German Startup SwitchUp Uses Contract Comparison To Foster A More Transparent Energy Market

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"Consumers can’t win in this market", says SwitchUp's founder Arik Meyer. To us, he spoke about Germany's current energy provider landscape and the startup's mission to empower clients.

How would you describe SwitchUp in a few words?

SwitchUp (website in GER, Ed.) is a young startup that bases its business transactions on principles, not profit. We optimize our clients’ energy plans and make sure they’re never overcharged for electricity or gas again. We don’t think it’s fair that energy providers are taking advantage of their loyal customers, which is why we came up with a solution for them.

What inspired you to create the platform? How did you discover the need for it?

I signed up for an energy plan a few years ago but the company went bankrupt and all the money I had prepaid for months ahead was lost. When I took a closer look at the energy market for consumers, I realized that on one end of the spectrum, cheap discount energy providers lure in unsuspecting clients with deals so cheap, they can’t be sustainable (spoiler alert: they are not). On the other end, well-established bigwigs in the industry rest on their laurels. They call their longtime customers “sleepers” and disadvantage them systematically. Large corporations use this convenient source of income to finance the acquisition of new customers – who get better deals than longtime customers.

The practice is unfair and the market is not transparent – that’s why I decided to create the “Tarifaufpasser” (contract guardian, Ed.) to oversee the manifold processes. It’s an algorithm that not only keeps an eye on contracts, it also allows us to see when it’s time to optimize the current plan. This helps consumers make a more informed decision and guarantees that our clients won’t have to research a new energy provider next year all over again because, after that first switch, we take care of everything.

How does the German energy provider landscape work? What are customer’s biggest pain points, from your perspective?

The market was nationally regulated until 1998 when a new law opened the energy market to the private sector. Currently, over 1,000 energy providers each offer a handful of contracts, some even dozens. While it’s become easier for consumers to find information online, the market is still intransparent. The old school price comparison platforms Germans use don’t solve their problems. On these platforms, discount energy providers make it to the top of suggestion lists, even though they overcharge their new customers. 7 out of 10 providers that make the cut belong to this category. One of the most popular profit strategies: raising prices significantly after the first year of the contract. Typically clients will be stuck in their plans for a second year if they don’t opt out in time.

Consumers can’t win in this market: Passive customers carry their energy providers financially and rarely benefit from price adjustments. Active customers pick deals that are too good to be true and end up with discount providers that employ questionable business practices. The current solution to this problem: study up and become proficient in the energy field, but that’s not for everyone. Consumers can’t be expected to become an expert just so they won’t be at a disadvantage in this market.

You mentioned that your automated contract watcher switches customers to a new deal every year to ensure that they are not overpaying. How does the algorithm work and what parameters do you take into consideration?

Our contract guardian keeps an eye on a multitude of factors, which we sort into different categories: Terms of contract (price, price guarantee, bonus, length of contract, miscellaneous), security features (type of business and business model, general terms, and conditions), customer happiness (after switch, longterm and after a year) as well as complaints. A detailed list of these factors is available on our website (in German, Ed.)

What is the biggest challenge that the company has faced and which were your biggest learning points?

Our biggest challenge was figuring out how to get the public to put their faith in us when we were starting out. We had no track record to prove to potential customers that we mean it when we say our business is founded on trust and respect. We learned that it takes time to build this kind of trust. What worked for us is the polar opposite of everything that the startup scene stands for: We consciously opted to grow organically instead of the fast growth prevalent in the scene.

While other companies measure the efficiency of their customer service, we measure the intensity of the relationship we build with clients. Customer trust is not a commodity that’s easily quantifiable, it’s a privilege. That’s why our customer service is excellent and we measure it in-depth.

We’ve recently featured a breakdown on startup driven innovation in the energy sector. In your opinion, what innovations we will see in the near future?

A trend we are seeing is awareness and a return to principles. This isn’t a technical innovation, but it will help make way for all kinds of innovations. We think the future lies with companies that make a virtual product like energy tangible with values and a philosophy.

The tech trend we’re most excited about is the development of airborne wind energy systems. There’s a pilot project pioneering in Scotland by Kite Power Systems and Ampyx Power. This technology has the potential to make renewable energy more agile and a whole lot cheaper.

What’s next for SwitchUp?

Besides expanding our customer base for our free energy and gas services, we also want to help consumers navigate new markets like DSL and cell phone plans. It’s a great example of another industry where the fine print goes on for pages and good deals are offered only to new clients. Meanwhile, loyal customers are squeezed dry for services for which technology or competition has already lowered the prices. Additionally, there is a multitude of pitfalls that consumers can expect when they sign up for a new plan. With DSL, they could be saddled with a more expensive plan that only covers a fraction of the upload/download speed, with a contract that offers no recourse in case the service turns out to be something from which the consumer isn’t profiting.

As a German startup, what is one thing you wish for in improving the European startup ecosystem?

We stepped into a crowded market armed with wits, a fantastic product, and a lofty philosophy. SwitchUp is living proof that having a solid philosophy at your core engenders organic success.

We wish more companies would rethink the way they see their own B2C relationships. If more new businesses put a focus on building trust and fostering an honest relationship with their clients, it would alter the market completely.

What’s one piece of advice you can give to fellow founders for their startup?

Be fair to others and watch good things come back to you. Even if your first instinct is to be ruthless and cutthroat because you feel like you’re in a shark tank, your behavior influences others. Lead by example, there’s no need to be aggressive if you have a solid basis in principles that are governed by reason. In the end, it’ll not only make you and your team more successful, it will make everyone happier, healthier and more empathetic. If you don’t love going to work in the morning, find out why and change it.



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