It’s a sad truth that consumers face a “loyalty penalty” across a number of essential markets, which – as reported by Citizens Advice – could mean that many are overpaying by as much as £987 for energy, broadband and financial services.
With the Competitions and Market Authority (CMA) looking into the home insurance market as well as ComparetheMarket for “breaking competition law” at the end of 2018, your business critical focus needs to be on reinforcing your value to your customers.
Loyal customers lose out on £4.1 billion a year
In today’s competitive marketplace, brand loyalty should be rewarded, not penalised.
Yet Citizens Advice claim that essential service providers have been “undermining consumer choice by using processes which take advantage of people’s behavioural biases”, leaving many on “poor value deals” and affecting the most vulnerable the hardest.
Being penalised for customer loyalty, otherwise referred to in the industry as “price walking”, sees consumers paying more and more for every year that they remain with the same insurance provider – making their policy more profitable at their own expense.
%
Now lack trust in businesses
%
Unaware of the 'loyalty penalty'
%
Stay put so they don't have to shop around
Over half (54%) of consumers are now under the impression that companies don’t have their best interests at heart, whilst one in six who have had a bad brand experience in the past have lost trust in other professionals from that sector.
If left to continue, this gulf between consumers and essential market brands could lead to more and more taking it upon themselves to obtain cover for themselves, using aggregators to do so and cutting the middleman – your brokerage – out of the process completely.
Consumers need help finding the best deal
There are a number of “key behavioural biases” that have a bearing on your customer’s ability to pick the right deal, according to Citizens Advice.
First and foremost, they’re overwhelmed with choice, so instinctively pick the default option.
They’ll also make their selection based on: seemingly irrelevant information (anchoring), how a particular deal is framed (framing effects), and the immediate benefits (present bias).
So, it’s essential that you’re communicating with them; reinforcing how much they could save by switching with your help and guidance, rather than allowing their policies to auto-renew.
Home insurance customers end up paying £75 extra per year than new policyholders, with 70% staying with their provider for longer than a year — just because it’s easier.
