Price Comparison Sites: Never mind the quality, feel the price  

Price Comparison Sites: Never mind the quality, feel the price  
March 31, 2017 Ben Leonard

Price Comparison Sites: Never mind the quality, feel the price  

Price comparison sites have become a key part of our online browsing and shopping habits. But can we trust them? And what does the future hold?

We have all seen the adverts – from the meerkats to the irritatingly perfect couple having a weekend away to the even more irritating opera singer…

Ads for price comparison sites are now an integral part of an evening’s view – and the sites themselves are an integral part of our lives.

It seems that we cannot now insure our cars, buy anything electrical or contemplate going on holiday until we have consulted a price comparison site.

…And now the sites have received the official seal of approval, with the Competition and Markets Authority (CMA) saying that they bring “substantial benefits” to consumers. Before we look at the survey, however, let us first consider the history and basic business model of a price comparison site.

The history of price comparison sites

We might think of price comparison sites as a relatively recent development. In fact, the first one – BargainFinder – was developed by Andersen Consulting (now Accenture) and went live in 1995, simply as an experiment. It was swiftly followed by Jango, produced by Seattle start-up founded by two professors from the University of Washington, and by Junglee – which was ultimately acquired by a small company that sold books. Yes, Amazon…

By 2010 price comparison sites had found their way into emerging markets, especially in South East Asia, with the first one being CompareXpress in Singapore. Inevitably – in such a huge market – venture capital firms were swift to invest, spawning a raft of sites, the vast majority of which are no longer around. The ones that survive, however, such as Priceza with local websites in six South East Asian countries, have become hugely successful.

How do price comparison sites make their money?

Typically, price comparison sites do not charge people to use them: instead, they are paid by the retailers, insurance companies, hotels or whatever might be listed on the site. The retailer might pay a fee for every time someone clicks through to their site, or when they complete a specific action, such as leaving their e-mail address or buying something.

The key to success for a price comparison site is a lot of visitors – traffic numbers are jealously guarded, but rest assured that they are very, very high – and one of best ways to guarantee the numbers is relentless advertising. In many ways, the price comparison sites have become brands in exactly the same way as the insurance companies or hotel chains they are promoting. If you want an example, looking no further than Money Supermarket: it screened the most complained about ad of 2016, but reported an impressive 20% jump in revenues in the final quarter of the year.

Price Comparison Sites: Never mind the quality, feel the price  

The CMA Report

The CMA launched its survey of DCTs (Digital Comparison Tools or sites like Trivago and GoCompare to you and me) last September. The research – with an interim report having just been published – found that consumers reported a high level of “trust and satisfaction” with the sites. While there were some flaws – such as some sites failing to report that they didn’t cover the whole of a market – the CMA saw no need to launch a full-scale investigation of price comparison sites.

“Overall these tools work well,” reported the CMA, “Making it easier to make informed choices and save money.” The survey indicates that consumers are generally confident in the way they use the sites, and many “use more than one site.”

The principal aim of the study by the CMA – which looked at energy, insurance, banking, phone and broadband services and airline flights – was to better understand how people use both price comparison sites and switching services, such as USwitch, with the regulator believing that sites like these – and their associated apps – have the potential to offer consumers even greater benefits than they do at present.

So far the CMA have surveyed some 4,000 consumers, with 85% of them saying they have used a price comparison site at some point, and more than half reporting using more than one site in order “to shop around.”

Can we trust price comparison sites?

The major negative to come out of the survey was that only 11% of people believed that they had been shown all the possible deals that might be on offer. While the vast majority – around 90% – still felt that they were able to make a better and more informed choice – there was disquiet expressed that some sites might be masquerading as price comparison sites in order to promote a limited range of products from which they received hefty commissions. For now, though, price comparison sites are both liked and trusted by consumers.

What changes might we see in the future?

The CMA’s report has highlighted some areas of concern, which might be indicative of changes that we will see in the future. The main points highlighted were:

  • They felt there was a need for greater clarity about which deals are offered and what criteria are used for ranking those deals
  • The CMA also felt that consumers might need more clarity and reassurance about how their data is stored and used
  • There was also a need to ensure that all the information offered by the sites was both accurate and up to date
  • And whether it was reasonable or fair for a price comparison site and a supplier to agree that a product or service would not be sold more cheaply on the supplier’s own site.

Clearly, both consumer groups and the suppliers will want to make their feelings known on the CMA’s report: if they are to continue to be successful, price comparison sites have to maintain the trust of both suppliers and consumers.

Is there a danger price comparison sites are becoming too powerful?

A senior executive in the travel industry (who definitely did not want to be named) was quoted recently as saying, “We do not own our own truth anymore.” What he meant was that the truth about his company’s hotels was no longer what they put on their website or in brochures – it was what someone wrote on Trip Advisor.

Hotels and airlines – as an example – have a love/hate relationship with the price comparison sites. On the other hand they rely on the sites to sell unused capacity – after all, an empty seat on a plane is a loss-making seat – but on the other they fear that the price comparison sites are becoming too powerful as they dictate prices and leave ‘truth’ in the hands of a disgruntled guest, or a rival from another hotel chain or airline.

But price comparison sites – and their attendant apps – are here to stay. As technology improves, so the targeting and accuracy of the sites will improve. They are also likely to become increasingly active – marketing to us – as opposed to passive – waiting for us to contact them. So if you want a weekend away, sit back and relax: your phone will beep with a choice of options any minute now…

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