Just when you thought you’d got the hang of selling services online, along comes another challenge: social switching. Julia Kukiewicz, Editor of Choose, takes a look at how online people power looks set to shake up the utility markets…
Claims that social media will empower consumers, make companies more transparent and generally revolutionise, you know, everything are nothing new but few companies, until now, have dedicated themselves to collective switching.
How it works
If you’re not already familiar with the concept, social or collective switching works like this:
- Consumers sign up to a collective switching site for a particular utility such as energy, broadband or even financial services.
- Once a sufficiently large number of consumers with a similar aim are signed up the switching site contacts service providers to arrange a reverse auction.
- A winning bid is chosen based both on value for money and on other factors such as customer service record.
- All the consumers switch at once.
The idea is that consumers can save money with a minimum of fuss in a streamlined process that encourages those who would otherwise be unlikely to move at all to get a better deal. That’s why Ed Davey, the Energy minister, is a big fan.
However, the fact that 290,000 Which? members recently moved to the same energy provider using exactly the same process shows clearly, if there were any doubt, that such services are also likely to be popular among those that currently use comparison sites.
The mess
However, as collective switching moves from its idealistic origins and into reality, things, inevitably, start to get a bit messier.
Here are three things that might prove among the most problematic for those tasked with selling the concept of collective switching.
1. It’s not always the cheapest
As Which? and everyone else learnt last week, the result consumers get from collective switching is unlikely to actually be the cheapest deal on the market.
This doesn’t matter, advocates of the process say, because the attraction of the collective switch isn’t getting, by a few pounds or pence, the ‘best’ deal available on the market but rather that those who don’t have time for comparing still get to switch and that they can do so with support from a whole community who are going through the same process.
Selling from a starting point of ‘not the cheapest but…’ isn’t ideal, though.
2. Users will need to really trust the sites
You’ll notice above that consumers only have to take action at points one, the sign up, and four, the confirmation of the switch.
That’s part of the attraction of a collective switch but it does mean that those signing up will really have to trust the site they’re using to have their best interests at heart.
That’ll be a problem because, just like comparison sites now, collective switching sites could make money by taking a cash reward from the provider that wins the reverse auction process.
Switching sites could choose not to go down that road and instead charge a fee for site membership. That’ll bring its own challenges.
3. Competing ‘group like’ services will confuse the issue
Finally, at least for this very short list, there’s the difficulty of explaining the concept in a market already stuffed with switching and deals-type sites.
Groupon, just to take an obvious example, looks and certainly sometimes sounds like a social switching site where community users work together to unlock deals but what it’s actually offering is the opposite of collective switching, where the group itself drives the price of the good down or forces the provider to offer a more attractive deal.
If collective switching were to become more widespread there would also be the problem of effectively communicating a particular site’s unique ‘scheme rules’.
Overall, social switching is, or could be, a really interesting way for people to move between providers in markets in which switching is often perceived as difficult or not worthwhile, but it brings a new set of priorities: clear and transparent communication trumps clickthroughs; trust and brand building trump SEO results.
Julia Kukiewicz is Editor of Choose, a consumer focused price comparison site covering personal finance and home media markets.
Choose offers market research and debate on industry updates, as well as covering a range of guides on topics from switching and saving money to consumer rights issues. See the Choose money guide for more.
You can follow Julia on twitter/choosenet and facebook/choose.net.