Rory Sutherland

Things we don’t mind paying for

Take parking in central London. I wouldn’t do it more than once or twice a year

Things we don’t mind paying for
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Here’s a challenge for film buffs: can anyone remember, from the entire canon of cinema and television, a single scene set in an underground car park in which something unpleasant or nefarious did not occur? Yet I still rather like them. By far the best car park in London is the one found underneath Bloomsbury Square, which is in the shape of a double-helix. This allows you to drive all the way down and all the way up again with your steering wheel in one position.

About once a year I park in the Mayfair car park at the bottom of Park Lane. I recently noticed that an annual season ticket for the car park is £3,900, which, provided you are happy to sleep in your car and wash in the nearby public toilets, makes it something of a bargain for central London property. I recently paid a fairly hefty £22 to park for three hours. On the positive side, if you want to look at spectacularly expensive cars, the Mayfair car park is a cheap alternative to visiting the Motor Show, and also gives you the mild thrill of visiting what is, following the closure of the Razzle Multistorey in Bexleyheath, the only car park in London to be named after a pornographic -magazine.

But the other reason I don’t mind paying £22 to park for three hours is that this is something I only do once a year or so. If I had to do this twice a week, the cost would drive me practically insane.

In mathematics, xyz=zyx. This isn’t true in pricing. Asking 100 people to pay £10 once a year is not the same as making one person pay £10 100 times a year.

The Italians have ingeniously solved this problem. I once asked an Italian colleague whether he found it a bit of a pain in Rome having to pay €4 every time he wanted a coffee.

‘If you are Italian,’ he gently explained, ‘They do not charge you €4. If you are a local, they charge you less.’

Every time my local town increases its parking charges, it involves a huge barrage of local complaint. I have never understood why they don’t placate the local voters by borrowing from the Italians — or from the principle of Amazon Prime. Why not just let me pay £10 a month, in return for which I can park for half-price in my local area? My hunch is that this would allow them to raise prices quite a bit for people out of town, while placating the local electorate and encouraging people to shop locally.

The only reason this practice has not been adopted is, I suspect, historical technological limitations, which caused parking spaces or train journeys to be charged in two stupidly extreme ways. One way was to pay the one-off price, which is too expensive for regular users. The alternative was to buy a season ticket, which encourages misuse, in that it provides no incentive to travel or park at off-peak times, or to avoid unnecessary use. The system of season-ticket pricing on trains, as the Campaign for Better Transport points out, is also ridiculously unfair to part-time workers.

Amazon Prime is an extraordinarily intelligent idea, in that it works in multiple ways. It is a ‘commitment device’, which encourages regular use of the service, since the more you use it, the more you save. But it is, I suspect, essential to Amazon’s ambitions. Paying for a next-day delivery once a month is fine. But there is no way you can get people to use a service more than a few times a month if they feel they are paying for delivery every time.

Again, xyz does not equal zyx.

Rory Sutherland is vice-chairman of Ogilvy Group UK.