If you have had any dealings within the energy sector you will be well aware of the Energy market investigation which has been taking place for the last two years.
The investigation was established because of the results of an earlier study which suggested competition in the energy sector wasn’t working as well as it should for customers. The Competition Markets Authority (CMA) started their investigation in June 2014 and their final report was published in June this year.
The document, which you can read here, contains over 30 suggested remedies, with the objective to free up competition and innovation in the market in order to drive down bills and improve service for customers.
Throughout the two year review period there have been a number of changes, uncertainties and restrictions on the affiliate sector. The final report is a welcomed end to the period and mostly the outcomes are positive for the affiliate sector. Affiliates promote competition, educate and support consumers in switching, which is ultimately the objective of all parties, including the regulators.
Some of the key outcomes of the report for the sector are:
1: Discount and Cash back restrictions
The restriction on discounts / points / cashback has been removed. For over a year there was a restriction placed on suppliers which led to a complete ban on cashback. Early reports a few months ago indicated that the CMA were recommending Ofgem to remove this restriction and the report confirmed this.
Many stakeholders in the affiliate industry including cashback websites, suppliers, networks and the IAB lobbied hard to get this restriction removed. Flexibility to discount and use incentives is a positive consumer experience and can only help in getting more consumers to switch and ultimately save money. Many of us felt this restriction went against everything that the report was meant to achieve so very good news that the ban has finally been lifted. Most energy suppliers are now offering discounts, rewards and cashback again.
2: Price comparison restrictions
There has been another restriction on affiliate sites which has made a significant impact over the last year. In January 2015 Ofgem directed price comparison websites to list the “whole of the market” regardless of whether commercial relationships were in place. Whilst I can see there is some sensible reasoning behind this, particularly with regard to energy suppliers outside of the “big six” struggling to get any real reach on price comparison sites it is also a major problem commercially. Price comparison websites have to be funded, otherwise they cease to exist, and that funding comes from advertising and converting consumers to switch. If that is deemed to not be a requirement by suppliers then these sites cannot exist.
The current situation is that this restriction has not been lifted by Ofgem and they have communicated that they will not act immediately on the CMA’s recommendation to remove this restriction. However, they are proposing to implement an intermediate step which is removing some of the restrictions allowing price comparison sites more flexibility on how they display tariffs. We will watch this space to see if the “whole of market” restriction remains or is removed, but I suspect the outcome will be something in-between the two.
3: Use of data
A key finding in the report and perhaps the area that offers most opportunity to the affiliate sector is that it found 2/3 of households are disengaged when it comes to Energy and are paying more than consumers who have switched. It is a key objective of Ofgem to engage and empower those consumers to switch.
I see intelligent use of data as the key element to unlocks this opportunity. Using data to empower consumers with information on their energy consumption and costs will enable them to make better informed decisions on whether they should look to switch, or perhaps find a different tariff with an existing supplier. Even small details such as using online billing can help consumers save money and affiliates can play a key part in that education and search.
The government-led roll out of Smart Meters will support this approach and help consumers to better understand the benefits of switching and ultimately help them switch. Those companies that can match this data with successful marketing will start to unlock those disengaged energy consumers.
Originally featured on PerformanceIN
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