After negotiating a much lower rate for cable and internet service, Fiscal Fool asks, “If that is what the product is worth why are they gouging us?” The answer isn’t that the service they provide isn’t worth much, it’s that it costs a LOT more money to attract a new customer than to keep an existing one. Think of all the money they have to spend on advertising and promotions just to catch one new cutomer’s attention. To keep this customer, it only cost them $50 a month.
In addition, most people behave like a frog in water: They’ll jump out if it’s too hot, but they’ll stay to their death if you slowly increase the temperature. Over time, they’re probably betting that they can slowly increase the rate and the customer won’t bother to switch to another provider.
We’ve got more brains than a frog, so we can make a better choice. We just have to overcome inertia.