21 Dec

"Make the switch" (oh, but we'll need you to sign this little contract here)

You've heard/seen their ads on TV/Radio/Mail: (I won't limit to certain companies, but you'll be able to tell who they are)

Make the switch to better service (...24 month agreement required)

Tired of your old service? (... 24 month agreement required)

Doesn't matter the product: Cell Phones, Cable/Satellite companies, Garbage Collection, DSL...you name it. The progression toward signing contracts for services is continuing. At one time, Americans shunned the idea. However, as time went on, more and more companies tried it out, and now people have become more tolerant of it.

I'm not saying that contracts are necessarily a bad thing, but let's think this through a little bit. Let's take the first example above -- "Make the switch to better service". Along with the "better service", I would have to sign a 24-month contract.

But what is "better service"? How can I be sure it's better without personally trying it out? Let's take a hypothetical example for a cellular plan: Let's say I'm a naive person who gets all their knowledge/facts from commercials and political ads. Let's say I saw a commercial for T-Mobile. In the commercial they state something to the effect of "we're better than Verizon and we're cheaper". I do my limited diligence with coverage maps and all and decide to switch [24 month agreement needed]. After 3 months, I become disgusted because more of my calls are dropping or the actual service isn't as great in certain areas, despite what the maps told me. I'm now forced to stick with them for 21 more months.

Now keep in mind, I understand the whole contract thing with cell phones... you get a free phone, and locking in a person for 24 months is a way for the company to get their money back from giving you a phone for free. The same argument used to be made with satellite companies.

But for garbage companies, satellite companies, or other services that don't require equipment? Really?

Look, most, if not all, satellite companies require you to return the free receivers when you cancel their service. If you don't, they'll charge you the actual cost for the receivers.

So then why do you need to lock a customer up for 24 months? Well, in the early days, a customer didn't have to return the equipment when they cancelled (we still have one of the old satellite receivers). A contract was used to ensure that the customer didn't cancel after 1 month. Now the satellite company is out the cost of the receivers. However, now, you are forced to return the equipment. But since you already had the contracts embedded into your business practice, coupled with the fact that you now force the customer to return the old equipment, you can now use contracts to limit the effect of dropped customers on your "Current # of subscribers" figure you give shareholders each quarter.

When I do my diligence work, what I really want to see with companies is a Customer Retention Rate. That will tell me if a service really is any good.

"Oh, but Schoms, they have many expenses with running the business!"

Oh, you must be talking about the type of expenses such as the every-three-week piece of junk mail I get, telling me they miss me. This stupid piece of mail costs them a little under $10/year. This doesn't even include the regular advertisements in the mail (every week, we get 2 ads for the same satellite company). Oh yeah, they're reallllllllly scraping by. They're making plenty of money, trust me. They don't need to be dealing with contracts.

Contracts are becoming the norm because companies are getting away with using them. People are becoming numb to the idea that they'll have to sign one. It's to the point now where one company (Comcast) can use the "we don't require contracts" as a BENEFIT... a perk! (and good for them for not requiring a contract)

Why would I want to take the risk of locking myself up with your company via a contract on something I haven't even yet tried? Do you walk into a clothing store and buy a pair of pants without trying them on? I mean, after all, you can return the pants and get all your money back! But no, of course you still try them on, because not all 33x32 pant fits everyone the same. And that's just it... not all TV channels are the same. Some people in Seattle or Minneapolis may be less tolerant than others that in rain/snow, their signal may be choppy or even non-existant for periods of time. At least with your pants, you can return them for a refund.

... but not with a contract. Not only are you inconvenienced with having to cancel [return] the service, but you can't leave, unless you want to get slapped with a hefty early-termination fee.

The only way to get rid of these stupid contracts is to voice our disgust with them. But just about the only way to do so is by letting companies know when you try signing on with them after they try to lock you into a contract.

Contracts can be effective for existing customers looking to upgrade. For example, say a person wanted to upgrade from a base phone to an iPhone. The customer might be dissatisfied at the cost of a new iPhone, but the company can give them a discount on the phone (which they'll recoup the cost with their overpriced data plan) if they sign a 12/24-month agreement.

(Full disclosure: We had a contract with Verizon to cover the cost of our base phone. However, we have been satisfied with their service so far, so the idea of a signing a contract to get some additional benefit might appeal to us. We have declined offers to Dish Network, Qwest, and whatever the internet company that's affiliated with DirecTV was called (they've undergone multiple name changes) telling them that we will not start service on anything that requires a contract. We have told Comcast that we liked the fact that they do not require a contract for their services)

Categories: Gripe