2.2 We commissioned a qualitative study75 which conducted interviews in pairs and triads with 106 consumers, 38 of whom were vulnerable. To build on these findings, we also commissioned a quantitative piece of consumer research. This involved 2,000 online interviews with the general public, plus 202 face-to-face interviews with vulnerable consumers. The types of vulnerable groups involved were those on low incomes (including some where there was no one in the household in employment), those with low levels of literacy and/or numeracy, those with no or limited internet access and those with a disability.
2.3 All respondents to the qualitative research thought that the number of tariffs available should be reduced. They also thought it should be easier for consumers to compare tariffs and identify the most suitable tariff for their circumstances. Most
respondents felt that all four of the proposals went some way towards achieving this. The main difference between the mainstream and vulnerable consumer samples was that vulnerable consumers often struggled more to understand what they were shown. Consumers on time of use tariffs (e.g. Economy 7) faced more complicated information and choices when looking at tariff information.
2.4 Presenting tariffs as a standing charge and unit rate was preferred to a two-tier unit rate, which consumers found complicated. An Ofgem-set standing charge across all standard tariffs was welcomed as it gave reassurance that some aspect of charging is being controlled. Some respondents appreciated that they could directly compare the cost of tariffs just by looking at the unit rate before they had seen the tariff information tables.
2.5 Presenting tariff prices in a monetary form was found to be more tangible and have the greatest potential to encourage switching. However, many consumers do not know what their energy consumption is, which limits the use of this method. Prices expressed as £/month were easy to understand for budgeting purposes. Prices expressed in £/year provided more of an incentive to switch as the savings appeared bigger.
2.6 A six month price guarantee period may work to increase consumer confidence that it is worth switching. Conversely a shorter time period could be counter-productive
75 Tariff comparability models, Consumer qualitative research findings, Creative Research, October 2011.
to encourage switching if it were perceived to signal a supplier‟s intent to increase prices as soon as the guarantee period is up.
2.7 While all four of the options tested were felt to offer some improvement over the status quo, there were also some difficulties associated with each one, which would need to be resolved to prevent reinforcing levels of disengagement. It was clear from our research that there was a low awareness and limited understanding of terminology used by suppliers, and whilst awareness was lowest for vulnerable consumers, other
consumers also demonstrated limited understanding. Therefore improving customer communications would be required to accompany any changes to the tariff
arrangements.
2.8 The quantitative work76 followed the qualitative study and was designed to test the ability of consumers to select the cheapest tariff when presented with different tariff structures and information. Participants were asked to choose the cheapest tariff from a range of options, given an energy consumption value and a simplified table of energy tariffs. Some of the options included a price comparison guide in £/month. In this way, we tested the different features of the five RMR tariff proposals. The quantitative testing was conducted via both an online sample and through face-to-face hall tests that helped to boost the sample of vulnerable consumers and include those who do not have internet access.
2.9 The quantitative research findings indicate that for non Economy 7 customers, a fixed standing charge and price comparison metric significantly improve consumer decision making and were chosen as the most preferred tariff elements of those tested. The research showed that 74 per cent of non-Economy 7 customers said they would be more likely to switch if these elements were introduced. However we note that the models tested were simplified.
2.10 The research showed that 81 per cent of non-Economy 7 respondents selected the cheapest standard tariff when the standing charge was fixed (but without a price comparison metric). The time taken to make a choice was 28 seconds, the fastest of all the options tested. The inclusion of a price comparison metric resulted in a further improvement in the proportion of customers correctly choosing the best deal. Our research indicated that 85 per cent of respondents achieved this but the average time taken to choose increased to 41 seconds.
2.11 For Economy 7 respondents, in the tests with a common standing charge, 47 per cent selected the cheapest tariff in the test. This rose to 70 per cent when a price
comparison metric was provided and the time taken to make a choice fell from 58
seconds to 48 seconds. Economy 7 consumers have day and night time rates and so face more complex choices. The price comparison metric can help this.
2.12 Overall, vulnerable consumers reflected mainstream consumers and were only slightly less able to make the correct decision. However, when the data from the hall tests is broken down it identifies degrees of vulnerability. Although the numbers are small it tells us that certain groups within the segment really struggled with the choices presented. Within the hall tests, only around a third of consumers were able to complete the online questionnaire without assistance. Two-thirds required some assistance from the interviewers to use the computer.