ERCG continues its ABC leadership interview series with Filip Vissers, Vice President and Cas Bijlholt, Co-Founder at iChoosr. We sat down with Filip and Cas and discussed several topics, including --
ERCG: For those who are unfamiliar with iChoosr, please tell us a little about your company. Where did you get started, how long have you been in business, and how many countries are you in today?
Filip Vissers: We started in 2008, by running our local heating oil auctions with towns and cities, and we were asked to take things further by organizing group switching programs for electricity and gas. This was 2010, and the Belgium energy market was dominated by a single large incumbent provider that charged high energy rates to its residential customers. Market restructuring had been in place for several years, but people did not shop regularly and were vastly overpaying for their energy. This was a concern in all layers of government, from the federal level down to provinces (counties), cities, and towns.
As a result, the Province of Antwerp, a county with 800,000 households, partnered with us to register residents for a group energy switching program. The province encouraged local municipalities to offer this free service to its residents without the obligation to accept the deal offered by the program. Residents liked the program so much that they encouraged their municipalities to re-enroll the following year.
In 2009 the Dutch homeowners’ association, Vereniging Eigen Huis, recognized the potential of Group Energy Switching and wanted to test it in The Netherlands. This small-scale pilot, organized by iChoosr, saw 1,000 households switching to the winning energy supplier and gave the Dutch homeowners’ association insight into the interest of consumers in group switching including ratios on customer satisfaction and complaints. After a positive evaluation iChoosr has now jointly organized 22 Group Energy Switching programs with the Dutch homeowners’ association since 2009.
iChoosr introduced its group switching model to the British market in 2012, where it has again proved effective at bringing disengaged consumers into the market. Typically, over 70 percent of consumers who registered for our programs had not switched suppliers in the last three years, if ever. The British energy regulator has recognized group switching as an innovative approach beneficial for consumers and has taken steps to better accommodate it in the market. Those steps provided regulatory certainty for energy providers, enabling them to respond to iChoosr’s programs with market leading prices for participating consumers.
Across all three countries iChoosr’s programs have boosted competition by lowering the barriers to market entry for “challenger” energy retailers, offering them a customer acquisition model that is both more efficient and more customer friendly than direct marketing and face-to-face sales.
ERCG: In the Belgian, Dutch, and UK markets, how many customers have you switched and how much have you helped them save through your programs?
FV: Since 2008, iChoosr has saved more than a million Belgian and Dutch households a total of more than $250 million on their energy bills. In addition, these households have all switched to green energy, helping to build a more sustainable future. A significant number of these households were first-time participants.
Since our introduction to the British market in 2012, more than 135,000 British households have saved a total of $38 million on their energy bills by switching with their municipalities. This works out to an average savings of $280 per household.
ERCG: What is your process for engaging customers and why do you think it has worked so well for so many customers? How do "community leaders" help you achieve your goals?
FV: For many households, the monthly energy bill is one of the biggest expenses. Today 15 US states offer consumers a choice in power providers. However, most consumers do not shop regularly for better rates because they lack the time to research the options available and find energy matters complex. In addition, consumers don’t know whom to trust. To remedy consumer inertia, iChoosr has developed this opt-in approach that is free for participants without any obligation to accept the rates offered. Group energy switching helps consumers realize more energy savings with less effort on their part. iChoosr navigates the complex energy market on behalf of consumers.
iChoosr divides consumers into two groups – Econs and Humans:
Research by iChoosr has shown that the large majority of consumers are Humans; our mission is to help them to become engaged and to enable them to make a deliberate and well-informed decision. But how?
iChoosr works with “community leaders” – organizations that are known and trusted by consumers as being on their side. iChoosr currently partners with 200 municipalities, consumer organizations, and membership associations across the Netherlands, Belgium, Great Britain, and Texas.
The community leaders iChoosr partners with are perceived of as being trustworthy.
This allows iChoosr to engage the community of consumers in large-scale education campaigns explaining – among other things – how competitive retail choice works and how they can achieve significant
savings as a group. iChoosr does all the “heavy lifting” – undertaking direct engagement with the relevant stakeholders, so that the consumers do not have to do much, other than collectively save
money on their bills.
Broadly speaking, a Group Switching Program consists of 4 steps:
The company now has over 50 employees and is growing rapidly. We have local offices in all countries where we are active; Amsterdam (Netherlands), Antwerp (Belgium), London (United Kingdom) and Austin, Texas. Next to strong project management we focus on marketing communication, data analysis, platform development, customer support, auction management and energy provider management.
