Why we can’t resist the 'Perkonomics'

You know the feeling. You’re booking your cheap flights online, which you’re not precious about, because why pay a premium when you’re only going to be in the air for two hours, right? But, all the same, you’re thinking about last time you flew, about the 40 minutes you spent in the queue for check-in, while some guy argued with the ground staff about his luggage allowance, you were put near the loo and the drinks trolley kept bumping into you. You’re thinking: Do I really want to go through that again?

Wouldn’t it be nice to have a little bit more time in duty free? And maybe the opportunity to choose where you sit on the plane? Your mouse hovers over the little circle that says “priority boarding”. And now you’re thinking, well, it’s only a little more, isn’t it? Congratulations – you’re about to buy in (literally) to a truly 21st-century consumer doctrine: Perkonomics.

Everybody loves an upgrade, because everybody loves to feel special, to feel important. Banks, airlines and credit card companies have rewarded loyal customers with goodies for generations. “Perkonomics”, according to the analysts of trendwatching.com – who coined the term – is now a movement: “A new breed of perks and privileges, added to brands’ regular offerings, [and] satisfying consumers’ ever-growing desire for novel forms of status and/or convenience, across all industries.”

Once, such privileges – picking a window seat, speaking to the same person every time you visit the bank – might have been included in the price, all part of the package; an incentive for customer loyalty. “You stick with us,” they seemed to say, “and we’ll look after you, we’ll see you right.”

But in today’s contrary consumer world, many of these perks aren’t perks at all; they’re purchasable upgrades of service, speed or convenience.

Trendwatching.com has pitched these upgrades as an effective way for brands to attract customers, or to persuade existing customers to spend more. But what about the consumer? Aren’t we all just being conned with the promise of privilege?

“We’re starting to see a growth in companies charging for things they never used to charge for,” says Martin Lewis, who runs the personal finance website moneysavingexpert.com. “But I wouldn’t call it perkonomics, I’d call it ‘jerkonomics’! Take bank accounts. There’s a staggering range of extras that banks will try to make you pay for, most of which you can get for free elsewhere. They’ll call you and say, ‘Hey, you’re a valued customer, we’d like to upgrade you’. And what they mean is that they’d like to charge you extra. They’ll offer you better interest, but if it’s one of the big four high-street banks, then their interest rates for savers are already substantially lower than the best on the market. They’ll offer you breakdown cover, travel insurance, cellphone insurance and so on.

“Most people say yes, and then never use any of those added extras, despite paying for them. You’re paying twice what you should, and the bank account isn’t as good as some of its competitors offer without any fee at all. I wouldn’t call it a perk. Most of the time it’s a punishment. Often you’re paying for things that you shouldn’t be paying for and that you could get cheaper elsewhere.”

Meanwhile, low cost airlines such as Easyjet and Ryanair are frequently attacked for their priority boarding policies, which add to the cost of a plane ticket, but which, it is argued, offer little real benefit to the passengers who elect to pay the premium.

But, as trendwatching.com observes – and Lewis readily admits – perks work. If businesses offer a freebie with their latest product, or a cheap upgrade, they’ll often draw in more customers and more cash. “Some perks can be good,” adds Lewis, “But too often people consider the perk to be in isolation from the product, when they should consider the entire package and calculate its overall value.”

Rob Walker writes a weekly consumer column for The New York Times and is the author of I’m With the Brand: The Secret Dialogue Between What We Buy and Who We Are. “All brands,” he says, “must deal with the problem of advertising clutter. We’re hit with so many marketing messages per day that we can’t really remember which one was for which bank or which airline. They’re trying to come up with any gimmick that breaks through the clutter but, of course, they’re just adding to the clutter, making it that much harder next time. Many businesses have become interchangeable: They’re all basically selling the same thing.

“Perkonomics applies most forcefully to brands for whom consumer loyalty is most difficult to maintain: Those selling intangibles, such as travel, personal finance or communications, rather than the sorts of products that have American Apparel labels or glowing electronic apples attached to them.

“Airlines are the classic example of a business where it’s pretty hard to differentiate on a brand level,” explains Walker, “so they’re trying to figure out ways to be more efficient and position those measures as somehow good for the consumer as well – by offering lower prices to those consumers for whom those extra ‘perks’ aren’t meaningful. They have to be careful. In the US airline market, people are all talking about how airlines have moved to a menu of charges, where they’ll charge you for checking a bag, or for your meal. Anecdotally, the way that’s been interpreted by the US consumer is not as a perk; instead, people feel they’re being asked to pay for something they should get anyway.”

