Price comparison websites (PCWs) have been a vital addition to the consumer’s arsenal when searching for the best deal on a product or service, but as they have grown they have somewhat commoditised the products & services they compare based on price and in doing so have encouraged providers to fight it out in a race to out-price their competition.
The price comparison site model works like this:
- Win on brand recognition (High Profile, provocative TV ads with memorable jingles)
- Win in search (Optimise content for SEO value, Buy PPC real estate in volumes)
- Build simple digital experiences
- Be genuinely helpful
- Pass through quotes, applications and sales
- Get a kickback for every customer you refer
It’s very, very successful.
So what’s the problem?
The problem for businesses is that it’s ok when PCWs drive 20% of customer acquisition, but the reality in 2020 (especially in banking, but also in other sectors like energy & travel) is that these aggregators are now responsible for 75%-90% of their new business.
Now to give PCWs their due, especially across lending (e.g. loans, credit cards), they have started to innovate to ensure that their partners aren’t (just) fighting it out on price by ordering comparison tables by ‘likelihood to be accepted’ but even this comes at a cost to the resultant service provider, as it means sharing your risk criteria and model information with a third party.
All of which puts the PCWs in an incredibly strong bargaining position when they negotiate your contract from £X CPA (cost per acquisition) to £Y CPA. As when you’re beholden to them for 75% of your new business, you will just have to accept the increased costs.
So, what can you do about it?
Building brand, product, and experiences
If you are an insurance provider that gets 90% of quotes from PCWs then this is a long term play. For others, this might have some tangible in-year results.
There needs to be an acceptance that you may not be the cheapest… but you may have (or could build):
- The best product features
- The best mobile app
- The most convenient contact methods
- The best reputation
- The best corporate social responsibility
The focus needs to shift from supporting a commoditised sales channel (PCWs) to a focus on customer experience, digital solutions, brand building and reputation management, all of which you need to hang on the notion of simplicity, accessibility and customer value.
Again, if we look at insurance specifically, the reasons that PCWs became so big in the first place was:
- The consumer couldn’t trust their current provider not to bump up prices
- The providers needed a new stream of acquisition to backfill the gaps left by consumers who left when prices increased
This vicious circle can be seen perpetuating in a number of verticals, not just financial services and is exacerbated when brand and product is devalued against commercial and sales.
Now, building a brand means building trust, giving back, empowering people with tools, thinking long term. So this isn’t for everyone, but the reason that some providers don’t need to battle it out on PCW’s is because they:
- Have happy, brand loyal customers
- They have frictionless ways to cross-sell and up-sell
- They empower existing customers with tools to make their life easier
- They have refer a friend schemes to help customers make money or get rewards
- They have enough data to offer personalised pricing and retain customers
- They have a big enough brand and strong enough reputation to opt-out
Sounds good doesn’t? But that doesn’t happen overnight. It happens over multiple funding cycles, it happens across departments and it is at constant risk of being disrupted by poor customer experiences, bad reviews or competitor aggression.
But PCWs offer me cheap incremental acquisition, why change?
It is important to understand lifetime customer value and cumulative cost per acquisition to really answer this.
If you pay £30 for every customer from a PCW and that same customer is acquired three times over five years, because your systems do nothing to stop either the customer completing that behaviour or the PCW claiming the attributed sale, then you are paying £90 for someone who may only make you £150 in revenue, which isn’t such a hot ROI.
Whereas £30 to acquire them, plus the cost of a push notification and a personalised reward offer to retain them over the full five years sounds a lot better.
If you have a complex relationship with PCWs and want to explore how to make the customer experience better, either on their platforms (by passing data securely) or on your own platforms by building customer-centric digital solutions, get in touch with Waracle to find out more.