On poaching customers, avoiding repoaching

 I'm changing mobile phone operator, and I received my new phone, complete with new SIM-card and confirmation of the changeover in the post last Friday. With all the papers came a note asking in big bold type whether I'd want to have my new mobile phone subscription with my new carrier opened as soon as possible. If so, I'd just need to call their customer service and ask them to speed up the process. The catch? By doing so I agree not to be covered by my statutory 14 day right to return the phone and SIM card and cancel my subscription. I didn't see any problems with this, so I called up my new operator and asked them to speed up the process.

Today, on Monday I get a SMS from my old operator, where they note that I’m about to change operator, but they urge me to call their customer service and get a better offer.

So what’s going on here? If I hadn’t surrendered my 14 day right of return (and whether I actually have done it in a legally binding way is a bit doubtful I guess, as this is a statutory right, granted by the consumer protection law, whose rights in general aren’t  surrenderable), my old operator, receiving notice of my plans to change from my new operator, could contact me and make me a counteroffer, so as to avoid having me poached by the new operator. However, my new operator, by ensuring that they do not initiate the process of transferring me from my old operator before I’m on the hook with them (with a two year agreement), can avoid having my old operator “repoaching” me.

Further, I’ve experienced more or less exactly this kind of repoaching about eight years before. I had already signed up online with a new operator, who initiated the transfer process, after which my old operator called me and offered a better deal than the potential new operator, with the benefit of not having to change SIM-cards, etc. So I didn’t change operators that time. So I see the operator have become smarter at this game since that episode.

Letting them die and the importance of competition

Both the original blog post by Karls Smith, as well as The Economist's Free Exchange comment have much to commend. They are very insightful, and these insights have quite serious and broad implications, beyond that which is explicitly stated.

For one thing it supports Steve Yegge's long rant about Google and the importance of platformization - Don't think you can do everything yourself, but rather let other developer's try to add value to your product by opening up to them.

Also, it speeks volumes about the public sector, with the clear implication that outsourcing service production to multiple service providers will be much better than relying on a single monolotihic organization to come up with all the ideas. Further, it does cause a bit of concern when thinking about the planned changes in the municipal structure here in Finland. While I do see the potential for improvement, fewer municipalities will without a doubt lead to fewer organizations producing services, given the hesitation to outsource.

The law of unintended consequences, or how to follow the letter of the law, but not the spirit

First a few stipulations:

I'm no friend of surcharges that cannot be avoided, like the fuel surcharge that some shipping lines charge. There really is no point in having a separate surcharge unless you want to steer behavior with it, so that people either avoid actions imposing costs covered by the surcharge, or only take those actions when they are ready to pay the surcharge. The fuel surcharge might as well be included in the ticket price, as you as a passenger can not book your ticket and tell the shipping company "transporting me will not increase your fuel consumption, so please don't add the fuel surcharge."

On the other hand, I am a big friend of surcharges on costly add on services, say parking, or the use of expensive payment cards (Do note that some payment cards are less costly than cash to the retailers), as these can make the customer take into account all the costs of their actions.

With that out of the way, I was a bit amused having read this article on Ryanair's latest invention when it comes to card use surcharges in the UK. Ryanair imposes various surcharges for bookings paid by card. British laws stipulate quite sensibly that there has to be some payment method which consumers can choose that avoids the surcharge. In other words, the costs of the cheapest payment method should be embedded in the costs of the products, and surcharges should then be imposed on more expensive payment methods, enabling consumers to make an informed choice as to whether they for example think that paying with their American Express rather than a debit card is worth the surcharge.

Now Ryanair started of in 2009 offering no surcharge purchasing to anybody using a prepaid MasterCard. The idea behind this was of course that most people wouldn't have a prepaid MasterCard and would thus pay Ryanair's inflated surcharges of £6 per person per direction (of course this makes no sense from a cost perspective, as the costs for processing card payments is not contingent on number of persons or number of flights). But this still made it possible to avoid paying the surcharges to Ryanair, and thus a potential source of profit was not fully exhausted. So now Ryanair launches it's own prepaid card and, yes you guessed it, only by using this card you'll be able to avoid the surcharges. And of course, obtaining the card, using it and even not using it will carry costs, which you pay to... ...Ryanair.

So there you go, the sensible law to protect consumers is honored in letter, but not in spirit.