Auto-switching – is the energy industry underestimating its potential to mix things up?
Our recent webinar, How to make money in ‘New Energy’ #1, focused on marketplace operations - one of 6 key categories of business models that we have identified through our ‘New Energy’ Business Model Service research. This business model naturally comes in a variety of flavours, ranging from simplistic price comparison sites – where customers are recommended a certain supplier to switch to – to sophisticated trading platforms which create new environments that allow consumers to be matched directly with their preferred energy generators.
Another example of marketplace operations becoming increasingly interesting is the notion of auto-switching – where companies provide a service designed to cut customers’ gas and electricity bills as much as possible by automatically and frequently switching them on to the best possible tariff.
In contrast to price comparison sites, which recommend a new tariff to switch to – these auto-switchers complete the whole process on a customer’s behalf, developing a deep and more ongoing relationship with their customer base.
As customer awareness increases and end-users have more access to information than ever before, transparency and trust is of utmost importance.
In 2016, Florian Riztmann of smartphone App switching service Voltz, told the BBC that “the switching market has been poisoned by its past.” A lack of trust has caused a state of inertia and consumers are reluctant to sign up for switching services for fear they will not be able to control which tariffs they are on. This is a view that seems to be shared by others in the industry, including those who joined our recent webinar.
A quick-fire poll conducted during the webinar suggested that the majority of those questioned (86%) believe that in 5 years’ time less than 1 in 4 customers will be signed up to a supplier auto-switching service within their market.
Poll taken from the How to make money in ‘New Energy’ #1 webinar, held on Thursday 18th May 2017
Although a small sample size of just under 100 attendees, these views come from a selection of industry experts who work within the sector, including utilities and manufacturers, and suggest a less than positive outlook towards auto-switching services.
Our in-house customer research however, tells a different story.
Recent primary research conducted through our Heat Insight Service’s customer panel asked ~450 homeowners – those responsible for making the decisions regarding energy within their household – about the appeal of auto-switching and their willingness to pay for the service.
Slide taken from the How to make money in ‘New Energy’ #1 webinar, held on Thursday 18th May 2017
The results indicate that if the service needed to be paid for, for example with Flipper in the UK, appeal is reasonably high, with 41% finding auto-switching very appealing or quite appealing. In contrast however, if the service were to be free (such as that which Labrador is proposing to offer in the UK), appeal significantly increases. In this case, a staggering 70% of those questioned indicated that they would find an auto-switching service appealing.
Although there are no specific attributes that stood out as to why this is the case (fuel type, heating system age, and use of smart of controls made no difference to the response), the response from the panel shows that customers’ interest in this type of business model may be very considerable – a daunting prospect for suppliers keen to hold on to their customer base!
Find out more
To find out more about auto-switching and the six categories of business model, contact me via email or call +44 (0)131 625 3336.
The Heat Insight Service has published its report on auto-switching, following a survey of the smart energy customer panel. Contact Steven Ashurst for more information.