Why the best financial product deals go to new customers – and what you can do about it
Every day we are bombarded with advertisements for the ‘great’ deals for new customers. Whether it’s a TV service subscription, ground coffee through your letter box, or car insurance, companies like to tempt people with initial discounts and bundled freebies to get their attention and custom.
Why they do this is simple – customers tend to be loyal – once they’ve switched over, they’ll usually stick around. Did you know that 80% of insurance customers don’t review their policy renewal and renew automatically without questioning the price?
We’ve talked about why people stay with financial services providers here – but human behaviours are well understood – customers do not often switch services even when a better deal is available.
Customers loyalty, whether deserved or not, can be so valuable that selling a product at a loss becomes worth it, and we see this often! Here are 2 examples:
- Sony, for example, have sold video game consoles at a loss early in the product life cycle to tempt people into buying it – then made profits on the games.
- Ink jet printers are ‘cheap as chips’ because the companies keep bespoke cartridges and make more money during the lifecycle of the printer by having costly ink cartridge replacement.
It works at a corporate level too, with entire businesses being run at a loss because they support brand imaging for a larger corporation and ensure other business lines make profits – in banking, the costs of providing free personal current accounts is offset by other products like business banking or loans.
Smaller companies don’t need to offer widespread deals which could erode their earnings; they can group customers and target small groups with offers which get great headlines and have broad impact but aren’t readily available to the whole customer base. Credit Card companies are an example where headline rates of 9% APR or 0% transfers (check the terms and conditions) may be available for a small percentage of customers but not all.
So, what can we, as customers, do about it?
Invest a little time and you can benefit as well. Product and service comparison sites can provide the key information you need – some new technology companies even alert you when you are not getting a good deal and can switch providers for you automatically.
But comparison sites don’t have ALL the solutions on their sites – Direct Line for example doesn’t use comparison sites. As most comparison sites get their income from the product providers, they may favour those suppliers with better margins – so check more than one site if you have time.
Timing is key, and so is the understanding of your financial commitments so you can take advantage of new deals when they pop up.
If you have time, ‘play the game’, to get discounts/rewards. Bank accounts are a great example – if you manage your money well, you can make passive earnings – a good description by Money Saving Expert of the passive earnings method can be found at https://www.youtube.com/watch?v=mJwt2Q-lYSs
However, this can be time consuming and, at times, complicated but an annual check of your insurance premium when the renewal notice comes in is not!
Now, at Services Family, we like to keep things simple. That’s why we look at your specific circumstances and offer you a competitive price first time and offer a loyalty reward, out of our ‘pocket’ to small businesses and veterans – we know these groups deserve a reward.
So, if you have a business or are arranging an event and want to get some insurance then our special prices are easy to discover, just contact us by phone (0800 029 3585) or fill out our contact form and we’ll get in touch to arrange a bespoke quote.