Reports suggest that UK energy switching websites are becoming more popular.
The energy supply markets have always been characterized by apathetic consumers that are reactive rather than proactive. Customers switching online are proactive in that they are deliberately seeking a discount.
Reactive sales are based on the in-area dual fuel dynamic; suppliers wish to protect in-area, ex-monopoly customers, of which they hold 50-60% and to which they usually charge the highest price. In order to compete with this high in-area price, the electricity companies, such as EDF Energy, Powergen and Southern Electric discount gas heavily (at a loss) and British Gas discounts electricity.
Customers that have never switched, and remain with their original supplier are now a lower proportion of the market than those that have signed up to an in-area dual fuel deal, which is the greatest proportion of customers. Companies have not actively tried to compete for out-of-area customers, because prices (and margins) are far lower.
Datamonitor estimates that less than 5% of switches are completed online, (which could be over 200,000) and as the vast majority switch to the cheapest service, one supplier can gain the majority of these. This is because the online price comparisons expose prices from the in-area supplier, prompting the customer to change gas and electricity separately, or switch to a supplier with a discounted out-of-area dual fuel tariff.
A supplier can therefore win customers online, but it needs to price competitively and it must pay commission to independent pricing websites. It also needs to realize that these customers are not likely to be the most loyal.
One way to counter this is to cut costs by providing an online only offer, where savings from paperless billing and customer meter reads can provide the supplier with the option of discounting.