Perkonomics took root in an age when consumers were feeling flush, especially

if it meant keeping ahead of the Joneses in the queue. But as the “real” economy begins to feel the pinch, people will be less likely to fork out for the window seat and businesses will have to devise more and more imaginative ways to squeeze cash out of their customers.

“If this recession becomes as grim as everyone thinks it will,” says Walker, “then people will get much more focused just on value, and consumers will be far more savvy than they have been. I assume that what you’ll see more from businesses are attempts to position nickel-and-dime tactics as perks, or even as reverse perks: ‘If you don’t want to pay extra for the coffee on the airplane, then you’ll save five dollars!’, something like that. They’ll try to position it as great value.”(The Independent)

 

WHAT THEY ALL OFFER

- PERSONAL BANKING

Earlier generations might have looked on our hi-tech commercial banking system with awe. Not, one should hasten to add, the bits of the system that generated the current economic crisis, but the bits of the system that allow people to check their balance from a desk, to pay bills or to transfer money at the click of a mouse.

Try, however, to get a bank employee on the phone in the UK and this technological idyll of financial facility becomes less appealing. If you don’t want to wait in a queue on a toll-free line, you must invest in a little something called “Personal Banking”.  Royal Bank of Scotland, Natwest and LloydsTSB all offer private banking as part of their now semi-public businesses. The Barclays’ Premier Account, includes the support of “Premier Managers”.

 

- PRIORITY BOARDING

Trading Standards in the UK recently condemned Easyjet and Ryanair’s priority boarding services as the next best thing to “fraud”, and there is much anecdotal dissatisfaction among passengers with this prime example of perkonomics. On Ryanair, a fee of £4 (Dh25) online, or £8 at the airport, earn you passengers the right to priority board. That said, Ryanair flights allocate up to 80 priority boarding spots per flight – 40 per cent of the seats. On an unpopular flight, you could easily find the priority queue longer than the regular one. Easyjet offers “Speedy Boarding”. The airline recently launched an “Easyjet Plus” card, which allows members speedy boarding on all flights for a one-off fee of £100. All very well, but if you take a bus across the tarmac to the plane, you may find yourself boarding the bus before everyone else.

Meanwhile, it has now become a paid-for perk not only to board a plane quickly, but also to check in a bag or eat on board. Throw in the amount it costs to reach some of those far-flung airports served by the budget airlines and you have to wonder how cheap all this low-cost flying really is.

 

- CREDIT-CARD EXTRAS

Credit-card companies are the original perkonomists, offering a direct correlation between exclusivity and the colour of your card: Black, gold, platinum and so on. For a mere £300 a year, for instance, the already wealthy holders of an American Express Platinum card can toast each other smugly in 500 VIP airport lounges worldwide.

In the US, Amex cardholders, and Amex cardholders alone, were offered the chance to procure the winning dress from the fashion design reality TV show Project Runway in September. Palmeiras, a Brazilian football club, has 5,000 seats reserved for Visa card customers in an exclusive area boasting a VIP lounge.

 

- CAR CREDIT

Wondering why the car you reserved has always left the garage by the time you reach the car hire desk, leaving you to prowl the Côte d’Azur in a deeply uncool Renault Espace for a fortnight? The answer: “Avis Preferred”, a worldwide members’ club enabling its card carriers to skip queues worldwide.

Cars – and particularly the parking of cars – offer infinite possibilities for the perkonomist. In Canada, Ikea are offering reserved parking to customers who drive hybrid cars. Babies’R’Us in the US offer mothers priority parking close to the store, while in Slovenia, Diners Club Black Card holders get prime parking reserved at the airport.

 

- REVERSE PERKONOMICS

Have you received cheap deal vouchers via email yet? The subject line says something like “Fw: Credit Crunch Food Deals!” These emails are the first sign that in a financial crisis, reverse perkonomics (i.e., charging you less for the same) is the best way to give consumers a sense of superiority.

In the US, several shops run classes on the art of penny-pinching. The Stop & Shop grocery chain offers “food summits”, Home Depot gives classes on cutting energy bills; and Wal-Mart now has an online “family financial expert”. (The Independent)

 

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