Pricing: Do those hidden fees really work? If I start providing a service, should I put hidden fees?

Is making a buck or two worth upsetting your customers? A lot of big companies get away with hidden fees, but they tend to leave customers unhappy. I've worked with startups before, and if you ask me, the answer is no. For younger companies, establishing yourself is critical, and sleazy tactics like nickel and diming customers with hidden fees tend to do more harm than good, since they give people a big reason not to choose your business. The last thing any business needs is a reputation for being dishonest about their fees.

Especially in a world that is more and more transparent, hidden fees are a dangerous price strategy. The question is not IF customers will find out, but WHEN. And as soon as they do, they will stop buying from you and tell others to stop buying. Professor Reichheld discusses the difference between good and bad profits in this article: http://www.netpromoter.com/netpromoter_community/blogs/fred_reichheld/2005/11/23/welcome-and-introduction-bad-profits-good-profits-and-the-ultimate-question

Please do not. Personally as a customer, I hate hidden fees. although such marketing may get you customers initially, but it will end up hurting your business in the long run.

There's a difference between "hidden" fees and add-on fees.  Many businesses, such as airlines and rental-car agencies, have "loss leader" prices followed by lots of this & that fees.  They get away with it because individuals are often not actually paying the bill (especially for travel-related businesses; they're reimbursed by their employers for biz travel), they don't pay enough attention while getting the service, or the individuals aren't quick enough to realize that $5/day for this and $3/day for that add up to Real Money if you get ten of them for a week's rental. If you *do* pay attention, you can skip most or all of the add-on fees. In most countries, actual "hidden" fees are illegal, although telcos and other entities that do this sort of thing are very good at burying the fees in complex legalese so you can't easily find out about the fees until you actually pay your bill. Note that if you're talking about tech startups, this sort of approach can blow up in your face bigtime, as the "cheap leadin + this & that fee" is sort of expected (or at least put up with) in some types of businesses, but if you introduce it in a brand-new business, people will complain about it online and you may develop a bad reputation quickly. That said, some business models do work with something like this approach; online games that are free or cheap to join but have in-game boosts available with real-money purchases have often worked, especially if there's also a way to buy the boosts with in-game resources (which takes the sting out of such things for players who don't want to pay for in-game items).

They work in the short term, until customers figure it out. Then they ruin the firm's reputation. The only firms that can get away with hidden fees in the long run are those in regulated/monopolistic industries where firms don't have to worry about serious competition (most famously, telecoms, mobile phone providers, cable TV service, etc.).

Short term Vs. long term it's what it really boils down to.