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Cheap Energy Club – pointer to the future?

Posted on: Wednesday 6th of February 2013

To get a glimpse of the future of consumer empowering services take a look at MoneySavingExpert’s new initiative the Cheap Energy Club – a price comparison service that not only compares prices but understands the behaviours and attitudes that stop us doing stuff we know we should.

Make it easy for me!

Instead of enabling one comparison (and perhaps one switch) Cheap Energy Club keeps on comparing your tariff against the market, month by month, so that you know when you are getting out of kilter and need to do something about it.

It’s also designed to address the hassle factor. OK, saving £10 a year is ‘a better deal’. But can I  really be bothered to go through all that hassle for just ten quid? In recognition of this, the service let’s you set your own threshold for action. If a £10 saving per annum isn’t worth it, perhaps £50 is. It’s up to you to set your own threshold.

By linking this ‘power of attorney’ service (‘keeping on checking the rates so that I don’t have to’) with hassle factor thresholds, Cheap Energy Club is addressing the dynamics at the heart of the emerging new industry of decision support services – the cost/benefit ratio of the decision-making process itself.

The bottom line is, for most of the 20th century most consumers relied on a series of decision-making short cuts such as ‘buy the brand I know’, but the cheapest (money saving), buy the most expensive (quality assurance), ‘buy the one my friends recommend’ (safety). They did this because the costs of investing time and effort trying to make a truly informed decision routinely outweighed the benefits.

Decision support: a new industry in the making

Now however, a new industry of decision support services is coming into being as innovators and entrepreneurs like MoneySavingExpert design new services where the benefits of investing in a better decision significantly outweigh the costs. In MoneySavingExpert’s words Cheap Energy Club is “a tool that strips the effort out”.

The interesting thing is, there’s no reason why the service should stop there. Once Cheap Energy Club has a critical number of users it can go one step further, using the same platform to launch collective switching deals. If it plays its cards right, it should be able to trump some of the concerns that have been raised about how some price comparison sites use and share the data they collect from users. That’s because its technology platform is based on a personal data store provided by Allfiled, which is capable of supporting a range of customer information management services. No doubt the service would become even more efficient if it were powered by data released under the midata programme.

There’s loads more information it could add to the decision-making process. Why not add peer reviews from the likes of Or open data about social, ethical and environmental performance or customers’ complaints about quality of service from the energy ombudsman: – choice need not be based on price alone.

And why restrict this idea just to energy? After all, there are a whole range of supply relationships where prices and tariffs are always moving and where the average consumer would love to know they are always on the best tariff.

A formula for success?

These are the ingredients of decision support services of the future:

  • ‘Power of attorney’-style services where the service automatically does checks and makes comparisons on my instruction and without my having to lift a finger – thereby turning inertia on its head and making it a force for consumer empowerment.
  • Integration of service components, so that price comparison, advice, peer reviews and access to other sources of relevant information are all brought together in easy-to-use ways.
  • Convergence around the individual – ‘help me manage all my suppliers better’.
  • All in ways which help me protect and manage my data, rather than expose it to misuse.

Supplier benefits

The intriguing thing about this is that it also opens up multiple potential benefits for suppliers. Companies naturally gravitate towards the strategies that make them the most money in the easiest possible way. If you, as a company, make significant amounts of money from consumer inertia (by pushing up margins year after year, for example), increased switching can represent a direct threat to profitability. However, if the market environment is less shaped by inertia, where consumers are more active ‘switchers’,  services like this can offer ways to significantly reduce customer acquisition costs and to improve customer retention: if you know who is thinking of switching, you know who to target your loyalty activities on. The same services can also offer increasing degrees of insight into customer decision-making processes and priorities – what are the savings thresholds that trigger actions, for example? Do different types of customer have different thresholds and decision-making priorities?

Right now, only about 3% of UK consumers use a price comparison service to switch energy suppliers each year. That says a lot about the current barriers – both real and perceived. Innovations like Cheap Energy Club bring these barriers down. Likely result? Rapid growth in the market.