Good customer outcomes may soon be regulated, and service providers will need to be ready

By Neil Bryant, Head of Analytics, Data Insight

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How good a deal are you getting on the subscription services you buy?

If your service provider releases new plans that would still cover your needs and are half the price you currently pay, do they
have a responsibility to suggest you switch to the new plan?

If you asked Kiwis whether they trust their service providers to ensure they’re on the right plans and not being overcharged, I think you’d find the trust is pretty low.

Last year the Commerce Commission undertook a review of nearly 80,000 mobile phone bills to ascertain whether Kiwi consumers were overspending on their mobile phone plans. The study found that 64% of the consumers surveyed did not change plans during the 12-month review period and that around 25% of post-paid customers could save an estimated average of $11.60 per month by moving to a cheaper plan that would still cover their usage. Another report by the Electricity Price Review (EPR) found that power companies could be making up to $39 million every year due to customers not being on the optimal plan for their usage.

Why is this important? Because it presents the question of where the responsibility lies for ensuring consumers are on the right plans or subscriptions for the services they buy. If your service provider releases new plans that would still cover your needs and are half the price you currently pay, do they have a responsibility to suggest you switch to the new plan? A report published by the Australian Royal Commission (ARC) in 2019 suggests they do.

The report investigated misconduct in the Australian banking and superannuation and financial services industry. In addition to 76 recommendations for changes to banking and life insurance practices, the report found that service providers are ultimately responsible for good customer outcomes, even in circumstances when services are sold by intermediaries.

In other words, it’s not up to consumers to ensure they are on the right plan, it’s up to the service provider.

The ARC’s report found its way to the Financial Markets Authority (FMA) in New Zealand, which agreed that good customer outcomes are the responsibility of the service provider. This kicked off a spotlight on the New Zealand banking industry, which has collectively undertaken significant changes to ensure good customer outcomes, and more recently a range of subscription-based industries such as telco, insurance and utilities.

It is very likely that good customer outcomes within subscription-based industries will be regulated at some point soon. When this happens, how ready will these types of businesses be to ensure this? Based on ongoing coverage of issues, evidence supports there is still plenty of work to be done.

The solution, of course, is data.

All of New Zealand’s largest service providers have an abundance of customer data. Collection of data should already be where it needs to be, so the next step is how it gets utilised. This data can be used to understand what customer needs are (and how these may change over time), which can then be used to select which payment plan or subscription is best. This places focus on understanding customer behaviour to identify when changes occur and whether any adjustments are necessary to ensure the customer is receiving the right advice, information and service for their circumstances. As well as then being able to meet any future regulatory obligations, there are a plethora of other benefits that come from utilising data this way and putting the customer needs first.

Trust within subscription-based service providers is low. We’ve all heard stories, or indeed had our own experiences with switching service provider to obtain the latest ‘better’ deal. Stepping up to meet regulations is one thing, but proactively using data to ensure customers are paying a fair amount for their services is also a good way to reduce customer churn – something all businesses try hard to avoid but inevitably face. Why switch if your provider is regularly making sure you are on the right plan for your needs? Imagine the power of a marketing campaign that reaches out to customers to let them know they are valued, appreciated, and can save money by switching to a better plan.

Above everything, it shows that the provider is doing the right thing by the customer. We don’t have to look far to see what can happen with a bit of complacency, as the group of incumbent default KiwiSaver providers found when they were recently replaced because they were found to not be providing good customer outcomes.

Customer data is bread and butter in today’s world. It can and should be used for good customer outcomes - to understand evolving customer behaviour and needs and adjust payments to provide the best fair value exchange. Putting the customer at the heart of analytics to do the right thing will no longer be a nice to have, or something on business roadmaps, but will be a must have – as being ready for good customer outcomes regulation, because it is coming.

Neil headshot 2 Neil started at Data Insight in 2015 and is now the head of analytics, providing support to both our clients and team members. He has accumulated significant experience in helping clients across the finance, government, retail, and telco industries over the last few years, particularly on delivering data driven solutions.