“If I said you could make a 30-minute phone call, and that phone call would make you $300, you’d make that call.”
That is what a conversation with his energy provider once saved Jodi Bird, head of money and travel at Choice. After Bird noticed his energy bills creeping up, he called to complain and was immediately put on a cheaper plan.
Bird is well versed in the ways recurring services (such as insurance, power and phone bills) tend to decrease in value or increase in cost over time. It’s his job to keep track of it.
“There’s definitely a perception that loyalty will be rewarded, but that’s not true anymore,” he says. Now, sticking with a provider over several years doesn’t earn you perks – it comes with a tax. “You call it the ‘loyalty tax’ if you’re being polite. But because we’re not polite, we call it the ‘lazy tax’.”
In the insurance industry, “we don’t really see loyalty discounts, and when we do, it’s often discounts on an inflated rate, because your premiums have been going up for years”.
It’s a penalty that could be costing Australians $3.7bn a year, according to Allan Fels, a professorial fellow at the University of Melbourne, and former chairman of the Australian Competition and Consumer Commission. That calculation, based on research by the Competition and Markets Authority in the UK, does not include the energy sector, where incremental price increases are rampant.
Journalist Andrew Stafford discovered this recently, when he received an energy bill of $834.36 for his three bedroom apartment, where he lives alone. The price was closer to the cost of powering a four bedroom home with multiple occupants. “My eyes did not begin spontaneously watering at the sight of it,” he tweeted. “They bled.” When he called to complain, he was immediately offered a $100 reduction in his bill, and a new plan with significantly reduced rates.
“The thing I think is most important is that when challenged, they offered rates that were almost literally half of what they were charging under a new plan that had conveniently ‘just come online’. That took my breath away, but not in the way I suspect they hoped,” he says.
“It made me feel more ripped off, if anything. It was tantamount to an admission they’d been price-gouging.”
Since 1 July, the energy industry’s practice of charging high “standing offers” to those unwilling, or unable, to renegotiate their contracts has been curbed by the introduction of a default market offer price, set by the Australian Energy Regulator. But even with this change in regulation, consumers still get better prices by shopping around.
“New and more competitive offers are being released all the time,” says Bird. “While companies want to keep their existing customers, they also want to poach customers from other providers, so new customers often get the best deals.”
While energy companies, insurance brokers and telecommunications providers are the biggest “lazy tax” villains, almost all set-and-forget subscription services, from pay TV to magazines, can be guilty of charging existing customers more. The model is to bring new customers through the door with an attractive but temporary deal, in the hope that inertia or inattention keeps those customers around long after the discount or bonus expires.
Signing up for a great deal is fun. Cancelling a service is boring and annoying. That’s the not quite rational, but deeply human, mindset businesses count on to squeeze extra profits from their customers.
Being promiscuous with providers may come at a time cost, but the amount it can save is often well beyond the effort involved. Here are some mundanely heroic tips from people who’ve beaten the lazy tax.
Watch out for renewal notices
“The best time to shop around is when your contract is up for renewal,” says Bird. “Anecdotally, we’ve had people put their details into insurance calculators for the same provider, and had the new customer quote come in much lower than the rate they were on.”
Take the time to complain
As he was moving house, Anton Trees was told he’d have to pay a $300 change in address fee by his telephone and internet provider. The Albury-based public servant complained and asked them to waive the fee, stating they were “incentivising me to change providers”. The company quickly capitulated.
Threaten to leave …
When Jocelyn Brewer, a psychologist from Sydney, called to cancel her credit card, “they talked me out of it”. They also gave her an incentive for staying: 25,000 frequent flyer points.
After noticing the sweetheart-deals new customers were getting from his mobile provider, photographer Tim L decided to call them out on it. “I threatened to leave … unless I got a great deal only offered to people who would switch to them from another provider.” He “gave them the logic that I, a loyal long-term user, am worth less to them than a user who keeps flipping providers.” That argument scored him a $20 a month discount, which worked out to $480 over the life of his plan.
… or actually leave
Rowan Togami Evans, who works as a freelance video editor, cancelled his account with a cloud-based software provider. Shortly afterwards, he was offered the company’s entire suite of products at a 40% discount.
Have you complained, cajoled or provider-hopped your way out of the lazy tax? Leave your story in the comments.
On 2 September this article was amended to say that Andrew Stafford is the sole occupant of a three bedroom apartment, not a one bedroom apartment.
