Compare and contrast

A move by price comparison sites to deeper, less transactional relationships with consumers could increase the distance between energy suppliers and their customers, says Nicola Eaton Sawford.

Millions of UK households use price comparison websites every year. It is an increasingly popular way to buy certain products and services and is shifting the power balance between consumer and supplier.

It’s big business: sites can earn up to £30 for introducing a single fuel customer and up to £60 for a dual-fuel switch. That’s not far off the cost of a smart meter installation – for an online transaction, it’s not to be sniffed at.

We see an interesting difference in customer appetite to engage with price comparison websites across different sectors. It is not yet as prolific a tool in energy as it is in insurance. In telecommunications, adoption of switching via price comparison sites is even more uncommon – it is a sector where common customer practice is to negotiate one on one with the provider for a new deal.

Increasingly, time-poor lifestyles are playing their part in driving consumers to use price comparison sites. They offer service at whatever time a customer deems it convenient, a fast turnaround and ease of access to a wide range of different suppliers. The tool reduces the complexity of selecting a new supplier, perceived or real. It would appear to provide customers with a means of comparing apples and pears, putting them in a position to make an informed decision. Many customers are all too happy to give up the high effort task and enjoy the peace of mind that comes with believing you probably didn’t miss a better deal.

To call them price comparison websites does them a disservice. These websites do a good job of educating customers, helping them understand a complex array of tariffs and offering useful advice, guidance and helpful tips.

But against that positive backdrop, there does appear to be growing customer disillusionment and trust issues.

An investigation by finance website This is Money in 2014 found that good deals for customers were being “hidden” because they didn’t generate good commission for the price comparison site. The tactics employed to confuse and mislead ­customers have been strongly criticised. Ofgem’s Confidence Code has helped the situation, but not resolved all the issues. More recently, the Commons Energy and Climate Change Committee called for “misled” customers to be financially compensated. For me, it is an odd expectation that a commercial entity such as a price comparison website should have to show all supplier options, irrespective of whether the supplier has a commission arrangement with them or not. Would we seriously expect Expedia to show every single hotel or just every hotel it was working on behalf of?

Further criticism has come from disability awareness groups, indicating that many disabled customers are poorly served by the price comparison websites. This is clearly a consideration in the energy sector given the focus on vulnerable customers.

So what is the future for price comparison websites in the UK energy sector?

In my opinion, customer appetite for price comparison tools will not be diminishing any time soon. I think the price comparison market will become increasingly competitive and competition will happen on new fronts, outside price. Trust and customer loyalty will become a key focus for the price comparison sites and those relationships need to better translate across products.

I believe collective switching and sites specifically delivering these services will become an increasingly common way to ­purchase energy. Customer awareness of voluntary accreditation schemes will increase and that will improve service standards and levels of trust.

I wonder what the reaction of energy suppliers will be to price comparison sites developing deeper, less transactional relationships with customers and potentially putting some distance between energy ­supplier and customer?

I expect a trend towards customer experience being a bigger feature of the comparison, shifting the emphasis from price to more rounded value. We have seen this begin with some price comparison sites making service ratings a feature of the selection criteria. I expect more, with closer integration or possibly mergers with customer review sites, adding a customer viewpoint to inform the buying decision.

The UK government’s Midata initiative may also change the landscape, potentially providing customers with consumption data that may power a new type of comparison engine based on more specific requirements and individual consumption behaviours. This requires more sophisticated data analytics capability on the sites and might neatly tie in with the renewed customer interest in energy that smart metering should bring.

I envisage some innovative changes to comparison websites and the way they function, with more tailored search options improving customers’ appetite for using the sites and increasing their value perception.

Shortening switching times plays well for price comparison sites, driven by ­customers’ demands for internet purchases to be ­completed “in the moment”.

So price comparison sites in energy are here to stay but I see their form shifting over the next few years – as will their relationship with suppliers, Ofgem and customers. And you have to ask the question: going forward, why would customers want to buy direct from energy suppliers?

Nicola Eaton Sawford, managing director, Customer Whisperers