Bamboozled consumers paying too much - ESRI
Published 13/05/2016 | 02:30
Consumers get bamboozled by complex products and services and end up paying too much for them.
Even numerate and highly educated people are as likely to get confused about the best value as those who have spent less time in school and college, the Economic and Social Research Institute has found.
And high-end and pricey products are often poor value for money, but consumers mistakenly rate them highly, according to research carried out by Pete Lunn of the ESRI.
"There is a consistent bias towards high-end products," Dr Lunn said.
According to consumer experts, there are 400 different mobile phone plans, and a similar number of health insurance schemes.
Each mobile plan will have a different data allowance, contracts will be for different lengths of time, and will have an offer on different types of handsets.
The research found that when consumers have to take into account more than two or three factors, they struggle to spot good deals.
"We are limited in the number of factors we can process," the academic said.
And complex products are more prevalent than previously appreciated, the study found. These create a spiral of confusion for consumers.
Dr Lunn said the sheer complexity of consumer products limited effective competition in the market.
"Complex products are more common than we thought. This limits the attractions of switching and competition in circumstances where consumers can't make accurate decisions."
Simplifying goods and services is a good idea, the research concluded.
The research, which is funded by a range of state bodies, recommends consumers use comparison websites.
Dr Lunn said: "The findings suggest that consumers can benefit if product ranges and descriptions are kept simple.
"Where companies instead market products in an unnecessarily complex fashion, with multiple characteristics and price components, consumers will be more likely to make mistakes."
The research is jointly funded by the Central Bank, the telecoms regulator, the energy regulator, and the Competition and Consumer Protection Commission.
Simon Moynihan, of price comparison site Bonkers.ie, said the research demonstrated what companies have known for some time - the more features that products have, the harder it is for consumers to compare them and work out whether they offer good value.