not, and if yes, how much to charge.

Application fees are great since they lock in serious applicants but they also might result in losing potential business from applicants who aren’t ready to commit just yet. Don’t forget, a great online registration software helps tremendously when it comes to collecting and managing application fees and deposits, especially a software that includes a payment follow up and payment communication and invoice system. Below I’ve tackled reasons why you should consider charging an application fee and also why you might want to think twice.

5 Reasons to Consider an Application Fee

1. Serious Applicants vs. Iffy Ones

Requiring an application fee highlights, without a doubt, who your serious applicants are so you don’t waste time and energy on applicants who aren’t really and truly interested in your products and are just shopping around. It also enables you to weed out uninterested or non-committal applicants when you have limited space for your program or limited time to review applications. Many times if you don’t ask for an application fee with a limited space program, you will reject candidates based on space but some will drop out by the time the program begins leaving you with an unfilled program. So taking a fee is a great way to ensure your program or event is full and that you will receive the maximum attendance and profit. (Waitlisting also helps alleviate this problem).

If you’re using a smart online registration software, it can enable you to set triggers or barriers in the application process as well. This can help you manage your fees and gauge the interest of applicants. You can allow applicants to fill out a certain amount of the application to help you get to know them better, but also sort between those who have paid a fee and those who have not so you don’t waste too much time. Your competitors might also think twice before spamming you so you do not focus on the real applicants (believe it or not we have actually seen this!)

2. $$$

Another practical reason to charge an application fee is that it provides a good source of income. If you have a program that is attractive but you know that in the end not every applicant who applies will end up coming, for various reasons not connected to you, you can make some money off of these no-shows. Which helps cover the cost of losing some applicants that drop off as time goes on.

3. Exclusivity

Charging a fee gives your products a sense of exclusivity, which can be a great marketing tool. It isn’t right for every company, so think about the type of applicants you have and the kind of products you offer before charging a fee. A program for post-grads (read: they don’t have a lot of money!) might not appreciate an application fee however programs for High School students (read: their parents are paying) or for professionals attending a program or conference, might be okay or even expect a fee, and the sense of exclusivity that comes with your fee will boost your appeal.

4. Check out the competition.

Check out your competition and your field. For example, with MASA programs and high level IT conferences, application fees have become a standard. Perhaps not charging one is a great strategy to help you stand out from your competition, but also think why everyone is doing it. It might be a standard because it works and gives you a bit of insurance financially. By not charging a fee, applicants who are aware of the application fee standard for your kind of product might think you are less serious and/or less prestigious than your competition.

5. It’s a great marketing tool!

Having an application fee as a standard part of your application can actually be a great marketing tool. You can offer to waive the fee for early bird applications or for people from specific areas that you would like to attend your program. If you’re down to the wire for registration and you still have open spots, you can waive the fee as well as an enticing way to gather a few more applicants.

4 Reasons Why Not to Take an Application Fee

1. It’s a great marketing tool!

Wait, didn’t I just say a reason to consider an application fee was because it can be used as a great marketing tool? Well I did, but it goes both ways. By not having an application fee as part of your application requirements, you can advertise your program as one with no upfront costs or no costs associated with filling out an application. There are organizations or programs that want as many applicants as possible and value a huge database of phone numbers, emails, etc to reach out to as many people as possible about their organization and products.

2. People like to keep their money!

In general, people like keeping their money instead of spending it (unless it’s on the 3rd generation iPad or a trip to Hawaii!). They might be interested in you over your competition if you don’t ask for one. However, for organizations that don’t have the manpower to deal with applicants who may or may not be serious (since application fees tend to eliminate this issue), it might not be a good move. Again, you have to look at your company, your resources and the standard for your industry to see what would work best for you.

