In Germany and Switzlerand1 there is an accepted culture that contracts for most services can be renewed for a year – sometimes even two – automatically if you do not quit your contract, in writing, before the end of the Kündigungsfrist. This is the deadline by which you must quit the contract and its usually three months before the end of the contract. In some cases this makes sense, such as renting an apartment, where both sides needs adequate notice, but most of the time this is used to simply lock customers into a contract all over again, because most people forget to do it until it is too late. Here’s how that usually plays out:
- Sign up for a new mobile/cable/insurance, etc. package – often you create a contract on the phone
- Receive a 10-page contract in the mail, put all the papers in a folder somewhere and forget the dates
- Have some problem with your service, decide you don’t like your service provider and decide you want to change
- Find out that your contract has automatically been extended and hate them even more, swearing you’ll never miss the date again
- Immediately write a letter quitting your contract for the next year
The thinking behind this is that companies can simply rely on most people to keep forgetting and lock them in. Sometimes this means they’re locked into old plans or tariffs too, which can be more expensive. Companies try to claim that they’re providing a helpful service by automatically extended the customers contract so that they’re always covered or connected, but of course they could still do this and let people quit with just, say, a month’s notice once they are past the official end of their contract.
All in all it leaves a sour taste in the mouth and, as a customer, you pretty much hate any service provider who tricks you with this and you swear never to do business with them again. The problem is, they all do it, so there’s not much chance to avoid it.
Signing the divorce papers on your honeymoon
What some people do is to quit their contract in writing immediately after signing their contract, so they don’t forget. You can always retract it later if you are happy with the service.
Let’s just recap on that and frame it in terms of a relationship commitment, like a marriage, which it is. This is akin either to a pre-nuptual or, worse, signing divorce papers and filing them away somewhere on the first day of your honeymoon, just in case it goes pear-shaped later. It’s not a recipe for a mutually beneficial and trusting relationship.
There is an enormous service opportunity for companies who decide not to do this, providing they can get it past blinkered management. Nobody wants to be locked in to a service, because everyone knows they have no power as a customer because they can’t go anywhere else and the company has no incentive to improve their service. In the mobile phone industry, the focus is still on customer acquisition instead of retention, though there are some signs that this is changing.
One company’s junk service is another company’s gold
Interestingly, a side-service industry has sprung up helping people to quit their contracts (Carphone Warehouse were the first company to do this back in the early days of mobile contracts in the 90s). In Germany there is a service called Aboalarm – Abo is short for Abonnement or subscription. They have both a website and an iOS app that has the customer service details of almost every service provider. You can go online and use one of the templates or simply use the app.
You put in your details, sign it with your finger and they fax it off for you. This is either free when hooked into some kind of social media recommendation or 79c. The app also allows you to set alarms when you first create a contract that goes into your calendar with a reminder a few days before the Kündigungsfrist, so you never forget.
The service design lesson here? Apart from the obvious one of not shackling your customers, it is possible make plenty of money providing ways around other companies’ lack of service.
I only know this from the Dark Ages of mobile phone contracts in the UK and from the current state of almost all contracts in Germany and Switzerland. I was amazed this was even legal when I first started living in Germany and found out about it. Germans and Swiss seem to just accept it as life, but I would be interested to know if any other countries do something similar or have outlawed it. Drop me a tweet. ↩