Friday, December 22, 2023

The Beggar Strategy

It never hurts to ask, right?

There is an old joke I recall from my college days.  A young guy goes up to a young co-ed and asks her to sleep with him.  She slaps him in the face and says, "You pervert!" and walks away.  He does this again and again and is slapped, kicked and abused and called various names.  One of his friends sees this and asks him why he does it.  "After all, you are just getting rejected again and again!" his friend says.

"That's true," the young man answers, "99 out of 100 times.  But that one time!"

It is an interesting strategy - and one that people and corporations and scammers use again and again.  The guy at Exit 29 with the worn cardboard sign saying "Just Evicted!" (since 2018, no less) is counting on the sheer number of cars passing by.  99 times out of 100, people ignore him or throw beer cans at him or call him names.  But that one time - when some clueless Joe hands him $10 or $20  - makes it worthwhile.  And since 1,000 cars a day pass by him, well, he can clear $200 a day easily, just for doing nothing but sitting there.   In some places, like tourist spots, you can clear hundreds and hundreds a day - enough to support a deluxe drug habit. Tax-free, too!

Of course, the entire premise doesn't work unless that 1-in-100 gives money.  We'll get back to that later.

Another example of this strategy is in scamming.  I recounted before how long ago, when I opened my law practice in 1994, I would get letters - physical letters - from a "Nigerian Prince" telling me they wanted me to deposit some millions of dollars for them.  It was the classic "Nigerian Scam" in paper and ink.  Later on, I got faxes along the same lines - dozens of them over the years.  And eventually, the Internet took over - and I got thousands of SPAM messages addressed to "My dear friend in Christ" or some such.

They played the odds - that one in one-hundred, or one-in-a-thousand, or one-in-a-million would bite on the scam.  Chelsea Clinton's father-in-law, who was an investment advisor, stole millions from his own clients to pay a Nigerian scammer.  So it isn't just "dumb people" falling for this, but random people.  And thanks to the Internet, these scammers can play odds as long as the lottery - that one in a million, or ten million or a hundred million or even one in a billion will answer.  Since there is no incremental cost in sending e-mails (as opposed to mail or fax) you can power-SPAM and play the odds and win.

And again, so long as one person responds, well, the scam works.

The same is true for telephone scams or text message scams - which is why wasting their time is the best way to hurt them (although I think you get put on an informal "time waster" do-not-call list these scammers pass around). They use an autodialer to call every number on the planet and eventually someone picks up and engages.  So long as the incremental cost of contacting potential victims is low, they can make money at this.  If you can keep a scammer on the phone even for a few minutes, it increases their cost-per-victim substantially.

But most of us have better things to do with our time.

Recently, New York Attorney General Letitia James decided to sue a scammer for ripping off people.  No, not Donald Trump this time, but an organization almost as scummy - Sirius XM.  What is interesting about this scam is that they not using the shotgun technique of calling millions of people to get one hit, but badgering existing customers who want to quit.  And the technique apparently works, too.

I wrote about Sirius XM's crazy business model before.  They charge an outrageous fee for "meh" content.  They pay car companies to put XM features in the cars, and offer a free subscription to new car buyers.  If you subscribe to XM and then try to cancel, they don't make it easy.  I had to call someone and they kept me on the phone with a "retention specialist" who badgered me to stay with their network.

They quickly offer to discount the service for up to a year for as little as $5 a month (as opposed to, say, $17).  I did this once and then once the price went back to the regular amount, I cancelled again.  I don't commute anymore and our car has 36,000 miles on it in nearly ten years, so I just don't spend enough time in the car to make it worthwhile as a service.

But others do.  I have a friend who signs up for six months or a year at $5 a month and then on the last day, calls to cancel and then ropes the "cancellation specialist" into offering another year for $5 a month, convinced they "won" a discount and beat Sirius at their own game.  They drive even less than I do.

In a way, it is the reverse of the beggar strategy - you get the victim to call you and then beg to get the service at a discount.

But they make money in other ways as well.  For example, if you do try to cancel the service, but don't stay on the line for a "confirmation number" they will say you changed your mind and "have no record of a cancellation request" - a stupid pet trick if there ever was one.

Still others - and I am not talking about rich people, either - will let the $17.95 a month charge go on and on, on their credit card, because they never check their balance and have no idea what they are paying for (and usually make the minimum payment every month, if that).  I used to be one of those people - long ago before XM was invented.  In the days of monthly statements mailed at the end of the month, well, it was darn hard to keep up with what you charged and a lot of people just gave up and assumed that what the credit card statement said was correct.

Today, of course, you can check your balance in real-time.  When I charge something, my phone buzzes almost immediately with a text-message telling me my credit card was charged.  There is really no excuse for not knowing.

But getting back to Sirius XM, even though the cost of haranguing your customers with "retention specialists" is far higher than what scammers pay to SPAM millions, it works along the same lines. "It never hurts to ask" as they say, and if you can get one-in-ten to stay with the service, you've come out ahead.  And if you are paying someone in a third world country to work as the "retention specialist" and pay them on a commission basis, well, your actual retention cost may be very low.

Even if you can scam a "cancelling" customer into paying for a few months more (at the regular rate) until they call up again (pissed-off this time!) and try to cancel again (be sure to accidentally "drop" the call before you read that cancellation confirmation number!) you make money for the company.

Maybe this only works for one-in-ten or one-in-a-hundred, but it does make money.  And so long as even one person engages with this strategy, they will keep using it.  It is like seagulls at a restaurant - all it takes is one jackass to offer a french fry to a seagull and the whole restaurant is swarmed with them!

To me, of course, it is the ultimate turn-off.  I look at Sirius XM like I would look at a venomous snake - pretty to look at from a distance, but nothing I want to handle directly.  They left such a bad taste in my mouth that it is a "never again" kind of deal.  Others of course, put their hand on the hot stove again and again - and never learn.

On the other hand, if Sirius is forced to put a prominent "Cancel" button on their website - one that quickly and easily works - then people would not try the scheme my friend uses, to negotiate with the "retention specialist" for a discounted rate.  As a result, they would lose my friend as a customer, unless they reduced their regular rate to something more reasonable, like $5 a month.

At which point, I might actually subscribe!  Nah.  I think I would throw $5 at Pandora before I give those bastards at Sirius XM a friggin' nickel!

That's the problem with the beggar strategy.  Whether it is a "homeless" bum, or a guy trying to score with chicks or an online scammer or a satellite service, the strategy leaves a bad taste in everyone's mouth and eventually results in a bad reputation for the scammer.

Think about it - do you harbor warm and fuzzy feelings for your cable company?  Of course not!  But so long as even one person keeps engaging with them, they will keep being scammy.