Doing the Wrong Thing

My last “Deep Thort” was about “doing the right thing”.  This latest “Deep Thort” is about “doing the wrong thing”.

Last week the Financial Conduct Authority (FCA) announced it had identified “a number of areas of potential consumer harm” over how insurers charge their customers.  The main concern is around so called “loyalty pricing” when insurers charge new customers less than existing customers as a means of drawing new customers in.

Many of us have experienced this and we really don’t like it.  It is not only insurers.  It is wide spread practice amongst many businesses offering services that we pay for on an annual or monthly payment basis.  We get this great deal to start with which becomes a poor deal at the end of the introductory period.

A particularly pernicious trick is the offer of “automatic renewal” whereby the supplier can take an increased direct debit amount from the customer when they increase the premium.  A letter arrives saying it is time to renew “but you don’t have to do anything”.  So most of us don’t, and then we find the payments have increased by 100% or more!

Why do these companies do this to one of their most precious assets, their customers?  The practice is clearly widespread if even the FCA has noticed and is becoming concerned enough to mount an investigation.  Let’s test this against the “doing the right thing” questions from our book “The Z to A of Success”.

1.  Is this really a better way or is it really just a short cut for my benefit?  It’s really just a short cut for my benefit.

2.  Will this deliver win/win outcomes for all the people involved?  At the start it looks like a win for the customer but it quickly becomes a lose.

3.  Am I prepared to give first and receive later to achieve those win/win outcomes.  It may look like give first and receive later, but as the ultimate intended outcome is win/lose it fails this test too.

So the companies that do this are playing win/lose.  But isn’t that what business is all about?  Well it is in some sectors but in the long run it doesn’t work.  Research tells us that it costs at least six times more to win a new customer than it does to retain an existing customer.  So loyalty pricing is not only “doing the wrong thing”, it is in fact the “wrong thing to do”.

Discuss!