A few weeks ago, Matt at Mom and Dad Money wrote about negotiating with utility companies. When it works, it’s a great way to save money. When it doesn’t, you have to try something a little more drastic. Then it is time to actually make a switch. Always threaten to switch when negotiating with a utility that doesn’t have a monopoly of service. But if they won’t budge, the only way to save money is to actually switch. And when you can’t get a lower rate with the new company in the future, switch back. I call this practice utility price hacking.
It started in April when our promotional price for our DSL internet service expired. In May, the price went up $21. That was almost a doubling of our promotional price. So I got on the phone to ask for a new deal. I was willing to sign up for a new commitment and said so. They said that they couldn’t do that. So I threatened to switch to cable internet. They responded that they would be sorry to see me go! To negotiate, there has to be some give from the other side. And CenturyLink apparently could simply care less about losing a customer. And CenturyLink, if that is not your policy, you might want to do some retraining of your customer service agents.
It took me a while to get around to it, but I got a cable jack wired up for Comcast, as opposed to the DirecTV used elsewhere in the house. Then, to save a $7/month modem rental fee, I bought a used cable modem on Amazon. Apparently, got on the wrong compatibility list on Comcast’s site and bought one only good for business internet. Ooops. That one is sitting in my trunk while I try to figure out how to get to a UPS drop-off location before they close when they work fewer hours than I do. But the new, correct one arrived on Friday. Sunday I hooked it up and now I’m typing this on my brand new cable internet connection!
Comcast is actually offering a pretty nice deal. A package that is twice as fast as my DSL service is being offered for 6 months at the same price as I paid for my first year of DSL. After 6 months, it raises by $15 and then after a year goes to full price. At that point, I will try to negotiate a new deal. Anecdotal evidence suggests that they are actually pretty good about that. But if they won’t…
The concept of utility price hacking
The concept of utility price hacking is simple. You treat your utility service as a commodity and simply ignore brands. When two companies compete against each other, you win. Either one company will match a lower price, or you can walk. After leaving one company for a year, you will be treated as a new customer and get all of their promotional rates.
Those promotional rates for new customers are the key to utility price hacking. New customers get the best rates for almost everything. When I donate blood plasma, new donors get paid twice as much for their first few visits. New utility customers get discounts (only if they have competition, if they are a monopoly like our internet, then you get connection fees instead!)
So if a company doesn’t have a mechanism to treat existing customers well, you leave. You will be a new customer to somebody else. And next time you are in the market to switch, you will be a new customer all over again to that first company.
It took me a fair amount of work to get my office wired for DSL, and then again for cable internet. But now that is done. I’ve invested in a modem for each service. If I need to switch back to DSL to get a better price in a year, it will take me all of 15 minutes to order the service. If I save $21/month again, then that 15 minutes is saving me over $250. For the amount of time I spend on switching, that works out to a rate of pay of $1000+ per hour. That’s a mere 100x my hourly rate at work. That’s double what Jenny Lang on Stacking Benjamins got when she comparison shopped on flights.
Have you ever “hacked” your utility prices be resetting your new customer status? What is the most you’ve ever saved by switching?