In today’s energy market, retailers are in competition with each other to gain and retain your business. They therefore advertise offers and loyalty programs to keep you paying the bills, and not comparing with services offered elsewhere, but does this loyalty really pay in the long term?

Many retailers offer loyalty discounts, from Frequent Flyer programs to your local coffee shop. Energy retailers are no different, and some companies are doing all they can to retain customers by offering a variety of incentives to people who sign up for longer term contracts. The big question is: are they worth it?

Cut-rate deals can sting in the long term

Prices are influenced by multiple factors beyond the control of the retailer themselves, and some retailers offer cut-rate prices by buying “bulk lots” of electricity from generators that along with lower overheads can allow them to undercut the market.

As tempting as these cut-rate deals are, they may be short lived. Contracts may be designed to lure you in with low prices, then sting later down the line with a higher than market rate once you’re signed up and under a contractual agreement. Ethics aside, this is perfectly legal under some contracts, and responsibility lies with you to be aware of exactly what deal is being signed up to.

Incentives to be loyal

Companies that don’t offer cut-rate tariffs may seek to retain customers by offering different incentives (e.g. cash rebates). This could be because fixing pricing is too risky for the retailer, as a sudden price rise from the distributor (who the retailers buy power from) would make them less profitable.

Utility bundling can save the savvy some coin

Bundling utilities is one common way retailers can offer you a discount, the most common being natural gas and electricity connections. Whilst you receive a discount, and the ease of paying one bill rather than multiple from different retailers, be aware that the retailer is making certain assumptions about you as a customer. For example, you may be less likely to pay much attention to marketing from other retailers, as you would probably only look out for the one correspondence with your current retailer’s logo. The retailer may start to see you as a loyal customer, beginning to creep up prices assuming you won’t find (or look for) a better deal.

That’s not to say that utilities bundling cannot be a good deal, as savings can be made by taking up these offers. However, it’s always worth calculating the connection and usage rates before signing up as it may still be cheaper to buy each utility separately.

Bill discounts may be offered

Another common discount includes monetary reductions for paying on time or early. These discounts are often offered as a percentage off the total bill, and can be beneficial to those with high power usages. Similarly, retailers may offer discounts for paying by direct debit, which can be very convenient so long as you are aware when the bill is due and ensure adequate funds in the nominated account are available.

Some offers require you to pay an agreed amount per month regardless of your usage, with the difference debited of credited when a meter reading is taken. This can work well in terms of household budgeting, but it’s a good idea to really keep track of your usage and bills as frequent debits and credits on your bill can become confusing.

Other tempting discounts and one-off gifts

Retailers are increasingly offering vouchers or discount cards which apply to a variety of non-energy related areas of spending. Meals at selected restaurants, cut price movie tickets, magazine subscriptions, hotel stays and travel, theme park entry, grocery and fuel discounts are among the most common. There are even exclusive online shopping stores with heavily discounted items for sale to energy customers.

These deals are usually dependent on signing up to a contract of 2 years or more, so the amount of value in these deals depends on how much you would normally spend on these benefits. The savings may be well worth your loyalty, or they may go unused, while the cost of the electricity itself is subject to change regardless of your participation.

On-the-spot signing can be tricky

One-off offers are often used to attract the attention of new customers. You may see these in shopping centre kiosks, on the internet, television, or billboards to name a few. These discount types are often used like a recruitment campaign, trying to get you to sign up “on the spot” because of the special offer. The initial appeal of “free money” is certainly difficult to pass up, and it’s unlikely that you will have time to read all the small print before signing. However, the usual cooling off period of 10 business days will still apply to these deals, so that should give you a certain amount of protection.

Whether these kinds of deals are worth looking into is ultimately an individual decision. If the products or discounts are something that usually comes into your budget they could be well worth investigating. Most people could use grocery or fuel discounts, for example, but if they are at restricted outlets which are not convenient then the benefit is going to be limited.

Consider all the costs for a great value energy deal

Deals where a discount is offered for multiple utilities with the same company, or where discounts for paying by direct debit, are quite common. However, even when a deal seems straight forward, it’s still often worth considering all the costs involved. For example, a ‘pay-on-time’ discount may be great, but if the supply per kWh is higher than the market rate it may not really add up to savings.

It’s ultimately worth considering the costs of supply first before seeing what additional benefits can be found, it’s probably better in most cases to get a lower price for electricity than discounts that may never be used. The company’s service record could also be something you want to consider too as good service can be worth more than all the gifts they can offer.

Ultimately, being loyal to one energy retailer is likely to cost you money in the long run. Companies are always competing for your business, offering new ways to help you switch and lure you in to signing with them. Regularly comparing what retailers have to offer can keep you one step ahead and always ready to capitalise on better pricing for your energy, keeping companies on their toes.