Will the comparator’s model be turned on it’s head?15 Mar 2018, Posted by NEWS in
Our large domestic comparison site brands continually broadcast their brand on tv, radio and digital media – bombarding you with their canny ability to save on your essential services (i.e. electricity, gas, broadband, pay tv, mobile, car insurance, home insurance, health insurance etc.). All the purchases we must make but don’t have the time (or will) to shop around for. There is very little emotion tied to these purchases but the negative emotion of not getting a fair deal eats at us all.
These comparators have muscled themselves into a strong position, such that they are responsible for a huge percentage of all switches and retentions for these services. The end business (i.e. health insurer) must pay a hefty commission for the consumer’s business that has been facilitated by the comparators. The commission numbers for health insurance alone are eye watering – Bupa estimates this number to be around $200m each year. The end business begrudgingly pays these commissions that ultimately the customer pays for. In a recent Choice review on insurance, Bupa health insurance made the following statement on the subject;
Bupa says, “Comparators claim as much as 40% of the first year’s premium as their commission for informing people of their choice. This fee doesn’t go to buying health services for anyone; it is taken off the table, must be absorbed somewhere and leads to higher premiums for everyone in the long run.”
The model is ripe for change – isn’t it?
Firstly, there has been the arrival of ebilling in the past couple of years, very few bills/renewals now come through the letter box but by email or through a portal.
So what, I hear you say? Well an ebill has a lot of detailed personalised data on it that can be used to provide accurate comparisons without any need for a phone call. In fact, that comparison should be far more accurate because it doesn’t involve any human interaction and is highly detailed.
An example of this working in the market is with Origin’s Savernator product – which allows you to upload your latest electricity ebill (from any provider) and receive an apples for apples comparison from Origin. The data from your bill is matched against the right tariff and they apply their best pricing in an attempt win your business – if they can’t beat it then you are assured you are on a competitive deal. Finally, a first step towards genuine transparency from a business sector that is generally viewed as untrustworthy.
Origin went live with this tool supported with a big media campaign in November 2017, before which they were losing customers monthly (source – Origin’s half year results). Within one month this had been turned around to a winning position. Something about this campaign worked and resonated with the consumer.
A bid-4-my-biz concierge service
Most people are not motivated to shop around for such mundane products such as electricity, gas and contents insurance.
For this reason, the comparators will likely have a role (although the mechanics may change). From an emotive point of view, a consumer is momentarily happy with result of getting a saving when working with a comparator. But this requires a fair amount of invested time on the phone to a call centre – time is a precious commodity. A richer customer emotional experience would be to have the comfort that they are being looked after, without little or any call centre interaction. The best deals are simply found for them using a digital service which scans and assesses their bills as they arrive in the inbox.
This service would effectively be a trusted concierge service that will find and match them to the best deals based on their personalised data (bills, policy renewals etc). A simple messaging service could simply alert them that their energy contract could be improved by $100 a year with the same retailer – ‘Would you like us to get this contract improved for you?’. Duh – who would say no to that?? I haven’t got to lift a finger and save $100/year.
By having your bills/renewal notices in electronic format means that you, as the consumer, can offer your data in a safe/measured way for end companies (i.e. energy retailers or insurers) to bid for your business through the comparator platform. From your bill, they can see elements of your profile (i.e. where you live, how much energy you use, when you use it, if you have solar) that means they can then easily match your data to their risk profile and make a competitive tailored offer for your business.
Competing on value beyond price
Additionally, this also opens the way for an offer to be made not purely on price. Price will always be a starting point but each business has customer value propositions beyond price that can result in a long loyal relationship. A good example of this is Powershop, a growing challenger in the energy market place that promotes and uses renewable energy, consistent pricing for everybody and a novel way of pre-purchasing energy through an app. Their customers are aligned to these values and tend to be sticky as a result.
So going back to the ‘bid 4 my biz’ model. I believe this is a role that the comparators will have to assume but they will likely have to compete (or partner) with the banks, as they also play an important role in the supply chain of these essential services and are heavily focussing on cashflow management as a value add for their customers. So why wouldn’t they help their customers get the best deals as part of this service?
Lower cost of acquisition means better value for the consumer
In this revised model, the comparator will no longer have to pour the millions into blanket marketing that they currently do because the consumer is already subscribed to the service. Also, the end business (i.e. energy retailer) should be able to reduce its blanket marketing, meaning their cost of acquisition or retention is substantially reduced. Both savings should filter through to a better deal for the consumer.
Ultimately the comparator or bank will need to be transparent around commissions and will likely have to compete on this metric to help win and maintain the consumer’s trust. The ongoing concierge service will also have to be slickly managed to keep their customers loyal and provide the assurance that they are not being ripped off. All this sounds too good to be true but I see it as inevitable.