3. Refunds can be time consuming!

There is always the issue of refunding the application fee that will always come up, which is important to keep in mind when considering whether or not to charge an application fee. If you know your client base can be difficult if say, they are not accepted to your program or they decide in the end not to come, perhaps charging a fee isn’t a good idea. There is a good chance that if they are not accepted or have to cancel they will demand the application fee back even if you have a clearly stated rule and/or policy about not refunding this fee. Dealing with these demands can be time consuming and may not be worth it in the end. On the other hand, depending on the amount of money and the amount of cases like this you have, it may still be worth the hassle of a few problem cases! This is totally dependent on your company, your staff and what is a better investment for you.

4. Deposits as an alternative?

A deposit, as opposed to an application fee, goes towards reserving space for an applicant and generally goes against the balance of the program. A deposit can be for a higher amount than an application fee since in general it goes towards a balance where an application fee is nonrefundable and doesn’t count towards the balance of the product. Applicants are more willing to pay this higher fee knowing it goes to their total program cost and isn’t an “additional” fee. You can include rules for the deposit as well, like it cannot be refunded after a certain date for instance, so that you still get serious applicants but you don’t lose everything if an applicant decides to drop out at the last minute, especially before you can fill their spot.

A deposit can also be returned at the end of a program. Ask for a high amount, have the applicant pay the full program cost and then refund the deposit amount at the end. This method can work for programs that might require money from the participant during the program. Say if you have housing where damage to a living space would require compensation from the responsible parties. Having a hold on a certain amount of money enables you to easily be compensated and lessens confusion and coordination of extra money owed once a program is over. This doesn’t work for everyone though! The idea, from a participant’s point of view however, that they can pay a high amount now but get it back later might entice them to sign up with you since it’s a good deal for everyone.

HOT TIP!

As a general rule, organizations that are academic or conference focused might benefit from an application fee over a deposit. An application fee gives the feeling of exclusivity, reserving a spot, that spots are limited, etc. A deposit might work best for a longer running program where the benefits of a deposits are an asset to the organization but don’t need to maintain an air of exclusivity.

So if you’ve decided that charging an application fee is the right thing to do, or you’re already charging one but you have some kinks to work out, read on to find out how an intelligent online registration software can help manage this aspect of your application and some guidelines on what fee amount is right for you!

How a smart online registration software can help manage application fees.

I’ve talked about the awesomeness of an online registration software before, so I won’t bore you with a long-winded speech on that. But keep in mind that having an online registration software and process allows you to manage charging fees and deposits much easier. Applicants can pay online, you can refund online in the event of issues and filter applicants by status – paid or unpaid, etc. It also allows you to communicate better with applicants by filtering unpaid applicants and then sending payment follow up and reminder emails to pay in order to complete the application or paid applicants to complete the application, etc.

How much should I charge?

How much to charge is a question without an answer. As a general rule, the application fee should not be an intimidating amount, but should also not be something so low that people do not understand why you are asking for it. It should also be connected to the overall cost of your product and the economics of your clients. If you work with high income companies putting a $50 application fee is not a real barrier, in that case it should really be something like $200. If the cost of your program is a total of $1000, having a $100 application fee looks really bad as it’s a high percentage of the total program cost. Generally speaking the application fee should be something like 2%-5% of the overall program cost, but not less than $10-20 and not more than $200 (obviously there are exceptions to the rule). This is a question where you really have to look at your industry standard and figure out what works best for you, your applicants and your ultimate bottom line, for the right answer.

Application fees and deposits can be a tough question to answer for your company, but with a little work and the tips above you should be able to find the sweet spot. Care to share the biggest factors that went into your choice of an application fee or deposit amount? Do you not charge one? If so, why not? Let us know below!

Learn more about Regpack’s online registration software and request a free demo here!

About The Author
Asaf Darash
Asaf Darash
CEO and founder of Regpack

Asaf, Founder and CEO of Regpack, has extensive experience as an entrepreneur and investor. Asaf has built 3 successful companies to date, all with an exit plan or that have stayed in profitability and are still functional. Asaf specializes in product development for the web, team building and in bringing a company from concept to an actualized unit that is profitable.

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