Only Suckers Pay Full Price

It is obvious that telcos have identified a brilliant way to make more money from customers: treat them like suckers. The core plan is to offer a cheap rate to get them to switch to a broadband or cable TV or postpaid mobile service, and then to ratchet up the price at every contract renewal. An increasing number of customers realize this, and respond by threatening to churn unless they get a lower offer from their existing provider. Compelling evidence from the UK market indicates that telco sales and retention strategies have made their retail tariffs as negotiable as the price tags in a Turkish bazaar. Martin Lewis, the self-styled ‘money saving expert’, has a page on his website that explains how to haggle for better deals, and the results from his readers should be startling for telcos. Of the ten best firms to haggle with, six are telcos!

The six telcos included in the money saving expert’s top ten are: Sky, EE, Virgin Media, Vodafone, Plusnet and Three. The only other firms that make it into the top ten are two insurance providers and two vehicle breakdown recovery firms. Data volunteered by Lewis’ followers indicate that Sky will give in to demands for a discount on 86 percent of occasions when asked for it, whilst EE will cut their rates in response to 80 percent of the challenges they receive from customers.

Looking at the full breakdown of the polling results, the toughest UK telco is Giffgaff. The MVNO only gave discounted rates to 29 percent of the customers who asked for it, but that probably reflects the fact that their tariffs are already aimed at the economy end of the market. In contrast, customers wanting to use the same mobile network through parent provider O2 will be able to get a discounted tariff 63 percent of the time. Giffgaff was the only UK telco that was more likely to refuse customers than to give in to demands for price reductions. All the other telcos – whether selling broadband, TV, fixed-line or mobile telephony – succumbed to haggling at least 60 percent of the time.

The danger is that telcos are steadily educating their customers not to believe the advertised prices for the services being offered. But having too many tariffs can lead to mistakes and lost revenues. If British telcos are not careful, this habitual haggling may become a roundabout route to bespoke tariffs for every customer!

Eric Priezkalns
Eric Priezkalns
Eric is a recognized expert on communications risk and assurance. He was Director of Risk Management for Qatar Telecom and has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and others.   Eric was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He was a founding member of Qatar's National Committee for Internet Safety and the first leader of the TM Forum's Enterprise Risk Management team. Eric currently sits on the committee of the Risk & Assurance Group, and is an editorial advisor to Black Swan. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.   Commsrisk is edited by Eric. Look here for more about Eric's history as editor.