The loyalty penalty that costs UK customers £342m a year
There are few things worse than finding out you’ve been overpaying... especially when it’s something as utilitarian as your mobile data, minutes and texts.
We’ve received a number of emails and phone calls from Raylo customers telling us about their experience with their network. Many of them suffered from the same problem – they’ve been victims of the loyalty penalty. So we’ve dedicated a blog to the topic, to spread awareness, and hopefully help more people avoid the pitfalls of the networks.
So what is the loyalty penalty?
The loyalty penalty is something that the mobile networks have been doing for years. Quite simply it’s defined as charging loyal customers a premium to the products currently being offered to new customers. In a fair market surely it should be the other way around?
In a traditional network contract, they make you pay the full cost of the handset over 24 months bundled with a SIM package. At the end of 24 months you would think that your bill would automatically reduce given the handset component has been fully paid off. Unfortunately however, customers often find themselves continuing to be charged the same high monthly price without being notified.
The problem exists for SIM-only customers too. One of our customers found herself paying £32 per month for using 5GB of data when the network in question was offering more data (8GB per month) to new customers for £10 per month. A shocking £264 a year penalty for being a long standing customer of 10 years! 👎
It wasn’t until she called her network provider and threatened to leave that she was provided with a similar range of tariffs and data options. So loyal customers apparently have to haggle too?!
Is anyone doing anything about the loyalty penalty?
Thankfully a few important people share our views on this topic.
Following new rules passed by Ofcom, from February 2020 onwards, the networks will be forced to do what any honest business would always have done, and notify customers that their contract period is coming to an end. Customers will be sent details about the ‘best’ tariffs currently available (i.e. those being offered to new customers), including SIM-only deals. The new rules are the latest in Ofcom’s campaign to foster a fairer and more transparent mobile market. Massive thumbs up to Ofcom. 👍
But do government plans go far enough?
The charity Citizens Advice, who filed a super complaint in September 2018 about the sector, state that loyalty premiums have cost mobile consumers £342m over the past year. They’re supportive of the changes, but continue to question whether the proposals go far enough.
We agree. It’s a broken market, stuck in the past and changing too slowly – that’s what inspired us to start Raylo. We have a vision for a completely new kind of mobile business; better in every single way.
We’re inviting customers to take a first step towards dumping their network. Raylo’s smarter way to pay monthly for the latest iPhone means you can stay on a SIM-only contract with your network, which is the cheapest and most flexible way to get your minutes and data. 😎
Check out our previous blog about SIM-only contracts – we’d hate to see you pay the networks over the odds!