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Press release
Energy|United Kingdom|English

Price comparison sites suffer switching dip as consumers go direct to get better deals with energy suppliers

06.10.2016

  • In Q2 2016, 6 percent of GB homes changed energy supplier
  • Third party web usage, such as price comparison sites, drops 11 points versus same period last year among switchers
  • Smaller suppliers are more likely to offer better deals to keep customers

GfK’s latest Quarterly Energy Market Monitor reveals that more than half (51 percent) of British households that considered switching energy supplier – but didn’t – in the second quarter of the year, stayed because of a better deal. This mirrors the trend for Q1.

Of those customers who looked to switch, but ultimately stayed with their current supplier, 29% were offered a better deal and 22% found a better deal with their existing provider – with smaller suppliers using this retention tactic more than the “Big Six”.

Price still top of the bill to tempt switchers
The primary driver to move energy supplier is still price, cited by 83 percent of respondents (followed by capped price/price freeze (18 percent), dual fuel discount (16 percent) and dissatisfied with service (11 percent)).

When comparing customers of the Big Six with smaller suppliers, we see the following:

  • The Big Six are more likely to have picked up customers due to capped price or a price freeze (20 percent versus 13 percent for smaller providers)
  • Smaller suppliers are more likely to have attracted customers to take advantage of a smart meter installation (9 percent versus 3 percent for the Big Six).

Bagging a better deal
In Q2 2016, the reason that more than half (51 percent) of customers stayed with their current supplier, having considered switching, was price-based – they were offered or found a better deal to stay.Q2 2016 saw the biggest gap between the willingness of the Big Six and smaller players to offer a better deal to keep customers. 27% of customers of the Big Six were offered a better deal by their current supplier versus 36% of customers of small suppliers.

At the moment, the smaller players have more ability (and inclination) to actively retain customers, however this may change as CMA reforms take effect and activate historically inert customers.

Gavin Sugden, Divisional Director Energy, GfK says: “In Britain, six in ten households are now classified as “Active Switchers” for energy. Many moved to the smaller suppliers for attractive prices. However, with the Big Six increasingly offering better deals to retain customers, and with powerful new channels to switch such as collective agreements growing in popularity, the market is being increasingly squeezed. Smaller suppliers are forced to be even more competitive on price to keep customers – many of whom are die-hard switchers, who proactively seek out the best deal. If energy prices rise, we believe these smaller players will find it harder and harder to compete with the Big Six on price."

The next big barriers to switching were lack of time and inertia (9 percent), a feeling that the gain isn’t worth the effort (9 percent), confusion surrounding the moving process or the fact that they were already on the best deal (both 8 percent).

Switching intentions up versus same quarter last year, but actual switching levels falling for customers of smaller suppliers
Overall, switching intentions are consistent with Q1 (41 percent), but up four points versus Q2 2015.
However, actual switching levels tell a different story. While smaller suppliers have to weather more switching than the Big Six, their switching levels have dropped over the last three quarters (17 percent in Q415, 15 percent in Q116 and 13 percent in Q216). This trend was similar the previous year, but suggests that these customers may be more motivated to switch and save money as they anticipate the rising energy costs in the winter months, along with the cost of Christmas.

Third party websites suffer marked decline for switching
The majority of switching still happens online, although the use of third party websites – such as price comparison sites - has dropped 11 points versus the same period last year (34 percent in Q2 2016 versus 45 percent in Q2 2015).

Sugden concludes: “With the news often bursting with stories of how much you could save on your energy bills by switching provider, it’s no surprise that switching intentions among UK consumers are up again this year. What is surprising, however, is that only 6% of UK households actually made the switch – along with the marked drop in use of price comparison sites.

As ever, price is the primary driver and we’ve seen suppliers giving customers better deals – either proactively or reactively – to incentivise retention. With the CMA reforms starting to come in to place, all energy companies are now having to consider their retention and acquisition strategies.”

Gavin Sugden  
Gavin Sugden
UK Energy and Utilities lead   
+44 20 7890 9818
 
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