Billing Blunders

A quick internet search will find any number of billing blunders.

• Vodafone to issue mass refunds after billing blunder (Aug 2010)
• Npower to pay £70m in refunds after huge billing blunder (October 2010)
• TalkTalk pays £2.5 million for billing blunder (Feb 2011)
• 1,300 customers hit by Northern Ireland Water billing blunder (May 2011)
• T-Mobile apologise over billing blunder (May 2011) 
• Contact Energy named and shamed for billing blunder (June 2011)
• Comcast blames Wells Fargo for Billing Blunder (March 2012) 

 What are the causes of these blunders? Here are some excuses anyway.

• Outsourcing - for example, Comcast blames its payment processing vendor
• Inaccurate records (NI Water)
• Unintended back-office error (Contact Energy)
• Complexity - for example "We’re sorry that the complexity of the changes we made caused confusion. We’re now doing all we can to improve our communication with customers." (Npower)

These blunders might be cited as an illustration of organizational stupidity. But when a chief executive says he didn't know exactly what was going on, and tries to pass a dodgy billing scheme off as if it were merely a programming error, I'm not minded to take this apology at face value. Obviously sometimes chief execs are confused and don't know what is going on, but is this really the explanation for dodgy billing?

Complexity is often a strategy for ripping off the customer. If you can keep the customers in a state of confusion, then they are unable to make good decisions, and end up paying more than they need. This follows a standard strategy known as the OODA loop, which is used in military circles to confuse the enemy.

This is how it works. Customers try to optimize their spending, using a technique known as Ninja Shopping, which is a version of the OODA loop - Observe (Prices), Orient, Decide, Act. Companies try to prevent Ninja Shopping by obstructing and obfuscating the orientation phase.

Obviously there is some embarrassment (plus regulatory hassle and compensation) when these so-called blunders are exposed. But if these companies usually get away with (and profit from) using complexity as a weapon, then there is little incentive to simplify.

See my post on Complexity-Based Pricing