The Behavioral Ploys Your Internet Providers Use When You Negotiate Your Bills

by:  Richard Mathera and Joanne Yeh

Recently we invited four people to come into our office to negotiate their internet bills.  Everyone who called managed to save at least $10 either through negotiating a lower rate, reducing their fees, or by receiving a credit on their bill.   

So why are people still so apprehensive about calling to negotiate their bills?  63% of the people we surveyed cited a fear of negotiation or conflict, partly stemming from their dread of the tactics that companies use to try to thwart them.

 

You’re hassled till you hang up

We usually tackle behavioral change by examining experiences through our framework, called the 3B’s:  Identifying Key Behaviors, Removing Barriers, and Amplifying Benefits.  And setting up barriers to success is something that internet service providers (ISPs) are famous for.  One type of barrier that these providers take advantage of is hassle factors, or small annoyances and inconveniences that can have an outsized impact in the way that we behave.  In a  study of farmers in Kenya by Duflo, Kremer, and Robinson (2011), the researchers found that the hassle of having to travel to town to purchase fertilizer significantly impacted people’s decisions not to purchase it.  Simply delivering fertilizer to farmers’ homes increased fertilizer usage rates by 70%.  

The first example of a hassle factor used to rebuff negotiation attempts is the robotic voice that greets you and takes you through an extensive phone menu.  The people we observed generally faced a 6-7 minute wait time before they could talk to a human every time they called.  This barrier isn’t merely an inconvenience—it’s by design.  It’s not in a company’s best interest to help you lower your rates.  On the other hand, call and try to pay your bill, and you’re quickly ushered to an articulate and highly “helpful” human, who can promptly process your payment.  But, using these barriers by design, the company plays a dangerous game—make things too onerous and people may get irked enough to switch providers, but make things too easy, and people will get what they want, which might mean a lower price.

 

What to do?  To combat these hassles and face the delays, you need patience or an engaging crossword puzzle to occupy your time while you’re on hold.

Anchoring keeps you near the rate you’re already paying

Anchoring is a powerful psychological concept which influences our perceptions of prices.  Studies have shown that your perception of a cost can be changed merely by changing the anchor price(s) around you.  If you enter a store where everything costs $20, and you see something for $50, you’ll see that item as being relatively expensive, whereas if you saw the same $50 item in a store where things cost $100, it would seem cheap.  Anchoring is so powerful that we’re actually influenced by random anchors, so if you were shown a random high number and then were asked to bid on a coffee maker, you’d on average bid higher than someone who randomly was shown a low number.    

Internet providers use anchors to their advantage.  You inevitably come into a negotiation anchored to your current monthly rate.  If your monthly bill is $160, the representative is going to strategically offer you similarly priced options. In our case, one participant was offered multiple alternative plans for about $140/month when she had a plan for $160/month, even though we heard the participant before her get suggested plans that only cost $70/month.  They are not going to offer the $70 plan to someone already paying $160 per month, because anchoring allows them to offer savings but keep someone comfortably at a higher price.  

What to do? Before your call your internet provider, do your research (including competitor plans) and identify a new plan that works for you.  Repeat to yourself “my new plan is…” like Dorothy in the Wizard of Oz until you convince yourself that this is your new plan.       

Confusion means plans are difficult to compare

When we’re negotiating internet bills, some measures aren’t concrete or easily understandable.  We typically understand the value of a dollar.  But how about a megabit of internet speed?

Cable and internet companies use your confusion about what different internet speeds really mean, combined with bundling various packages of channels and landlines to create options that are difficult to evaluate against one another.  When choices are difficult to compare, we often throw our hands up and either accept the first offer presented to us or just default to the status quo.  In either case, that means less aggressive negotiation and a win for the internet service provider.  

We’re working on a solution

Cable companies are wily, but the Common Cents Lab is currently working on a bill negotiation prototype to combat some of their ploys and make bill negotiations easier and more successful.  Follow us on Twitter for updates on the prototype and more behavioral insights.