In my illustrious career as a management trainer, the first course that I ever delivered was a two-day Negotiation Skills event run for an energy company in a dingy hotel in Shoreham-on-Sea. Other than my extreme imposter syndrome, there are two other things that I remember clearly from the experience: firstly, that being able to cry tears on demand is a highly effective negotiation tactic, and secondly that one of the central themes of negotiation is to offer something of value to the person that you are negotiating with that is of little or no cost to you, at little or no higher cost to them.

Last night I had an experience with BT that showed that they seem to be inverting this principal to some degree. It left me fuming, and here’s why…

Now it has to be said that there is something about dealing with utility companies that can bring out the inner Victor Meldrew in us all. On the other hand, these days I tend to be fairly placid about most things. BT pushed me over the edge.

We use the telco for home phone and broadband. My wife noticed that our latest bill was somewhat higher than usual – not a huge amount, but noticeable (and everything is noticeable when you are starting to build a new business).

I investigated, and it seemed that we were now being charged for two services that previously had been offered for free – Caller ID and voicemail. Not a huge amount, but in excess of £40 a year, dribbled into the ever more complicated spreadsheet that is the average phone bill these days.

I called them up. Apparently the services had started to be chargeable (didn’t see the note about that one), but that I could have them again for free. All I would need to do would be to commit to a new 12 month contract.

So, I could save £40 by agreeing to spend a further £600 without adequately assessing whether I should change supplier. Not a great value proposition for me, and one that has seriously dented my trust in the provider.

Why? Well, it’s particularly irked me because of the way in which we anchor prices. If you are negotiating, then the first price mentioned will act as an anchor to all other discussions about price. This is a phenomenon that psychologists have validated in numerous experiments over the years.

If a price starts at zero, it’s really difficult for it to go anywhere without it seeming somewhat unjust – a problem that UK retail banks also face having for years not explicitly charged  customers for banking services.

The marginal cost of providing caller ID and voicemail to me? As near to zero as makes any difference. It’s not that the service doesn’t cost anything for BT to run, it’s just that the cost of the infrastructure is such that individual by individual makes no difference.

But by raising the cost they’ve managed to take something was of some value to me and made me realise that it’s not worth that much (voicemail now switched to our home phone, CallerID increasingly little value as the majority of our calls are junk). Moreover, by sneaking in the “but free again if you sign up for 12 new months” I feel they’ve pulled a trick on me, and I’ll be spending much more time assessing suppliers when my contract comes up for renewal in a few months time.

One thought on “Pricing and negotiation

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