Energy markets around the world have increasingly been opened up to competition, but many consumers remain disengaged and continue to pay significantly over the odds for their energy.
In the UK, we’ve supported the energy regulator, Ofgem, to design and test communications to improve customer engagement and increase switching rates. Together we launched and evaluated a large-scale trial with nearly 150,000 customers, testing a series of personalized letters that showed households how much they could save by switching energy provider and including the top three deals in the market for them.
Within 30 days, the letters effectively tripled switching rates from a baseline of one per cent. The quality of these switches also improved – customers who switched after receiving a letter saved on average £50 more than those who switched of their own accord. This demonstrates the potential of these market interventions not just to prompt action, but also to help consumers to make better decisions. A recent Ofgem trial, where BIT provided quality assurance support, found that letters offering customers an exclusive tariff and personalised support from a third party price comparison service (a ‘collective switch’), resulted in eight times as many customers switching, from 2.6 per cent to 22.4 per cent.
In Australia, too, there has been renewed debate about energy markets. New rules mean retailers must notify consumers by letter once their introductory discounts expire, the aim being to encourage them to use the government comparison website (Energy Made Easy, or EME) to compare alternative plans. We worked with the Australian Energy Regulator to run an online randomised controlled trial on Predictiv to test the best way of framing the letter. We found that a headline that focuses on loss aversion (‘you are about to lose your discount’) was most effective. We also helped develop the design for standard information documents.
Our findings have fed directly into the design of the regulations. The notice letters will have to state that a consumer is ‘losing’ their discount and also include other behaviourally informed concepts – for example, by providing all the information that a consumer needs to use EME, in a standardised format that matches the EME website.
These trials and experiments have provided valuable insights into what drives effective consumer engagement, which we will continue to apply – with regulators around the world – to other regulated markets like telecoms, water, insurance and mortgages.