The " Discount " Price Wars !

A newspaper is promoting a novel scheme to try and gain discounted services for those that join it's "Big Cost of Living Switch ".   The idea is to recruit twenty-five thousand New South Wales households and use them for collective bargaining to gain a discount from the providers of electricity, health insurance and the supply of petrol.

There is no doubt that commodity prices are outstripping the rate of wage increases and since 1990 the  price of electricity has risen 237%, Health Insurance by 261% and petrol by 162%.   In comparison, the average wage has risen by a minuscule 163%.   A new tax increase will see petrol prices increase sharply with the passage of time.

 A collective of twenty-five thousand homes that promise to switch to a nominated supplier in exchange for an attractive price deal would have a massive bargaining chip at their disposal, and it would be relatively easy to implement in both the electricity and health insurance industries, but putting it in place on petrol with the vast spread of resellers in that industry could be a much more complex problem.

This idea tends to highlight the problem facing the average person struggling to pay high commodity bills.  Telephone marketers deliver a frenzy of phone calls offering tempting discounts caused by the ending of the carbon tax.   This is available - if they switch supplier to the company the tele-marketer  is promoting.    Television channels are packed with competing claims of more services for less money - from the health insurance providers.    The loser seems to be the loyal customer who remains with his or her present supplier.  The impetus is to gain new custom by dangling the offer of a discounted price, but that only applies if you sign on the dotted line - and switch supplier.

It must be galling to those loyal customers to see a full page advertisement in a newspaper offering a tempting discount to those prepared to switch - to the very company presently supply their electricity and which has made no contact to advise that the benefits of the carbon tax withdrawal will be coming to their electricity bill.

Unfortunately, when an industry succumbs to a price cutting war the loss of profit caused by tempting new customers with a discount must be borne by the vast masses that are still charged the base price. The clever people who calculate the marketing algorithms are balancing market share as the component to even out the highs and lows and arrive at a satisfactory bottom line.   The individual customer is reduced to a mere cypher on a financial printout.

It is quite possible that this cumulative bargaining proposal will deliver a saving to the households rushing to join, but the problem is that the advantage will lack permanency.   Over a short period of time these discounted prices tend to become the norm - and then comes a new round of ingenious offers to tempt another switch of supplier.   The discount given away eventually has to lead to a general price increase because inflation steadily erodes the profitability of providing the basic service.

It seems that the past notion of reward for loyalty is now as dead as the Dodo !   We live in an age when blatant opportunism reigns and it is wise to seize each and every advantage - and sit back and wait for the next offer to improve our position even further.