Inertia selling - where unless you take the trouble to refuse a product or
service you will be charged for it - has reared its head again, this time
in a big retail group.
The most recent culprit is Edgars, which has dumped its more than three
million customers with an account protection plan sold through an inertia
selling campaign.
The account protection plan covers the outstanding balance on an Edgars
account up to R10 000 as long as the account payments are up to date, if
the account-holders lose their income through retrenchment, disability or
death.
The plan includes lost card protection if the Edgars charge card is lost or
stolen and fraudulent charges are made on the Edgars account.
If you are an Edgars account- holder you are considered to have accepted
the plan unless you cancel the cover before the end of August. The cost of
the plan is 25c for every R100 owed on your account. So on an outstanding
account of R1 000, you will be charged R2.50.
Inertia selling, which is also called negative response marketing, is not
illegal in South Africa.
But it is frowned upon by the Department of Trade and Industry's Consumer
Affairs Committee, the Advertising Standards Authority and the Direct
Marketing Association.
Davy Ivins, executive director of the Direct Marketing Association (DMA)
says it is unlikely that contracts done by way of inertia selling will
stand up in a court of law.
Ivins says the DMA's Standards Committee has ruled that the campaign
contravenes the association's strict code or practice and is therefore
unacceptable. Edgars is a member of the Direct Marketing Association.
Despite the obvious effectiveness of negative response selling as a
marketing tool, the DMA is opposed to the principle of selling products on
the basis of consumer inertia.
One problem is that some customers may not receive or read the
communication and may end up paying for something that they do not need or
want, Ivins says.
And even if you do receive a notification, points out Lana van Zyl, of the
DTI's Consumer Affairs Committee, nobody is allowed to impose an obligation
on you to reply or to receive a benefit for which you have to pay.
Ivins says a danger inherent in condoning any negative response campaign,
even where it is clearly in the interests of the consumer, is the precedent
it sets for less ethical marketers looking only to their own interest.
Since Edgars has launched its campaign, many DMA members have contacted the
association to question the use of these marketing tactics.
The DMA, the Advertising Standards Authority and the Consumers Affairs
Committee all act to stop inertia marketing. The DMA and the Advertising
Standards Authority work through their self-regulatory codes and the
Consumers Affairs Committee through the Unfair Business Practices Act.
Pat Mdoda, group public relations officer for the Edcon Group to which
Edgars belongs, says he does not believe that the account protection plan
is inertia selling because "it is being communicated as added value to
Edgars customers".
"We have been upfront and have made sure the plan is very cost effective."
Mdoda says the plan, underwritten by Hollard Insurance, costs about one
fifth of similar plans that consumers could buy themselves.
Edgars has also made it easy for account-holders to respond, he says.
Account-holders can make use of a toll-free number and can indicate that
they do not want the plan when they go into the stores to pay instalments
on their Edgars accounts.
If account-holders do not get the letter about the plan, Edgars will cancel
the plan and give customers a full refund, he says.
Asked why Edgars resorted to this inertia selling to sell the account
protection plan, Mdoda says Edgars wanted to make access to the plan easy
for all its customers and to make the plan cheaper, large numbers of
customers had to accept the plan.
In the two months since the plan was sold to Edgars account-holders, about
12 800 people have cancelled. Edgars has processed 73 claims to the value
of R145 000 and 16 claims have been settled. Also, 73 percent of customers
who opened new accounts at Edgars since July have accepted the plan, he
says.
* You can report any attempt at inertia selling to the Consumers Affairs
Committee of the Department of Trade and Industry at telephone 012
310-9569/2