I want to break free – Ofgem’s Collective Switch results
On 27 September, Ofgem published the final results of its five collective switch trials, which were administered by energyhelpline and held between February 2018 to April 2019.
The trials were designed to test switching among disengaged customers and assess the impact of the default tariff cap on switching. Customers received three letters sent either from their supplier or Ofgem. Letters offered a collective switch or an Open Market offer which did not indicate a specific tariff. Open market letters saw fewer switches, suggesting that naming a tariff can remove confusion surrounding switching.
More customers switched in Trial 3 after the default tariff cap was implemented (Figure 1), despite potential savings being lower. The Re-engagement trial offered a collective switch to customers who did not switch in Trial 1. Despite the low switching rate (14%), which was expected, the results highlight the value of secondary communications, particularly as just ‘a handful’ had remembered Trial 1.
19% of those that took part in the collective switch switched to a small and medium supplier (SaMS). The lower value was attributed to disengaged customers feeling ‘uncertain’ of less familiar brands. However, 30% of the customers switched to SaMS after the trials, according to energyhelpline, suggesting that the trials sparked long-term engagement.
The success of these trials could inform future regulatory intervention under Ofgem’s ongoing retail market reforms. In fact, energyhelpline suggested that Ofgem assess the market impact of scaling the trial up to the full database of 8mn disengaged customers.
However, Ofgem has announced it will not progress in developing this database.
Scaled-up trials could pose risk to large suppliers and their long-term customer bases, although the preference seen towards recognisable branding offers an opportunity for large suppliers to retain loyal customers, and the potential for increased acquisition if they win a collective switch auction.
Our Domestic Energy Sales Channels report explores sales channels including collective switches. For more information contact firstname.lastname@example.org
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