Comparing the energy market02 Jun 2016, Posted by NEWS in
In the old days people would need to buy a trade magazine or cruise the shopping malls for hours to find the best deal on a product. Then the internet arrived and took much of that effort and some of the fun out of consumer choice. It did not take long for aggregators to emerge with comparison sites to make it even easier to find the best deal on items like insurances, broadband and energy.
Today there are many comparison sites giving consumers a one-stop shop for everything from insurance to Internet bundles. The idea is that with a few clicks enough information is gathered to offer comparative quotes, at least from a selection of companies that are signed up with the aggregator. If all goes well the supplier makes a sale, the aggregator takes a referral fee, and the consumer gets the best deal.
Earlier this year the SMH reported a share price tumble at iSelect one of the larger comparison sites in Australia on announcement of a near 40% earnings downgrade, the result of a “staffing mismatch”. That is, too many staff for the volume and conversion rate of traffic. Whilst there may well be specific problems at iSelect, there is a problem or two with the comparison site business model. They are beholden to the suppliers they spruik who call the shots and can withdraw at any time from what for them is little more than an affiliate partnership. Any number of competitors can emerge almost overnight because making comparisons is not that hard. Most important, users can see the comparison without having to buy the product.
Another problem with many of the comparison sites is that whilst they look good the user experience is poor. In order to make a reliable comparison the system needs data. Currently this arrives from user input as answers to questions, not all of which are at your fingertips. Do you know the kilowatt hours you used last quarter? Users want the comparison but not if it means spending half an hour giving up personal details. Most sites get around this with the call in or call back feature. This comes at a cost to the aggregator and a change in experience for the user. Now I’m off the Internet at a call centre that reminds me of a hard sell and Mumbai.
Technology solutions would improve the experience. For example, data scraping technology that can instantly read all the relevant data from an energy bill uploaded as a PDF is now available via third party APIs which can plug into a utility provider’s website. When you don’t want to be called back and be talked to by pushy sales staff then technologies that can quickly automate the comparison process are a delight.
The comparison site seems like a no-brainer. Consumers want the best deal and are easily convinced when they see offers lined up against each other. No matter that they are not all the offers available in the universe. To stay competitive though these sites must be ahead of the user experience. Otherwise we will begin to doubt that the benefits are worth it. The share price fall at iSelect to 67c from a within year high of $1.86 suggests that investors are beginning to doubt too.