Consumer engagement in the energy sector has been the elusive goal of the Office of Gas and Electricity Markets (Ofgem) since the UK energy market was deregulated in 1989. The primary duty of Ofgem was to protect the interests of consumers by promoting competition between private energy companies. In 2000, with the implementation of the Competition Act, Ofgem concluded that competition had delivered substantial price benefits for all customers, and with this, price controls were removed and competition between the suppliers was allowed to occur without interference.
Fast forward 21 years and according to Ofgem’s Consumer Perceptions of the Energy Market survey, 55% of consumers have never switched despite 52 active energy suppliers (as at Dec 2020) operating in a highly competitive market, stories of “Energy Price Rises” frequently occupying the headlines and electricity and gas remaining front of mind as one of the largest household costs. In the same period Ofgem has regularly intervened in the market to protect consumers, the latest intervention being price caps, a direct contradiction to their declaration in 2000. So why is it that despite high levels of competition, awareness and regulatory intervention, consumers are still not taking action?
The solution to engagement lies not with the launch of another energy company, sensationalised news stories or further controls by the regulator, but rather with understanding the drivers of consumer behaviour.
The Fogg Behavior Model (FBM) illustrates this well and may give clues as to why engagement remains low. FBM highlights three principal elements namely, Motivators (Motivation), Simplicity Factors (Ability) and the types of Prompts, or what marketers refer to as a “Call to Action”. When executed simultaneously, the customer will take action, however if either element is missing or not at the requisite levels, no action will be taken.
We can only surmise that motivation and ability to seek out a new energy supplier are not at the requisite levels for the disengaged majority to take action.
Following the implementation of the Competition Act in 2000 and advancements in digital technologies around the same period, price comparison websites (PCWs) played a vital role in breaking down engagement barriers by giving consumers access to a broad view of suppliers in a single place. The relative ease (ability) of comparing suppliers and seeing how much one could save (motivation) is a driving force behind consumer engagement with 65% of all switches taking place via a PCW today. PCWs have solved the problem for the highly engaged minority, however we must turn our attention to the 55% of the market that have never switched and find a solution to increasing the motivation, ability and prompts for them to take action.
Could the answer to engaging the disengaged in the energy sector lie within the financial services sector?
We’ve seen first-hand the early success Open Banking is having in the financial sector. Open Banking has democratised personal financial management and enabled countless fintechs to enter the market offering innovative digital solutions that solve traditional banking problems. For established banks to avoid being left behind and lose the opportunity to remain the main focal point for managing their customer’s money, they are enhancing user experiences and finding new ways to digitally engage customers by offering services beyond their core proposition.
Digital banking has been a driving force behind engagement by delivering a wave of features aimed at enhancing the financial lives of consumers. Use cases such as spending categorisation, budgeting and savings targets have all contributed to increased engagement. Recent figures state that 73% of British consumers now primarily use digital banking methods.
With 10.3% of UK households currently in fuel poverty, leveraging bank and Open Banking data to enable consumers to compare their energy supplier within a financial tool (e.g. mobile banking app), could allow many within this group and beyond to hit key financial goals. By way of example, a customer within their mobile banking app (ability) would receive an in-app notification (prompts) letting them know that they could save towards buying a home (motivators) by changing energy tariff. Information known about the customer would allow for minimal customer input, greater personalisation and streamlining the switching process (simplicity factors).
In the above example the FBM elements of motivators, simplicity factors and prompts are catered for in abundance making for a highly engaged audience likely to take action. However, we can take this a step further and deliver a far more engaging user experience through increased access to energy data.