Whatever one may think of price comparison websites, they are very much here to stay. The impetus for business owners to shout loudest has thus never been stronger
Much like smartphones and social media, price comparison websites are now a ubiquitous part of our lives. Whilst they may have spawned some cringe-worthy television adverts, it is hard to deny the service that the sites provide has become almost invaluable to the contemporary consumer.
“The internet has empowered people with knowledge and, coupled with the daily stream of adverts for price comparison sites on TV, consumers know they can use this to get the best deals at the best prices,” comments Graeme Sandwell, managing director of affiliate marketing network, Paid On Results. “Combined with the lack of loyalty from customers as the demand for saving money increases, price comparison sites are a natural fit to allow those customers to find a bargain and save time as the choice of retailers nowadays means there are too many to manually check them all.”
Given that comparison sites are seemingly here to stay, there is almost no hiding place for the business owner. On the contrary, being listed alongside competitors – a number of which may be offering a lower price – only reinforces the incentive to offer a high-quality product and level of service. “It makes you give a reason for any difference in price,” says Sam Cropper, CEO of eco-friendly car service provider, Climatecars. “It makes you be more clear on what you are offering and, especially if you want to pull away from competing solely on price, that is obviously very important.”
Indeed, the evidence suggests that it is not always the firm offering the cheapest deal that succeeds. “Often it is companies that have a competitive price and a good name for quality service that win out,” explains Mark Todd, director of energy price comparison service, energyhelpline. “If a fairly unknown company or one with a tarnished reputation is top, they are very unlikely to take the most customers. So it isn’t just necessarily a race to the bottom.”
And whilst comparison sites may naturally force businesses to compete on price, Cropper warns of the dangers of treating them like the afore-mentioned race to the bottom. “In lots of markets, you have got to be very careful when getting involved in something like that because if you do, it chips away at your margins, which chips away at your standards, which chips away at your service levels and before you know it, you are losing your premium clients,” he says.
Of course, one could be forgiven for asserting that price comparison sites are something of a necessary evil. But, on the whole, they do appear to be a force for good, both for the consumer and supplier. The first benefit comes from the very size of the audience that they put businesses in front of. “It brings people who we wouldn’t normally reach or who wouldn’t normally use our service, and that is obviously an advantage,” comments Cropper.
Moreover, the additional custom that Climatecars receives through its partnership with aggregator-style services helps keep the business ticking over at all points of the day. “At peak times, we have no capacity and so we will turn down cash work, we will turn down one-off bookings and we will turn down the aggregators that are trying to put work into us through their comparison services,” he says.
“However, at the troughs, it is very convenient for us to be able to pick and choose work even if it may be at a lower margin or not exactly the type of work we are looking for in terms of geographical location.”
Regarding a price comparison site as an outsourced sales and marketing tool unveils another advantageous side to the service – one which is particularly pertinent for start-ups that won’t necessarily have the most sizeable marketing budget. “It means that you can effectively concentrate on running the business,” says Todd. “Obviously, you will probably still need a PR agency, you will need some kind of limited marketing team, but you can simply offer a competitive price and allow the price comparison service to do all the hard work of pricking the consumer interest.”
The nub of the comparisons site debate is nonetheless whether a partnership with such a service can serve as a primary revenue stream. Todd reveals that for some energy suppliers, 90% of their customer base will come through a comparison service, but adds that a particularly lean approach is necessary for it to be truly sustainable. “You are going to need to build a business with a low cost base,” Todd says. “If you can do that, you will be able to offer a competitive price and gain customers.”
It is indeed evident that small firms in the insurance and energy sectors are reaping the rewards of price comparison sites, with Direct Line a rare example of a more established company not choosing to partner with one. And whilst going in at the cheap end of the market may not suit the tastes of all business owners, the fact remains that partnerships with comparison sites generally work on a ‘pay per sale’ basis. This seemingly minimises any risk of utilising their service from the business owner’s perspective. Todd explains: “The only risk is that a company comes out with such a low price and gets such a huge customer demand that they can’t actually satisfy that.”
Start-ups can certainly pick up some ‘quick wins’ on comparison sites, especially if an attractive price point is accompanied by an equally appealing commodity and level of service. “There is no harm in coming on a price comparison site,” concludes Todd. “All you can do is gain some customers because people are going to go there anyway. If you don’t buy a ticket you don’t win the raffle.”
Either way, having access to an entire marketplace at the click of a button can only serve to benefit those on both sides of the fence.