Jan Gooding: Daylight robbery doesn't breed brand advocacy
Why are the most loyal customers the ones so easily abused by brands?
Recently I got a letter from my broadband supplier, Virgin Media, advising me that my monthly direct debit was going to increase by £3.50, taking my total monthly bill to £75. I felt it was an innocuous bit of information, which sounded reasonable enough, as the price rise was roughly in line with an inflationary increase.
And yet I felt uneasy. So, I decided to visit their website. There I discovered that new customers were being offered better speeds than I was getting (about double) for considerably less, at £45 a month. I think you would all agree that is a big difference. So essentially a new customer gets a far superior service, and pays 40% less, than a long-standing customer.
We are all so used to being abused for our loyalty
But Jan, I hear you say. You know that’s how it goes. It looks like it’s cheaper but it’s not really. It will be an introductory offer, and the price will probably increase after three months to £75. It will be in the small print.
So, I looked at the contract in detail. No, there wasn’t a catch, it was £45 for considerably faster broadband, for 24 months.
I can almost hear your apathy. We all know this is how it works don’t we. The inertia of customers means it doesn’t pay to reward loyalty. So, of course all the best a brand can offer is targeted towards new customers, at huge discounts.
Why do we think this is acceptable?
But, let’s just stand back for a moment and shake ourselves down. If I went into my local Sainsbury's, and was required to pay almost double for my shopping because I was a regular customer, we would all be astonished.
If I went into John Lewis, and when I got to the till and produced my loyalty card found I had 40% added to the bill, you would all understand if I didn’t return.
By now I felt pretty cross, and I decided I was going to switch providers.
So, what happens when you decide to take action?
After an hour online I came to the conclusion that because broadband speed, and quality of customer service were important to me, the best provider to switch to was, yes you guessed it, Virgin Media.
So, I decided to call to see whether I could appeal for fair dealings. I wanted to point out the huge price disparity and see whether I could switch to the higher speed than I was on (which I checked was available at my address but had never been offered to me) and get a ‘new customer’ discount.
Good luck with that, I hear you cry.
Virgin Media know they can get away with it
A very nice man patiently explained that the new higher broadband speed was not available to existing broadband customers, only new ones.
And the best he could do on price was waive the £3.50 inflationary price increase for a year.
By now I was almost beaten. My target became to at least get the higher speed which I knew was available (350Mbps instead of the 200Mbps I was on). Even if I had to pay the loyalty penalty because I wasn’t a new customer, I would at least be on the better service.
‘No madam. I am sorry I cannot do that. There is no promotion available this month for existing customers.’
We are all colluding with this dishonesty
I know that many of you can hardly bear to read on. This is all so familiar. In fact, in our day jobs we collude in the marketing of these complex, opaque and illogical price tariffs, even though we get penalised too when we turn up as customers.
I know. I have done it too.
But I did try to help change it. You will have seen the recent Aviva Plus advertising that promises to reward existing customers, so they don’t have to go into disguise pretending to be a new customer to get a fair quote.
That change has come after years of the marketing leaders at Aviva banging the drum about this very issue. Until finally, Lindsay Forster, the UK Marketing Director, broke through and real work began to tackle it.
Customers resent you for it
We all know these practices are a terrible problem in many sectors, not just financial services, energy and IT. In my view it is not only completely dishonest, customers rightly hate it. To be penalised for loyalty may be logical for profits but it isn’t for customers. But it happens because it’s possible to get away with it. The market is not ‘self-correcting’ through competition.
And what’s more, the apathy of customers makes it very hard to make the business case simply on the basis of ‘fair play’ when the cost of giving existing customers a lower price doesn’t result in greater loyalty and certainly means less successful acquisition results.
This is why we need regulators to intervene
So, I have come to the conclusion that regulators simply have to take action here, so that whole sectors have to adjust their pricing strategies to stop loyal customers being punished.
I am sure there is tolerance for the idea of promotional discounts. However, there should be established time periods, and maximum levels of discount, before the price reverts to a standard price. I think we can all agree that a 40% discount, for a superior service, for a period of two years is too big a gap.
So, what happened in the end?
There is a sort of happy ending to my story though. I called Virgin Media back and spoke to a different operator and asked if I could switch from being a residential to business customer and get my coveted 350Mbps speed for the advertised price of £60 a month. And the answer was yes!
So, the Aviva ad is right. You do have to change identity to enable a switch to a better deal with your existing provider. And I have them to thank for giving me the idea.
I’m glad I am still with Virgin Media, but I do feel very grumpy that I have had to jump through all these hoops to remain a customer who is not being completely ripped off. And, once there is a comparable competitor, I will not feel obliged to remain.
Jan Gooding is one of the UK's best-known brand marketers, having worked with the likes of BT, British Gas, Diageo, Unilever and Aviva. She is also the chair of both PAMCo and LGBT equality charity Stonewall, the president of the Market Research Society and a partner of Jericho Chambers. She writes for Mediatel each month.