I’ve had RAC breakdown cover since 2012. Their basic Roadside Assistance service means that if you break down, a patrolman will come out and try and fix your car, and if he (or she) cannot then you will be towed back to your home or your nearest garage to a maximum distance of 10 miles. This basic service is fairly standard now in the market.
So when I got my renewal letter recently which asked me for £50.98 (notice the price point there – why not £51?) for another year of cover I blanched, recalling how my premium has increased way above inflation over the years. When I first signed up in 2012, the price was £29. By 2015, it had risen to £40.82 for another year. In 2016 it rose to £46.40. Last year it went down to £45.79. But my latest bill represents an 11% increase in price. Last time I checked, inflation over the past year was 2.3%.
When I queried the price rise back in 2016 on the phone with the RAC, I told them that another big rise out of line of inflation would result in me leaving them. I presume they put a note on my file as my premium was 61p lower in 2017. But this year they reverted to type. So I am leaving them.
A quick search on a price comparison website found me some much cheaper offers. I chose Rescuemycar.com, the cheapest at £26.33. I then rang the RAC and told them that I would not be renewing on 10th May and why. Immediately the (admittedly well-trained) call handler apologised and promptly offered me a deal for, I recall, £32. I reminded her of the previous conversation in 2016. She tried again, saying that her offer included 15 months of cover not just 12. This last minute offer was only made when it was clear I was intent on leaving. I thanked her and declined.
The point I am making is that the RAC took my customer loyalty for granted and tried to charge me way over the market rate for what is essentially the same service as less well-known brands. I’ve only ever used the RAC once when I wrote off an alloy in a pot-hole in the dark in 2013. The rescue vehicle that came wasn’t an RAC one with an officer who doffed his cap to me, it was a regular fellow from Manchetts, the regional breakdown vehicle operator. I had no special benefits being with the RAC.
But here’s an idea for the RAC – after, say, five years of steadily increasing prices on your loyal customers why not consider giving them a premium ‘holiday’? Reset their renewal price so that is the same as what you offer new customers in your acquisition program. That way we would get a discount for our loyalty and you get to keep your existing customers.
My case is a good example of the big customer loyalty battle being fought for consumer business. I was raised and grazed in direct marketing in the ’90s when we were taught that retention of customers was more important than acquisition because it cost up to 6x to acquire a customer than to retain one. Times have changed, all caused by the internet. Now, consumers of products and services from electricity supply to breakdown rescue through to pet food have instant access to information on prices and bundles meaning they can compare their existing supplier to others. Competition has increased as market entry barriers have been lowered. Acquisition costs are down as cheap online ads and price-comparison websites have displaced the more traditional and costly advertising and direct marketing methods. Now the customer can be much more easily tracked from initial interest to purchase, and the digital medium ostensibly offers better ROI.
Customer churn is an accepted fact and different brands will decide what churn level is acceptable to them in the trade-off of spending money cosseting existing customers versus spending the same amount to steal customers from competitors who, in the case of the RAC, essentially offer the same service for less. It’s the customer pipeline principle – stuff new customers into it as fast or faster than they fall out the other end.
It is in this race to the bottom that many brands – or rather the people that run them – are messing up. They have forgotten the value of the brand and the principles of brand loyalty. No longer seeking a competitive advantage by product/service differentiation or market segmentation, they seek to compete on price, or trade on their brand heritage without investing in their brand and delivering their brand promise. I’ve never had a ‘reassurance’ call from the RAC asking how I was and how my car was, although they tried to cross-sell me car insurance via direct mail regularly. Small, cost-effective ways of showing the existing customer that you care about them are there but are lost in the more distractive and appealing battle for new customers.
So take note RAC. You need to go back to basics and invest in customer loyalty. You got too greedy, you took me for granted, and consequently you lost my business. You can be sure I’ll be telling my friends, family and business colleagues on social media.