FrOMO – what’s it all about?

FrOMO – what’s it all about?

Many of us have probably suffered from FOMO – the fear of missing out. But what do we call the anger and disappointment we feel when something ends up costing more than the advertised price and we end up missing out on a great deal?

This increasingly widespread syndrome is known as FrOMO – the Frustration Of Missing Out.

It occurs when brands including banks, travel companies, insurance providers and car hire firms advertise a ‘great’ price online that is often unattainable, often due to extra fees, costs and charges that weren’t included in the price initially advertised to us.

This popular marketing technique used to lure customers in is called “teaser” pricing – when companies advertise prices that could be misleading because not everyone can get it.

A recent survey of 2,000 people, commissioned by Shawbrook Bank found that FrOMO is common across the UK, with nearly three-quarters* (74%) of online shoppers admitting they feel frustrated when they are forced to pay more than the advertised ‘teaser’ price. The study also revealed that customers could end up paying a whopping 428%** more than the advertised price for train journeys and 527 %** more for flights.

Leading Psychologist, Honey Langcaster-James has examined Shawbrook’s findings and concluded that this kind of advertising has a huge impact on how we interact with brands and can influence what kind of online shoppers we are. Research has revealed that there are four distinct types.

Why are we talking about FrOMO?

Banks are one of the offenders, often using teaser pricing in personal loans advertising. Some lenders will advertise an ultra-low interest rate or APR, which makes customers believe they could get a really good deal if they apply.

But under regulations, lenders only need to offer these attractive Representative Rates to just 51% of successful applicants, meaning the remaining 49% could end up paying much more.

Our study uncovered that the cost the interest rate for taking out a personal loan with one leading UK lender rose by 183%** by the end of the application process. Overall, this practice costs households an estimated £204 million a year in extra interest [1]

At Shawbrook, we’ve taken a different approach, we believe in being open with our customers, which is why we launched our five-point Transparency Charter earlier this year.

[1] Calculation by Cebr based on the average discrepancy between interest rate offered and Representative APR for consumers who take on a loan despite being offered an interest rate above the Representative APR.

*2,000 UK consumers surveyed by 3Gem, 2018
** Desk research conducted by MRM, 2018