Market view: The seamless switchover

The big energy companies must make switching as simple and straightforward as possible, or they will be overtaken by younger, data-savvy competitors, says David Green.

The great energy switchover is here. More and more consumers are switching energy suppliers, according to Ofgem figures, which reveal that more than 3.8 million switches took place in the first half of this year. That is a million more than the same period in 2015. But while these numbers paint a picture of savvier consumers taking better control of their energy tariffs, other figures indicate that there is still some way to go.

First, despite an increase in switching rates among consumers, two-thirds of all UK households are still on the most expensive standard variable tariff. This indicates that there is still a huge number of potential new switchers out there. Second, it was revealed by Energyhelpline that a third of UK households have not changed energy supplier for at least five years, while nearly one in ten had not switched for as long as 15 years, and consequently have collectively spent £18.7 billion more than they needed to.

Ofgem is keen to work closely with suppliers to help disengaged consumers shop around for the best deals. But is a hesitancy to switch less about a lack of consumer awareness of the numerous options available to them, and more about a fear of things going wrong during the process of transferring to a new provider? When queried on why they have not switched, the majority of UK households agreed with the statement that “if it ain’t broke, don’t fix it”, demonstrating they would rather not face the hassle of changing their current situation, despite the fact it could result in a new and better deal.

Recognising the opportunity

With a fear of errors occurring and an unnecessary experience of being “passed around the houses” at the forefront of many consumers’ minds, the process of switching providers has to be as smooth as possible. And only suppliers that use data intelligently to consistently deliver this seamless switchover will flourish.

Energy providers need to be in a position whereby they can share and exchange customer data, including address locations, without delay. This is especially true when you consider that Ofgem has a proposal in place to make next-day energy switching a reality by 2018. However, this could prove a real challenge for larger utility providers that may not be agile enough to correctly verify the identities of customers and match the addresses of their potential customers quickly. Consequently, those that fail to deliver on this expectation risk losing customers to disruptive, data-centric companies.

The margin for error and delay has to be removed entirely, and if the big six are not able to do this, then challenger brands will take the opportunity to shine.

Loyalty is dead

As well as providing a seamless switchover, younger, disruptive companies are giving the big players further reason to worry. Today, delivering exceptional customer experience is everything. It is what sets one company apart from the competition in a world where consumers have more choice than ever. In fact, the number of suppliers in the energy sector has more than tripled since 2010. If consumers do not receive the customer service they expect, they can easily take their custom elsewhere. With a lack of face-to-face contact in our internet-dependent world, delivering a slick, frictionless customer experience relies heavily on making sure customer data is accurate and up to date.

That said, built with the customer at front of mind right from the start and with a data-first strategy in place, many of these smaller, more agile companies are able to deliver the ultimate customer experience, better than ever before. Customers of these new services can now get a quote on demand or even renew their supply agreement while sat on the bus or in the pub, and a company that has operated the same way for decades will struggle to compete.

Data, here, proves invaluable to the survival of big companies, built on legacy systems, in this increasingly competitive landscape. The more accurate data is, the better the customer service. Matching customers to the right meters and quickly sending them the correct bills is crucial to delivering good customer service, as is having up-to-date information about where a customer lives or where a business resides. With this information at their fingertips, companies will be in a much more advantageous position in our service-driven world.

What is clear is that it is no longer enough for the big players in the energy sector to rely on the blind loyalty they long depended on. As consumers have more choice available to them, and a much closer eye on what they are spending their money on, they are going to be increasingly on the hunt for the best deals, and service providers will be very much under the spotlight. Only those that can take away the pain associated with the perceived laborious process of switching will come out on top.