THE FIRST THING you need to learn in this chapter is that, when it comes to cash, forget all the touchy-feely stuff you’ve ever been told about how important it is to be loyal. With friends, relatives, husbands, wives? Yes. Loyalty in these relationships is generally a very good plan. But in your dealings with companies, businesses and banks? NO. The average adult in this country wastes up to £5,000 each year – simply by being apathetic and not getting off their backside to grab the best deal.
I’ll say it again: LOYALTY IS NEVER REWARDED!
The normal rules do not apply – sticking with the same people for longer means you get less.
There is no such thing as a ‘fixed price’.
No one else will ever search and find the best deal for you.
So ask yourself the question, ‘Do I want to be the customer who has companies fighting for my business or do I just want to be taken for granted?’
WHY THE LOYAL LOSE OUT
What you’ll actually get, if you’re loyal to companies, is usually a bum deal. That’s because companies are not your friends (have I mentioned that yet?!). By staying with the same company – whether it’s a building society, an insurance firm or even your mobile phone provider – you probably think you’re doing the right thing. As you’ll see below, most members of the Teen Cash Class believed that in return for being a loyal customer, they’d get better treatment.
Martin:
So, imagine you’ve got a car and you’ve had insurance with the same firm for years. You’ve always paid on time, you’ve never had any problems, but your premium’s coming up for renewal. Are you going to get a better deal by sticking with the guys you know or switching to a different company?
Jessica:
I think you probably stay with the one you’ve been with, so you get more things, like no-claims bonuses.
Robert:
I’d stay with them because if you went to a new company you’d have to start building that up again from scratch… But if you’re a loyal customer, you’ll get more bonuses.
Martin:
Who agrees? A few of you. Hmm… Think from the insurance company’s perspective now. Think – who is the easiest customer to get for their business?
As the conversation progressed, we talked through the simple logic of our dilemma. The answer became obvious:
Jack:
The existing customer. They won’t want all the hassle of changing to a different company, and having to make phone calls and send letters out and everything.
Martin:
Right. And if you’re an insurance company, how do you win new customers?
Jack:
By bringing them good deals.
Martin:
Good. What else do you have to do to win them over?
Jack:
Advertise, marketing and all that stuff.
Martin:
And that costs money, right? How do you think they cover the cost of giving new customers money off and putting adverts on the telly? Who does that cost get passed on to – I mean, who really ends up footing the bill?
Jack:
The existing customer.
Martin:
Brilliant!
Callum:
The existing customer doesn’t cost them anything, either. They don’t have to advertise to get them, and they needn’t cut their bills.
The amount of feedback I get from people who use my cheaper car insurance system never fails to amaze me. They say something like, ‘I can’t believe it. I tried your system and it was £200 cheaper, but bizarrely it’s with the company I’m currently with.’ This shouldn’t be a surprise: enter your details as a new customer and it’ll fight for your business, but at renewal it’s seducing you into apathy.
Changing attitudes about loyalty is a slow process. Getting rid of the concept of the 1950s bank manager in his hat, ready to help you, is crucial. If you haven’t got it yet, perhaps it’s time to reread the first lesson… a company’s job is to make money.
So far, so simple. Loyalty doesn’t pay, and now you understand why. What’s a lot more difficult to explain is the behaviour of millions of people every year who, in the situation outlined above, would simply sign the renewal forms sent by their current insurance provider and wave goodbye to another fat chunk of their hard-earned cash.
These sorry individuals, poor fools, have fallen into what I call the apathy trap. This is where you become thoughtless, you settle into a routine and – in the end – become too lazy to get off your backside and check whether or not you are being swizzed.
It’s easily done, you could say: adult life is busy, you have a job, a house to organise, maybe even kids to keep under control. These are all excuses I’ve heard time and time again. In the end, though, there is no excuse: apathy is the enemy, and as we learnt in Lesson One, you have to do this or no one else will do it for you.
This means, for example, that six weeks before your insurance is up for renewal you put a note in your diary – then you take yourself by the scruff of the neck and make yourself spend some time finding a great price.
The internet has changed the world of shopping and money. That’s because there are so many tools out there which offer to do the job for you. Many websites quickly search the internet to find you the cheapest price. While of course my 15-years-olds have been clicking a mouse since before they could read and found this the easiest exercise of all, for those with the odd grey hair, it isn’t always as simple. Yet there’s no greater single MoneySaving exercise available than getting online and web-savvy.
However, while the internet is a great resource, it’s also dangerous. As you’ve seen from credit cards, there’s no one best fit deal for anything. So you really must understand how a product works before doing a comparison.
Having taught my Teen Cash Class about car insurance, I then challenged them to find a better car insurance deal for their history teacher. Those bright sparks quickly used their computers to save him a massive £385! As you already know, they later used their learning to help their families save thousands of pounds as well.
