Bargain! Why it may be time to sell protection on price

Recommending products to clients based on price is not the adviser way, but Roger Edwards, proposition director at Bright Grey and Scottish Provident, says it may be time to change tack...

Packed shops in the January sales prove that people still love a bargain, despite the supposed age of austerity we are living through at the moment. I always find it amazing that after weeks of spending in the run up to Christmas, many people allow themselves just one day off, before heading back out onto the streets to find even more bargains.

The relentless marketing machine of the retail industry fuels this spending spree with its promise of double discounts and ‘everything must go by Friday’, when of course we all know that the next sale will start on the Saturday morning.

The desire for a bargain promotes behaviour that could appear irrational from some viewpoints. The double discount trick tells the consumer that the cost price of a sofa, for example, is £1,000.

The first discount reduces the price to £600 and the second – the double discount – reduces it to £400. They will buy the sofa and boast to their friends and family that they saved £600. But of course they haven’t saved £600 at all, but spent £400. And that is the big trick of the January sales.

Pricing lessons

So what can we in the protection industry learn from the spending habits and the trends in the retail sector? I have lost track of the number of times I have been quoted by journalists or written articles over the past five years stating the price of life assurance is at its lowest ever.

Every time I say it I expect that, sooner or later, the price will stabilise but it has not yet. People well into their 40s can get more than £100,000 of life assurance for only £10 a month. That is a truly remarkable bargain. But unfortunately the consumer does not see this.

Despite the plummeting price of life cover, demand has never increased. The rock bottom price, our own equivalent of double discounting or other similar financial seduction marketing, has not altered the fact that the product needs to be ‘sold’. It has not transformed it from a grudge purchase to an aspirational one.

So if we have to continue to sell we need to tap into this obsession the public has with price. However, we should be careful that the price message does not become so powerful that we send our protection customers off to the internet to log into price comparison websites.