Why customers stay put
Customer inertia means that once a customer has signed up with a bank, building society, or insurance company, they tend to stay put. Despite the information made available we simply do not have the time or inclination to constantly review our arrangements and hunt down the best deal.
Customer inertia as a term may be new to you, as it is the term used by the organisations listed above, and not their customers. Inertia means something will stay put until it is forced to move.
Here is an interesting snippet we found which dated back to 2008, but it is still spot on:
“ADDIDI Wealth said today that “inertia” prevents many people from making the best out of their savings. According to the firm’s director, Anna Sofat, many Britains are not earning as much as they could by neglecting to switch savings accounts. The comments come in the context of the ongoing “savings war” between financial firms, which has seen rates for new customers on the increase as credit crunch-hit banks attempt to repair their balance sheets. This means that several firms now offer AERs of over seven per cent, compared with the Bank of England’s base interest rate of five per cent. Ms Sofat said: “I worked for a building society for many years, and you have lots of inertia – it doesn’t matter how much information there is on the web, and there is a lot there, not everybody has the inclination to look and see what is best for them, and do something about it.”[People] just don’t have time; they are so busy making money they don’t necessarily have time to pay attention to their own affairs… [although] the government’s campaign to get advice sorted means there is a lot more awareness [now] for good money management.”
The situation is the same in 2010. A study by Datamonitor shows London banks earn 9.3 billion pounds from customers who “can’t be bothered” to move to a more competitive deal.
Customer inertia in the retail banking sector remains high, though, the root cause of this is laziness on the behalf of customers.
Insurance Guardian suggests you take control of all arrangements – utilities, banking, and insurance – and see the difference you make.
You can then start on phone services, but that’s another story.