Customers 'Duped' By Energy Switching Deals

chanz4

isnt the cheap energy saving club built by moneysupermarket anyway? Which would make me think twice

chanz4

I wonder if the big switch incetive was becasue they knew this article was coming.....

kevbev321

I've actually just had a response from Martin about this, see below.

http://blog.moneysavingexpert.com/2015/02/06/an-open-letter-to-the-energy-select-committee-about-comparison-sites/

System

OFGEM has also banned energy companies from offering cashbacks. To its credit, MSE CEC does share the cashback that it receives; however, I would still like the option of talking directly to an energy company knowing that a direct contract would lead to a higher discount on the offered tariff. As that is never going to happen, I share EDF's view which is that there should be a single comparison site - run by OFGEM - funded by an energy company levy.

matelodave

MillicentBystander wrote: »

Talking of the CEC, I still don't understand why they require your FULL address? I remember bringing this up on here when the CEC launched and Martin stated they would look into it and remove the need if it wasn't wanted but he never got back. Just seems strange when the vast majority of the switching sites I use (including Martin's previous favourite, energyhelpline require just a post code). I know Martin has stated that MSE have no intention at present to use this (very valuable) info for marketing purposes but it just seems uneccesarily invasive....

If a site wants my full address, e-mail or even telephone number I usually reject the site or put in something fictitious. There's no way I'm offering up my info unless I know what it's being used for and as far as I'm concerned an energy supplier doesn't need to know my actual address - only a post code, e-mail or phone number for me to get tariff info.

System

kevbev321 wrote: »

I've actually just had a response from Martin about this, see below.

http://blog.moneysavingexpert.com/2015/02/06/an-open-letter-to-the-energy-select-committee-about-comparison-sites/

Martin makes out that he and other comparison site owners are doing the public a great service. The economic facts are that a business buys £xs worth of energy and sells it at £1.05x which generates a 5% profit. Let us assume that the majority of energy users switch to the lowest tariffs available. The effect of this would be an increase in the cost of fixed tariffs by energy companies to ensure that their 5% profit margin is retained.

If people cannot be bothered to shop around for the best deals - whether it be energy or anything else - then so be it. Comparison sites exist only because there are huge profits to be made by encouraging people to switch.

footyguy

canterswest wrote: »

...
On commission, where there are two or more referral businesses the total commission needs to be published. If CEC for example makes £25 per dual fuel switch and uses Moneysupermarket to handle that switch which itself makes £60 per dual fuel switch, the customer needs to know the total commission.

Why does the customer need to know? :huh:

The price the customer pays is the same whether they apply direct to a supplier, or goes via an intermediary.

Does a customer know how much mark-up Tesco makes on a tin of beans? Or how much commission the Avon Lady is making?

Actually those energy companies that do pay commissions effectively use comparison sites as a advertising service. Do customers need to know how much DFS pay TV broadcasters for their adverts before buying a new sofa?

Do you know how much a comparison site earned when you consulted it for a new insurance deal?

So I am confused why people get so het up about energy comparison sites.

Anyway, in answer to your point, energy companies pay about £28-£30 per fuel switched (exact amount varies based on individual agreements between those involved)

I would suggest that the energy supplier only pay the site they have the agreement with, so that means in the case of CEC switches, the energy supplier pays MoneySuperMarket.com, as CEC uses MoneySuperMarket.com, and of course they are both ultimately the same company anyway.

Similarly other (smaller) energy comparison sites actually use one of the big accredited ones. The energy supplier doesn't pay both sites; the energy supplier pays the comparison site they have a contract with, and the comparison site pays affiliation fees/referral commissions to the add on sites.

Compare to amazon marketplace. The end customer pays Amazon who takes a cut before paying the supplier, the cut being the fees to provide the services to the seller to advertise/sell their goods. Amazon than may also pay affiliation fees to a third party site if the customer is actually brought to Amazon via an agreed affiliation service - the customer pays no more whether they go to amazon directly or via a affiliated site. The supplier does not pay different fees to amazon dependent of how the customer arrived and purchased through amazon.

Does the buying customer care about any of this? No

It really does intrigue me energy customers are bothered.

Comparison sites provide a service. It costs money and comparison sites are not charities. But just like MSE makes money selling products, the customer does not pay any more for the product or service procured whether they buy direct or via a third party referral site.

Indeed, its probably cheaper and more effective overall for energy companies to advertise via a comparison site, then say undertake a conventional marketing campaign. This is supported by the comparison sites saying their services offer the small suppliers a cheap easy, and affordable route to market. And of course, the energy comparison sites offer a very targeted approach to those interested in switching their energy provider, unlike say a scattergun approach of an expensive TV or other media advertising campaign.

Theres enough different comparison sites out there to create heavy competition bewteen them, and if the energy company didn't think it was a good form of advertising for them, they wouldn't pay the comparison companies anything - they are not forced to deal financially with any comparison site.
Ebico, as one example, do not pay any comparison site any fees at all.

System

So who is actually telling the truth, the whole truth and.....

http://www.parliament.uk/documents/commons-committees/energy-and-climate-change/06f%20-%20Letter%20from%20EDF.pdf

kevbev321

footyguy wrote: »

Why does the customer need to know? :huh:

The price the customer pays is the same whether they apply direct to a supplier, or goes via an intermediary.
Does a customer know how much mark-up Tesco makes on a tin of beans? Or how much commission the Avon Lady is making?
.......
Do you know how much a comparison site earned when you consulted it for a new insurance deal?
So I am confused why people get so het up about energy comparison sites.

You're missing the point - The issue isn't with the fact that comparison sites get commision - that is fair enough. The issue is with the fact that they have been manipulating the results they display so that the customer may choose a tarriff which isn't the cheapest for them; but earns the website the money.

footyguy

kevbev321 wrote: »

You're missing the point - The issue isn't with the fact that comparison sites get commision - that is fair enough. The issue is with the fact that they have been manipulating the results they display so that the customer may choose a tarriff which isn't the cheapest for them; but earns the website the money.

My point was about the specific issue raised by canterswest which I quoted

I have previously addressed the issue raised by the OP as early as post 7 of this thread

I think it's fair to say only some comparison sites are involved in "manipulating the results they display so that the customer may choose a tarriff which isn't the cheapest for them" and if the customer were to pay attention and remove such filters applied by default (perhaps by consulting more than one comparison site to ensure common, correct results) then such an event is unlikely.

To those who want a simple approach to life, they presumably also want the same simple approach to switching, and so are given (by some sites) by default only those tariffs the site can switch the customer to.

The argument works both ways.
You can't please all the people all the time.
But if you are prepared to put in the effort, all the details are there on all the comparison websites, whichever one (or preferably more) you wish to consult.




Btw, are you aware with insurance comparison sites, that the price offered by one such site may be different to that offered by another such site for exactly the same cover provided by the same insurer? Talk about manipulation.
That's why the MSE article (in part) advises you to consult numerous insurance comparison sites
(the other bigger reason is that unlike energy comparison sites, an insurance comparison site only ever lists those insurers they have commericial arrangements with)