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Harnessing behavioural insights to encourage consumer engagement in the British energy market: Results from a field trial

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  • Tyers, Roger
  • Sweeney, Martin
  • Moon, Beth

Abstract

Many British energy customers pay more than they need to for their household energy, and a lack of engagement is now a recognised policy challenge. Around 60% of British energy customers are on a Standard Variable Tariff (SVT), a ‘default’ tariff which costs on average about £300 more per year than the cheapest market alternative. This paper presents results of a large-scale randomised controlled trial (RCT) which aimed to increase consumer engagement in the energy market. We tested the effect of sending a “Cheaper Market Offers Letter” (CMOL) to nearly 140,000 disengaged energy customers drawn from two energy suppliers. The CMOL was highly personalised, highlighting the amount a customer could save by switching and featuring details of the three cheapest tariffs on the market available to them. We measured the effect of the letters on switching (our primary outcome) and quality of switch (our secondary outcome, measured by estimated savings). After one month, we find that CMOLs significantly increase switching – from 1.0% to 3.4% in the most effective arm – and increase savings amongst those who switch by an estimated £50 per year. We conclude by discussing the results and implications for future research.

Suggested Citation

  • Tyers, Roger & Sweeney, Martin & Moon, Beth, 2019. "Harnessing behavioural insights to encourage consumer engagement in the British energy market: Results from a field trial," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 80(C), pages 162-176.
    • Handle: RePEc:eee:soceco:v:80:y:2019:i:c:p:162-176
    DOI: 10.1016/j.socec.2019.03.001
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    Cited by:

    1. Gordon, Joel A. & Balta-Ozkan, Nazmiye & Nabavi, Seyed Ali, 2023. "Price promises, trust deficits and energy justice: Public perceptions of hydrogen homes," Renewable and Sustainable Energy Reviews, Elsevier, vol. 188(C).
    2. Uddin, Main & Wang, Liang Choon & Smyth, Russell, 2021. "Do government-initiated energy comparison sites encourage consumer search and lower prices? Evidence from an online randomized controlled experiment in Australia," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 167-182.
    3. Esplin, Ryan & Davis, Ben & Rai, Alan & Nelson, Tim, 2020. "The impacts of price regulation on price dispersion in Australia's retail electricity markets," Energy Policy, Elsevier, vol. 147(C).
    4. Deetlefs, A.M. Jeanette & Chalmers, Jenny & Tindall, Karen & Wiryakusuma-McLeod, Cindy & Bennett, Sue & Hay, Iain & Humphries, Jacqueline & Eady, Michelle J. & Cronin, Lynette & Rudd, Karl, 2021. "Applying behavioral insights to increase rural and remote internships: Results from two Randomized Controlled Trials," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 92(C).
    5. Muyi Yang & Yuanying Chi & Kristy Mamaril & Adam Berry & Xunpeng Shi & Liming Zhu, 2020. "Communication-Based Approach for Promoting Energy Consumer Switching: Some Evidence from Ofgem’s Database Trials in the United Kingdom," Energies, MDPI, vol. 13(19), pages 1-16, October.

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