No change – why UK consumers are unlikely to change bank accounts or energy suppliers.

Protest has been a regular fixture in the public discourse over the past few years.  After the financial crash, we saw movements like Occupy and UK Uncut taking to the streets in protest at what they see as the inequalities and injustices of the status quo.  The fury aimed at bankers was then partially deflected onto the various governments being held responsible for elements of the problem, with the tea party in the US and unions in the UK going after politicians and near civil war in Greece.  In the UK the latest wave of ire is being directed at Energy Companies.  The private companies which own the formerly national utility companies are putting up prices to consumers.   Even the Conservative politicians in charge of the country are crying foul and encouraging consumers to switch suppliers.

Our free market system gives us choice: if there is a consumer demand for a service, for example ethical banking or fairly-priced energy, you would expect to see that service in the market place.   In both instances, it would seem that there are options.  In the case of banking, there’s no need to entrust your money to the same banks that you complain about.  Remember building societies?  Well, they still exist: the likes of Nationwide offer an obvious antidote to those miffed with the banking system.  If you don’t want your bank to be run for profit for the benefit of its directors and shareholders, what could be simpler to switching to an organization which offers the exact same services, but where the shareholders are the customers?   Even amongst the banks, there is the option to choose to bank with the Cooperative, with its roots in the deeply egalitarian cooperative movement and a comprehensive ethical investment policy.

Similarly with energy companies.  There’s no need to go with the Big Six (as they are commonly referred to, making them sound as exciting as characters from a Kurosawa movie.  They’re not that exciting).  Ebico offer simple tariffs and operate as a not-for-profit.  Irrespective of how much you are likely to pay, the promise of not-for-profit surely offers an alternative to the suppliers who are enraging us so much.  At the same time, Ecotricty and Ovo are specifically positioning themselves as a cheaper and greener alternative to mainstream suppliers.

So, given the outrage expressed by the public about energy suppliers and about banking excesses, and given the alternatives to the loathed big players, why aren’t people switching in droves?  According to the Office of Fair Trading, the big four high street banks still have a 75% share of the market, while (according to wikipedia) the big six energy companies have a 90% share of the market.

First, it’s worth thinking about whether the public discourse around energy suppliers really reflects how people feel, or more specifically how strongly, people feel.   The media, including social media, give an impression that people are really up in arms.   Certainly, when you ask people how they feel about it, they are likely to respond in a way which mimics what they’ve heard in the media, and to some extent what they really feel.   However, with the media trying to create a story, and politicians trying to score points on the issue, the noise is probably quite a lot more significant than people’s real sense of grievance.

Second, inertia: the idea that people might want to change, but just don’t get round to doing so. This is frequently mentioned by politicians and the press, and certainly when you meet the average British consumer they are likely to describe their lives as busy and hectic.  In the spare time people do have, they are far more likely to just want to curl up and watch Strictly than to go through tedium of switching bank accounts.  Research by Santander, of the type conducted for PR rather than to gain real insight into consumer attitudes, claims that “20% of UK consumers would rather go to the dentist than switch bank accounts”.

It is a paradox of the privatization of utilities: people don’t really want to choose between these very dull and largely generic things.  There’s less inertia in markets where there is a real difference between what different brands are delivering.  While some players offer different propositions which appeal to specific types of consumer (Sharia banking, green energy and whatnot) generally, people are buying a service that they just want to work and not spend too much on.  Energy companies and banks are boring, tend to be fairly undifferentiated and when they are different, the differences tend to be slight, dull and fleeting.   In addition, we’re far less likely to show signs of inertia when it comes to purchase decisions that we have to actively choose who to buy from every time we buy (like where to get dinner tonight, or where to buy a new coat online).

Current accounts and utilities suppliers fail on both counts: banks and energy suppliers are boring and there’s no need to switch unless you really want to: you sign up once and then have to opt out if you want to switch.  Then, there’s little difference between what they offer in terms of basic service.  Both banking and utility services are inertia rich categories.

The third factor worth mentioning in this sea of complaining-but-not-switching is how the ethical brands market themselves.  In some categories it really doesn’t make sense to shout too much about ethical credentials, and can actually be counterproductive.  A nice example of this is Cafédirect, the pioneering fair trade coffee brand.  Cafédirect suffered for years from negative perceptions.  Coffee lovers often assumed that if a coffee was ethical, it wouldn’t taste nice.  It was only by focusing on taste, and using Fair Trade as a support to this message – “look after the famer, he’ll look after the coffee and it will actually taste better”) that Cafédirect turned its brand around and started to get significant market share.  A similar but simpler example is Tom’s Shoes, an ethical brand which leads on style and uses ethical credentials as a secondary message.  Tom’s realise that their customers will buy Tom’s shoes because they look nice, but will buy their shoes that look nice rather than somebody else’s because they are more ethical.  In both these instances, the brand stakes its claim in its own right (Cafédirect coffee tastes good, Tom’s shoes look good) and then uses ethical credentials as an extra support or differentiation.

Banks and Energy companies aren’t like this: customers aren’t looking for stylish banks, or better tasting energy; they want the basic service that works.  If they are interested in a bank’s investment policy, or ownership structure, or if they care how their electricity is produced, the chances are that ethical credentials alone would be enough to get them to switch.  Brands like Ecotricity have realized this, and capitalize on it: their message is single minded: that they provide an environmentally sustainable alternative to other suppliers.  Others don’t seem to do it quite as well: the Co-operative Bank always mentions ethics in their communication, but it’s often relegated to a very minor role, while Smile barely makes any mention of ethics (in fact Smile still sells itself as “the internet bank” which feels like quite an antiquated claim in 2013).  With the building societies: it seems strange that they haven’t made a big push to explain why they are different to banks and encourage people to switch.  It feels as though all Smile, the Co-op, and building societies need to do is tap into the discourse around the problems with banks; to explain to disgruntled consumers why they are different.  Talking about the online services the provide or piffilingly small returns on current accounts or ISAs seems irrelevant.

In fairness, there is also the problem of relative marketing budgets: smaller brands in both categories struggle to match the spend of the big players.  Rather in the way that the London Credit Union is sadly never going to be able to reach as many people as compellingly as Wonga, brands like Ebico and Ecotrcity are going to struggle to shout as much as British Gas or EDF.

Let us just hope that in the digital age, clear messages from ethical brands will be able to circumvent traditional advertising and get their message across clearly enough on Facebook to overcome people’s natural inertia when it comes to banks and utility suppliers.  As long as the discourse around energy companies continues, surely a clearly argued ethical proposition communicated in media and social media is enough to counteract all the Big Head advertising Bristol Gas can produce?  Perhaps that, combined with moves from the government to improve the switching experience will be enough to get people putting their money where their mouths are and switching with the fervour with which they’ve complained.