Auto-switching will threaten big energy firms

Brand will be all-important to the big six companies wishing to hold on to their market share in the digital-first world of automatic switching.

Two years ago the government introduced a policy to make it easier to switch provider, and to its credit consumers are switching more than ever as a result.

With a more level playing field, the number of disruptive new energy providers has burgeoned, the tanks of tech-savvy challengers like Octopus and Robin Hood parked on the lawns of the big six. Competition has driven down prices and improved customer service. But according to consumer group Which?, two-thirds of its members have still never switched energy suppliers.

Great news for the big six, no doubt. Eon was first to announce that its tariffs would rise to essentially the maximum permitted under the newly introduced price cap and the other five have followed suit. But this gravy train won’t last. Profits at Britain’s biggest energy firms fell from £1 billion to £900 million in the face of tough competition, and their market share dropped to a record low as more than a million customers left them for smaller challenger companies.

Despite switching being easier the process still requires a fair amount of manual input – especially through traditional price comparison services like Compare The Market or Uswitch. But some new firms offering automatic switching are disrupting the sector, ensuring consumers are always on the cheapest rate possible.

Switchcraft, for example, is an online service where customers enter their details once and are automatically moved to the best possible energy deal. Monzo offers a similar service, as does Flipper, which promises to take care of the “tedious and complicated process of energy switching for you”.

Backed by serious marketing, these services all promise to lower rates by hundreds of pounds a year. And this presents a challenge for the big six. When switching becomes a wholly automatic process from which the consumer is detached, it risks eroding the relationship with the originator brand. The big six need to provide a reason for consumers to not look elsewhere.

Cost, convenience, technology and customer service will carry them so far. But they need to double down on brand – to improve their image and prove that their decades of insight and experience are enough of a differentiator to combat the start-ups’ promises. Brand is about more than logos and identity. It means providing a great experience. Ensuring employees are engaged, willing and able to answer customers’ questions. To be useful and positive; adapt to stay relevant. There’s little doubt the big six’s market share will continue to erode. Just how far is up to them.