The Price of Loyalty

I did a heartless thing last week. You probably did, too, but didn't notice.

I needed a plane ticket from Boston to Manchester, U.K., and was going through the myriad options available. So many routes, so many airlines, and, inevitably, so many prices. As usual, I was using Expedia to search the possibilities. I started using Expedia a long time ago, longer than I remember, and really like it: the clear user interface, the well-organized presentation of options, the large number of airlines handled. I finally picked a flight on U. S. Airways, for $422, and was on the verge of purchasing it, when I noticed a little blurb on the page about a non-refundable $5 booking fee.

"That's odd," I thought, "I've never seen that before." Just to figure out what it was, I accessed the U. S. Air site in a new browser window. Finding the best flight is rather tiresome using this site, but, in this case, I had already decided on a particular flight, and just wanted to see its price. And, guess what, U. S. Air's price was $417, exactly $5 less than Expedia's price!

Naturally, I bought the ticket from U. S. Air for $417. Furthermore, I had just learned something useful. Expedia is great for finding the best flight, but then it's worthwhile to check that flight on that airline's own site. Maybe the price will be lower, maybe more air miles will be offered, whatever. In the worst case, if there was no advantage, I'd have just wasted a few minutes.

Since then, I've booked many more flights in this manner. Am I doing something heartless? Definitely. I've used Expedia for years, yet defect without a qualm for the sake of five dollars. Even worse, I continue to use their service, consuming their CPU and bandwidth, yet always stop just short of buying from them. Some services, such as SideStep, even facilitate such "parasitic" behaviour, as termed by Barney Pell.

Would you do the same thing? Many people do have a lot of inertia, always going to the same gas station, for example, but that's mostly out of laziness, not really loyalty. In many other situations, people just look at the bottom-line, and would happily defect without a second thought. The new supermarket has lower prices? Great, sayonara to the corner store to which you've been going for five years. The local Barnes & Noble store has jacked up its prices? Fine, go there to peruse the books, and then use Amazon to buy your selection online.

People regularly do such heartless things, often without even noticing, and usually without considering them heartless. But when other people do similar heartless things, then it seems different. The local Barnes & Noble store is closing its doors and laying off eighty people? Why, that's just heartless! A big company like that, not caring a whit about all those people, simply dumping them on the street, just so that the company can push up its share price!! Does this sound familiar? It is heartless to lay off people like that. But it's in response to the myriads of equally heartless decisions made by people like you to reduce purchases from that store.

Being heartless is, unfortunately, the price of progress. When a long-time customer heartlessly stops patronizing your store, that's an unignorable signal that somebody else, somewhere, has found a better way to deliver your product. Either you must improve your offering, or find something else that you can offer. Hopefully, you get your act together, improve your offering, and regain customers. Or you fail to do so, and society sees no economic reason to support you when your competitors are doing a better job. Either way, this is the distributed mechanism whereby society relentlessly improves its productivity and its collective economic situation. If you think there's a viable alternative to this signalling mechanism, ask yourself: what would a person do if his employer, or his customers, told him that improvements in his work were necessary, yet continued to pay him, regardless of any change in his work?

Every innovation, every advance, has been a rude shock to people accustomed to the status quo. The horse and buggy emporiums must have watched in dismay as their clientele slowly seeped over to the showroows with the new-fangled horseless carriages. Legions of programmers in the U.S. are up in arms to find that people around the world are willing to do the same work for a fraction of the price. But in each case, society is better off, overall, in having found a cheaper way to get the work done. Suppose that somebody found a magic way to get computer programs written, instantly, at no cost. Such a wonderful device would be a benefit to society overall, wouldn't it? But such a discovery would be as much a curse as the offshoring movement to U.S. programmers.

Economics is often called the "dismal science," and rightly so. But it simply, and heartlessly, gives us exactly what we demand. The next time someone breathlessly tells you about the latest heartless round of layoffs, agree that it is indeed heartless, and then ask that person what heartless things he's done lately himself.

Rujith de Silva
Created 2004-01-25; modified 2005-03-31