Yet they were rightly wary about using the internet. So here are some quick rules:
Always use more than one comparison site. Even comparison services are commercial companies out to make a profit. They tend to compare only companies who pay them if you end up getting the best deal through them. This means you should use more than one – after all, it doesn’t take much time. Take car insurance, for example: even the website which gives the widest search compares only around 30 companies, but if you use four comparison sites you can get around 90 compared and it only takes a few minutes longer.
You may be able to beat the best price by haggling. Secondly, when you’ve found a good price, ring the company who are offering it direct and see if you can beat it down some more (details on how to go about this later).
And there are other ways you can use the internet to save yourselves loads of cash. Hundreds of shopping robot websites (shopbots) are now out there, and any one of them could help you save. Whether it’s a CD, DVD, book, stereo, skincare product or more, there are comparison engines to search for them for you.
MoneySaving Web Resources
Cheapest car insurance, including a list of comparison sites:
www.moneysavingexpert.com/carins
Cheapest home insurance, including a list of comparison sites:
www.moneysavingexpert.com/homeins
Online shopping, including a list of shopbots for different things:
www.moneysavingexpert.com/shoppingrobots
Super-savvy Shopping
Now let’s step it up a bit and go somewhere most people wouldn’t dare. This is about pushing the web to a higher degree using cashback websites. These are essentially advertising websites, but instead of keeping the money they’re paid by companies to promote them, they give it to you. So if you buy something or get a product from a website having clicked from the cashback site, it gets paid and you get some of it.
Therefore, once you’ve found the best product for you (and always do that before using a cashback site) then see if you can get cashback on it. This isn’t small change either: it can be 4–5 per cent of the cost of what you’re buying, or up to £100 per insurance product. So if you’re getting new products or buying something online, step up the gain by getting a cut of the advertising revenue for yourself.
MoneySaving Web Resource
Top cashback sites, including a list of comparison sites:
www.moneysavingexpert.com/cashbacksites
Chutzpah (pronounced hoot’spa), is a Yiddish word that basically means ‘nerve’. If you’re a person with chutzpah, it means you’ve got cheek – and this is a good characteristic for MoneySaving. If you’ve got the brass neck to demand them, you will always get better deals. Having chutzpah means having the confidence to ask for more than you’re being offered, or suggest you should pay less for what you’re getting.
Haggling is about getting what you want by having the chutzpah to ask for it.
It’s not about being rude or difficult.
It is about understanding that there’s no such thing as a fixed price, and that those who don’t ask don’t get.
Haggling isn’t always easy. Even if you try it once a year on holiday, you’re not likely to feel 100 per cent comfortable doing it in Woolworths.
The good news is that, increasingly, some companies are used to hagglers, especially those with call centres. A great place to try your first haggle is with a mobile phone company or digital television or broadband provider; any deal where you have a contract which ends after about a year. This is because these providers are notoriously competitive, and always desperate to take customers away from one another.
The Haggling Challenge
When filming the Teen Cash Class programme, I challenged some of my students to try this. It didn’t make the programme’s final cut, but it was an incredibly useful lesson. What they didn’t know was that the person they were talking to was an actor, specially briefed by me.
Martin:
Here’s what I want you to do. This is the phone bill of a woman called Lesley Jackson. Call the company and get the very best deal you can for her, by haggling.
Robert:
So we talk to them and see if we can get money off? Or extra stuff?
Martin:
You haggle for a better deal.
Robert (cheekily):
What if they won’t give me one? Am I allowed to tell them I might leave and look somewhere else?
Martin:
I can’t tell you that! This is a challenge! That’s for you to decide.
Sadly, in the challenge itself, Robert didn’t say he’d consider leaving – a pity, as it would have got him top marks.
Remember, you’re not locked into any company. They want to keep you, but they’ll only fight for your custom if you make them. So if they don’t give you the deal you want, ensure they know (politely) you’ll consider leaving and then see what you get. Loyalty is for losers.
In fact, there’s no such thing as the disconnections department. When you threaten to leave a provider, they often say, ‘We’ll put you through to customer disconnections.’ Yet often the internal name for the department they connect you to is ‘customer retentions’. This is because their job is to keep you as a customer and they have a LOT more power than standard customer services departments. If you’re going to haggle, they’re the best place to do it.
MoneySaving Web Resources
Cashback sites:
www.moneysavingexpert.com/cashbacksites
Mobile phone haggling:
www.moneysavingexpert.com/mobilehaggle
Car insurance:
www.moneysavingexpert.com/carins
Online shopping:
www.moneysavingexpert.com/shoppingrobots
Digital television:
www.moneysavingexpert.com/digital
Mobile phone cost cutting:
www.moneysavingexpert.com/mobphones
Home phones:
www.moneysavingexpert.com/homephones