According to new research, customers who remain loyal to providers of TV, broadband, mobile phone, and other services, could be losing hundreds of pounds every year
The consumer group Which? surveyed customers to see how much they are paying - and how much they could be saving. It found that customers who sign up to combined broadband and television packages have the potential to be paying £690 more than new customers who take advantage of cheaper deals.
Which? research found that 40% of customers who subscribe to 'dual' or 'triple' (if a phone line is included) bundles have been with the same provider for more than a decade - meaning that they are potentially overpaying by hundreds of pounds a year.
The consumer group surveyed over 3,000 of its members about their standalone broadband, combined broadband and TV or mobile phone contracts in October 2018, to see which companies were charging their customers the most.
It revealed that Sky customers who had not attempted to haggle with the company on price are paying, on average, £1,050 a year. However, the cheapest deal offered by Sky was their ‘Broadband + Entertainment’ bundle, which is available from £30 a month (equivalent to £360 a year) a massive difference of £690 per year.
The Which? study confirms research carried out by the 'check and challenge' site Ismybillfair.com which used customer data from more than 100,000 people. It directly compared people on the same packages and discovered that the 'loyalty penalty' for broadband-only customers was up to £273, with BT being the worst offender.
Even with car breakdown cover there can be a massive discrepancy between what new and existing customers pay. For example, the research found that existing AA customers paid on average £133 more for breakdown cover, while RAC customers paid on average £110 more, than the best price offered to new customers.
In an attempt to more accurately compare packages, Which? also looked at what new customers opting for the high specification TV and broadband would pay. Even customers who opted for a premium package (that includes faster broadband and extra channels like Sky Sports) would be paying £780 per year - which is still £270 less than the average that Sky customers were paying!
Virgin Media customers, who hadn’t haggled on price, were also paying well over the odds for their service, telling Which? that they pay £960 on average annually for their TV and broadband bundle. This is £576 more per year than if they opted for the provider’s basic Player bundle, which is available for £32 a month (£384 a year).
BT customers also told Which? that they were paying more than necessary, with the average customer paying on average £720 a year for their broadband and TV bundle. However, a bundled introductory offer with the same company would cost a new customer just under £480 a year, which is £240 per year cheaper. So where is the incentive for existing customers to remain loyal?
Even BT customers who were considering a premium package could save money with the ‘Max HD’ package that includes ‘add ons’ such as sports and extra channels and costs just under £600 - which is still £120 less than what the average BT customer was paying!
A spokesperson for BT said: “The majority of customers want plans that provide faster broadband speeds than the classic bundle. We fully agree that customers should get great value and a service that suits them. We are working to provide even clearer information to our customers about the options available to them throughout the life of their contract.”
The loyalty penalty affects a large number of households across Britain, including people who have been with their service provider for a long period of time. The research revealed that 59% of Virgin Media customers had been with the provider for at least 10 years, as well as 30% of Sky customers and 25% of BT customers. Overall, 77% of customers admitted to staying with their provider for at least three years.
Alex Neill from Which? said: “Yet again we’ve found that loyalty doesn’t pay when it comes to your broadband and TV service. People will choose their provider often because of a cheap introductory deal and then stay for the content offering. However, you shouldn’t accept getting a bad deal, there are potential savings to be made for those who take the time to haggle and even bigger savings for those who switch.”
Customers are often enticed by introductory deals advertised by providers but then end up staying after the initial contract comes to an end and the substantial price jump kicks in. Prices then usually creep up every year, meaning that customers are likely to substantially overpay if they stick with the same provider for several years.
However, 90% of those who haggled managed to receive a fixed discount and now pay 22% less on average for their bundle as compared to if they had not asked for a better deal. The research showed that, by haggling, BT customers saved an average of £210 per year, Sky customers saved £120 per year, and Virgin Media customers saved £180 per year. So haggling with your existing provider definitely works!
What is the solution to this problem?
The fact that loyal customers are charged more than new customers will not be a surprise to readers of this blog. However, many customers still allow service providers to get away with it. This is often because they simply don’t realise how much they are being overcharged. Other people simply can’t be bothered (or are too busy) to check their bills, challenge the rip-off price increases, and use price comparison sites to get a better deal.
Other customers might simply be too timid to confront their existing service providers and might feel scared to phone them and haggle for a lower price.
Worse still, it is often the most vulnerable members of society (such as the elderly or people on very low incomes) who don’t have access to the information they need about switching providers, or in many cases they don’t even have access to computers and the internet in order to use price comparison sites.
The Competition and Markets Authority (CMA) made a series of recommendations in December 2018 to address these massive loyalty penalties after discovering that consumers are being overcharged by around £4 billion a year, with poorer people and the elderly being the most likely to be overpaying.
The CMA has recommended that the government cracks down on harmful business practices using enforcement and clamping down on harmful practices that stop people getting better deals, as well as publicly holding firms to account for charging existing customers much more.
Whether this actually happens remains to be seen, and The Customer Service Blog will be closely monitoring developments and reporting back on progress throughout 2020.
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