What Does a “Typical Customer” really understand? Why focusing on (actual) Customer Understanding is the only way to go…
Our response to Ofgem’s Consumer Vulnerability Strategy Refresh highlighted our work to address a major, yet often overlooked, consumer vulnerability: poor numeracy.
As part of our mission to make customer communications more understandable, we welcome the opportunity to highlight how low numeracy impacts vulnerable consumers and propose changes that can lead to better outcomes for everyone.
The scale of numeracy issues in the UK is staggering.
Nearly half of the UK adult population only possesses the numeracy skills expected of a primary school child, compared to one in six who struggle with literacy.
Poor numeracy skills, much like poor literacy, hinder people from fully understanding essential information—especially when it involves finances, energy usage, and other critical areas.
Why Understanding Numbers Matters
Ofgem’s strategy highlights that vulnerable customers struggling to pay their bills should receive accurate bills that are easy to understand. ‘Easy to understand’ is an excellent aim, but by whom?
It isn't enough of an aim if it doesn’t account for how different people understand numbers. At Plain Numbers we therefore advocate an approach that mirrors what the Financial Conduct Authority (FCA) has done, moving towards real, measurable customer understanding among consumers.
Our research demonstrates that customer understanding is startling low.
For example, an independently conducted Randomised Controlled Trial showed that only 32% of consumers understood an original energy communication from Octopus Energy.
When we simplified the communication using the Plain Numbers Approach, the percentage of people who understood increased to 57%.
The importance of plain language in improving company communications is well-known, but without making the numbers understandable too, the overall communication fails to get the key messages from energy companies and others across.
The results from the five Randomised Controlled Trials (RCTs) that have been conducted on the Plain Numbers Approach are clear: adjustments in language, numbers, and the application of behavioral science led to a doubling in the number of customers who understood a communication, on average.
This is strong evidence that it is possible to take account of poor numeracy and make significant improvements to customer understanding.
Rethinking the "Typical" Customer
In its current definition, Ofgem contrasts a ‘Vulnerable Consumer’ with a ‘typical domestic customer’. However, the government data cited above muddies this significantly; with half the adult population having the everyday number understanding that we expect of a primary school child, what does a ‘typical domestic customer’ really look like?
A while back the FCA used to talk about an “average” customer, but they saw the light and we now encourage Ofgem to do so too. The FCA approach now defines a vulnerable customer as someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a company’s communications aren’t tailored to meet their needs.
This updated understanding could incorporate four key characteristics of vulnerability that the FCA have adopted: Health, Life Events, Resilience, and Capability.
Based upon this framework it is clear that many consumers, regardless of education or demographic, will find themselves vulnerable at some stage in their lives – and that firms need to do all they can to respond appropriately to this.
Supporting Cross-Sector Solutions for Vulnerable Consumers
We strongly support Ofgem’s proposal to “work with partners to solve issues across multiple sectors.” Adopting the FCA’s vulnerability definition would be a step forward here.
Regulatory bodies and firms inevitably suffer from what Steven Pinker calls the “curse of knowledge” and therefore make assumptions about the ‘average’ customer based upon what they themselves can easily understand, inadvertently leaving many behind.
Testing real customer understanding, as the FCA now expects, and moving beyond the “curse of knowledge” will help create solutions that work for everyone.
Conclusion
Numeracy challenges are pervasive and impact a wide range of consumers, particularly vulnerable groups. To truly improve outcomes, we encourage Ofgem to integrate numeracy and customer understanding into its Consumer Vulnerability Strategy. This approach will lead to clearer, more accessible communication and ultimately help more consumers navigate information from their energy provider with confidence.
See case studies on how we work with firms to boost customer understanding