Marketers need to be wary of price comparison sites

LONDON - Traffic to price-comparison sites has risen as the economy has slowed, but marketers may need to approach them with caution

Direct Line
Direct Line

The rocketing popularity of price-comparison websites shows no sign of abating. No doubt driven by the growing desire to cut back on household spend, a hefty 43% of British consumers active online in November 2008 visited a shopping directory or guide website, according to Nielsen Online.


Indeed, the number of visitors to the UK's biggest price-comparison site, Moneysupermarket.com, which covers sectors including financial services, travel, utilities, broadband and motoring, rose to just shy of 3m last November, up 14% year on year. Meanwhile, a raft of newcomers, including Tesco, have joined the fray, helping to confirm price-comparison sites as established partners for marketers.
'As with all marketing channels, we are looking to maximise the opportunities they generate from both a customer retention and customer acquisition perspective,' says Martin Stead, brand director of EDF Energy. 'Customers are increasingly using a variety of digital platforms, including switching sites, for their personal financial decision-making, with the broad range of channels used by the energy industry leading to 100,000 people in Britain switching energy provider every week.'


In the current economic climate, it is not surprising that marketers and consumers should focus on online price comparison. Consumer site MoneySavingExpert.com, for example, says it has about 3m people on its emailing list and 7m unique users each month, compared with 1.8m on its list and 3m unique users a year ago.
More crucial is the approach users take to comparison sites, which depends on the product or service they wish to buy. 'For financial products and services, people tend to use comparison sites as a starting point for the quote process,' says Zoe Mason, senior media account manager at digital direct agency Cheeze. 'This sets the standard and can trigger brand-related searches and, depending on loyalty, a consumer may return to the aggregator to complete the transaction.'


According to Bruce Fair, UK managing director of shopping site Kelkoo, most visitors to his site have decided what they want to buy before they get there. 'We tend to attract people who have already made their purchasing decision in the high street over the weekend,' he says, adding that Kelkoo offers a typical saving against high-street prices of about 15%, the average transaction value is £250 and the busiest time of the week is 4pm-5pm on Mondays.
Moreover, he stresses that the cheapest retailers are not always the ones that get the biggest sales. 'Some smaller retailers don't have the brand recognition or assurance of the likes of Dixons or John Lewis, so if there is only a price differential of around £10, users often prefer to go with a retail name they know and trust,' he adds.
In addition, not all comparison sites are created equal. Consumer concerns about their funding and the accuracy and impartiality of their listings mean that online retailer Amazon remains more powerful than even the biggest online shopping aggregator.


In the utilities sector, however, where consumers are making a simple price-driven or grudge purchase, comparison sites such as uSwitch and Energy Helpline have become dominant forces and household brands in their own right.


MoneySavingExpert founder Martin Lewis notes, however, that energy providers are hitting back at these sites by limiting the number of tariffs they advertise with them. 'For example, last August, the three cheapest capped energy tariffs were not on any price-comparison sites; they were available only from the providers,' he says.
The new year has brought a similar battleground for insurers. 'January is a hot month for insurance, but current TV advertising is dominated by comparison sites - the likes of Sheilas' Wheels and Elephant.co.uk have almost disappeared,' adds Lewis. 'It will be interesting to see how individual brands react.'


Norwich Union, soon to be Aviva, has responded by withdrawing from price-comparison sites and launching its own mini web and phone service that gives customers details of rivals' products and prices, even if they are cheaper. However, many believe the balance of power is shifting toward comparison sites at the expense of individual brands.


'The way consumers shop for insurance has changed dramatically, from brokers to direct insurers and online buying, and, more recently, the price-comparison sites,' explains Norwich Union's director of marketing, David Tyers. 'Now we think it's time to do something different.'


Rival insurer Admiral has made much of the fact that its latest multi-car policy is not available from comparison sites, urging consumers to go to the firm direct, while Direct Line, which refuses to participate in comparison sites, has tried to combat the power of the price aggregators in its TV ads by focusing on the idea that it is cheaper to cut out the middleman.


'As the biggest direct insurer in the country, with a massive media budget, Direct Line can afford to be in everyone's faces all the time using other channels,' says Andreas Pouros, chief operating officer of search-engine marketing agency Greenlight. Indeed, Direct Line is part of RBS, which not only has other insurance brands such as Churchill that do list on price-comparison sites, but is also the financial engine behind Tesco Compare.


Smaller names cannot refuse to play the game, however. 'Our brand awareness is not as high as some, so we're looking to the big price-comparison sites to get volume through,' says Sean Barton, e-business manager of Co-operative Financial Services, which works with GoCompare, Confused.com, Tesco Compare and, as of February, Moneysupermarket.com.


Using an advertising mix of pay-per-click, per application and per policy, Barton aims to get a good position on the aggreg-ators that come in the top five on a Google search married with SEO that ensures a good Google ranking for CFS' site. 'You always have to be aware of the comparison sites' Achilles heel - users can come out of them and go direct to the provider,' he says.


It would be erroneous, however, to believe that UK consumers are becoming obsessed with price. 'There are some people whose first point of comparison is always going to be price, especially in highly comm-oditised categories such as insurance, mortgages, savings and online gambling,' says Mark Rogers, chief executive of online monitoring and response specialist Market Sentinel. 'But it is not the entire market and, more importantly, it's not necessarily the most valuable part of the market.'


His firm calculates that only about 10% of the UK population is truly price-driven, but a further 30% is liable to switch when service falls short. 'Long-term, customer service and building brand value will always win,' says Rogers. 'The problem with buying market share by persuading people to swap on price is that there's nothing to stop them swapping again the next week.'


This view is endorsed by Mike Colling, managing director of media company Mike Colling & Co, who cites statistics from the Journal of Direct, Data and Digital Marketing Practice (2008) showing that the churn rate for consumers recruited through price-comparison sites is 39% compared with 18.4% for those recruited by direct mail. 'These sites don't contribute any net gain to marketers, they merely encourage consumers who are already in the market to become more price-driven and less brand-conscious and loyal,' he says. 'They may be a necessary evil, but no sane marketer would actively support them.'


The challenge for marketers is that they don't always have the choice. Comparison sites may contribute little to the good of the industry, but brands either need to join them or find ways to beat them.

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