ERCG: What made you decide to enter the US market? What successes have you had so far?
FV: We are looking at many markets to expand our business, including Austria, France and Japan. When looking at the US market we were quickly drawn to Texas, which seems to have the most active and robust market in the country. There are a lot of similarities between the Texas retail electric market and those in Europe. For many families, their monthly power bill is a significant expense, especially in the summer, when air conditioning load is high. The average Texas household spends $1,450 a year on electricity; hence, by aggregating large numbers of customers and bargaining on their behalf, the average cost could drop to less than $1,200, or over $250 savings per family.
The Texas market, despite its many positive features, however, is a complex one for the unfamiliar to choose from. Moreover, most families do not shop regularly for better rates because they lack the time to research the options available to them.
In launching the Texas Power Switch program this spring, iChoosr is partnering with a few cities and towns in Texas. This is a small-scale pilot project in the Dallas area and is already showing interesting results at the time of this interview. There is great interest from residents to join the Program. So far we have signed up 10% of households in the targeted area. The program already shows interesting statistics. When asked during registration, more than 70% of registrants indicate they have not switched electric provider in the last 3 years. For these people the program may be a good opportunity to check their spend on electricity.
ERCG: "Group switching" is similar in some respects to opt-out municipal aggregations, where town or city leaders negotiate on behalf of their residents for a preferred energy rate. How is iChoosr's group switching program different? What are the challenges (and conversely the benefits) to suppliers under your program?
FV: The main difference to many, but not all, municipal aggregations is that our programs are opt-in. People opt-in to register for the program and then they have to actively opt-in to switch to the rate of the winning provider. We want the customer to make a well-informed and deliberate decision to switch to a new provider. This is where the “community leader” plays a key role. Together with the partner we go out to actively market the program to its members, residents or followers. The trusted brand of the community leaders helps to grab the customers’ attention and to give them confidence. We support this with large-scale education campaigns to consumers, explaining retail choice and how the program can empower them to take advantage of it and the savings it offers.
The profile of customers we attract in our European programs are affluent home owners of which many indicate they have not switched energy providers in the last 3 years. This makes an interesting profile for energy providers. People who do not engage with the market, but will engage once being exposed to a Program run by their local towns or city. European providers also report back to us that they find that our customers are more creditworthy and are more likely to stay with the provider after one year. Once customers have switched to the winning provider, they can also offer a renewal rate to these customers.
ERCG: What qualities do you look for in an ideal supplier partner?
FV: iChoosr qualifies providers based on their ability to win and deliver on a group switching program smoothly. Interested households sign up to participate in a group switching program during a registration phase which typically lasts several weeks. iChoosr then conducts an auction among qualified providers. These providers bid against each other during the auction with an offer for all participants. The provider which delivers the best bid wins the auction.
After the winning bid has been validated by iChoosr, the winning provider and iChoosr prepare to send out the offer to participants. The provider will be made aware of the communication content, planning and implementation of the project. iChoosr then e-mails a personalized offer to every participant. If a participant accepts the offer, iChoosr introduces the customer to the provider. The provider thus receives signed up customers, not leads.
iChoosr remains involved in the customer’s switch and oversees the quality of service and operations. We will support the providers and the customer throughout the switching process. The satisfaction of our participants is paramount. Therefore, we are typically looking to work with energy providers that run a very good operation and maintain a strong focus on its customers, ideally with a very low record of complaint and violation activity.
The provider should be able to take large volumes of customers in a short period of time, while being able to keep up with customer queries and customer queries coming via our customer service organization. A provider should also understand the position of the community leader, who does not want to see its carefully built up reputation being tarnished by a bad customer experience resulting from a failed switch.
In return a provider gets a more affluent customer who very likely would have been deemed to be difficult to reach for the Provider.
ERCG: iChoosr has also made trips to Japan to assess the opportunity there as the government expands energy choice to residential customers. What have you learned about the Japan market and customer interest in group switching programs?
Cas Bijlholt: In Japan the residential market for electricity has been deregulated as of April 1st last year and the residential market for gas has been deregulated as of April 1st of this year. During the first year around 5% of all consumers have switched their electricity provider, the majority to their current gas provider. It is clear that Japanese consumers have a limited understanding of how energy choice works in practice and a lot of education is needed. Based on discussions we think our group switching model could work in Japanese society and bring value to the different stakeholders.
For more information, contact Young Kim, Principal at ERCG
Phone: (617) 903-0877
ERCG sat down with Mark Nuzzo and Tom Kowenhoven of Energy PriceBook - click below for the interview.