The government announced the increase of the energy price cap on 25th of February to take place on the 1st of April 2025.

This unexpected price rise may be causing uncertainty for many, but different groups of the population will be experiencing this in their own ways.

Our Understanding the Nation segmentation can help to unpick this, and by applying behavioural science, we can understand how different groups may act in relation to the increasing energy price cap.

Heavily Impacted – 21% of the public

This group are amongst the hardest hit by the cost-of-living crisis – they are struggling financially, have cut back on spending in all areas, show high levels of concern, and have very negative attitudes. Key potential reactions:Distress, disengagement and possible inaction

• Cognitive overload

  This group will likely be feeling overwhelmed by stress and unable to pragmatically think about solutions or support, and are more likely to disengage entirely to avoid the negative and effortful process of addressing their situation

• Status Quo BiasHumans are inclined to keep things as they are, and so some may avoid action and feel overwhelmed when it comes to looking at new tariffs or providers

Worried Adapters – 15% of the public

Although they feel quite positive about the country’s future, this group have financial concerns and are making spending cuts. They are particularly worried about job security and losing their home. Key potential reactions: High anxiety, proactive but fearful decision-making

• Regret AversionThey may hesitate when making energy related decisions such as switching tariffs or providers out of fear of making the wrong decision
• Hyperbolic DiscountingHumans discount the value of future rewards, preferring to win in the present. With bills in the summer likely to be lower, some may want to delay action even though switching to a better value tariff could prepare them for winter later in the year

Cautious Monitors – 15% of the public

This group are feeling uncertain in many areas, including their personal and the country’s finances. Many are concerned about the prices of gas/electricity and have made easy-switch behaviours. Key potential reactions: Proactive but anxious, watching the market

• Preference for CertaintyThey may value predictability and therefore prefer fixed-rate energy deals even though these may not give the best savings
• Availability HeuristicOur current emotions influence our judgement and decisions, and therefore news coverage around price increases may cause them to overestimate their own risk

Positive Flexers – 24% of the public

The happiest and least concerned group overall, with many feeling that they don’t expect to be affected by the financial situation and are very optimistic that the country’s finances will improve. Key potential reactions: Indifference, inaction

• Optimism Bias They may assume they won’t be impacted by the price rises and therefore ignore any messaging around rising costs
• Overconfidence Bias They may assume they can handle any price rises without the need to take action

Secure Savers – 13% of the public

This group generally feel very positive about their life and their finances, being amongst the lowest showing concerns. However, many have been personally affected by rising energy prices and have made consumption cutbacks. Key potential reactions:Mild concerns, making practical adjustments

• Status Quo biasWe stay with what we know, what we have done before, or what seems like the easiest or default option. Therefore some Secure Savers will not be actively looking for deals, and therefore need to be nudged in that direction
• Simplicity biasThis group may be less likely to put in high cognitive or behavioural effort when making financial decisions and instead follow the path of least resistance

Better Than Okay – 13% of the public

As one of the highest income groups, they are feeling positive and secure with their personal finances. On the other hand, they are feeling very negative towards the country’s finances and the future of the country. Key potential reactions:Personally unconcerned but politically frustrated

• Negativity biasAlthough they are personally coping fine with price increases, news of the energy price cap increase may result in them being more critical of energy companies or the government
• Control illusionAlthough they feel personally in control of their finances, they may ignore broader risks that could impact them such as further price rises in the future

Understanding how these different groups react to energy price rises can provide valuable insights for both policymakers and charities.

Recognising the nuances in how different individuals respond allows for more effective communication strategies, targeted financial assistance and behavioural nudges that can help the public make more informed decisions about energy usage.

To find out more reach out to our Behavioural Science experts to discuss what this might mean for your customers –  Email alex.baines@walnutunlimited.com