It's infuriating to realize that corporations occasionally profit from our inaction. Unfortunately, it is widespread.
It happens because people are flawed beings, and corporations (and governments) are well aware of this. We forget to check our bank accounts, we are too busy or uninterested in canceling subscriptions, we misplace gift cards, and we occasionally make mistakes.
It may be extremely profitable if corporations guarantee that we pay the price – not them – each time we make a mistake.
Here are a few examples of how they do so:
'Do nothing' letters Kayo Sports, a streaming app, emailed me last week to say they were "introducing a new third membership option to provide you additional ways to enjoy Kayo."
Despite the fact that Kayo launched the new tier at the same price as the old "standard" tier, everyone on standard was instantly promoted to the new pricing.
There were no advice on how to avoid the price hike, only a reassuring "This will happen automatically." (I ultimately discovered the option to downgrade in my Kayo account settings..)
Any firm that says, "You don't have to do anything," should raise a warning signal. Businesses are well aware of the power of the status quo.
Over the years, I've received several letters from energy retailers congratulating me. "Here's your new plan," she says, hoping that I won't notice the price hike.
Insurance companies do the same thing with their annual renewals, but several states are now requiring them to include both the new and old premiums in their mailings.
‘Breakage’
There are corporations whose whole revenue-generation strategy is based on what they call "breakage." That's an accounting term for money generated by services we've paid for but haven't used.
The worst example is gift cards.
It's a carefully guarded secret how much of the value on gift cards is never used, although Costco, the world's largest retailer, previously estimated gift card "breakage" at 9%.
For this reason, many businesses provide gift cards. It's similar to playing in a casino, where the chances are stacked against you. They understand that a considerable portion of the gift card cash they sell may never be repaid. As a result, Australia's law changed in 2019 to require gift cards to be used for at least three years before they expire.
It also happens with credit card points and frequent-flyer miles. Then there are the millions of dollars in airline vouchers that Australians have received in the last two years as a result of COVID-19-related flight cancellations. Many of these vouchers are unlikely to be used.
Customers, not airlines, will be the losers.
'Opt ins'
'Opt ins' are a term used to describe those who choose to participate in a
Governments are also aware of the force of human fallibility.
It's why they can announce new spending plans with large figures attached, confident in the knowledge that they won't wind up spending much.
The NSW government, for example, introduced a $640 million "empowering homes initiative" two years ago to provide households with interest-free loans of up to $14,000 to install solar panels and batteries. However, just about 500 individuals have signed up so far.
Following the Banking Royal Commission, the Commonwealth Bank and NAB each announced $2 billion in funding for client remediation, but only a portion of that amount has been paid out, mostly because it is up to their customers to claim it.
