Guest blogger Varvara Vasciuk of Capgemini UK writes about how energy & utility companies need to change their mindset in order to survive in the new world
Energy companies used to concentrate their effort on upstream activities. Those days losing a customer was not a realistic option. Today market analysts use customer churn figures to evaluate energy companies’ prospects. Following market deregulation, a number of factors contributed to the growing customer churn:

  1. Energy spend turned into a considerable part of family budgets, as energy prices grew higher and credit crunch drove the budgets tighter.
  2. User-friendly switching websites meant that changing a supplier stopped being a mind blowing operation requiring an IQ and patience of a PhD in Biochemistry.
  3. High awareness of sustainability issues over the past decade led to consumers paying attention to the green agenda of their energy suppliers. In other words, it has become important for the consumer who they buy energy from, and it has become easy to choose.

As a result, in 2009 every month approximately 300,000 gas customers and 400,000 electricity customers switch suppliers!! While the ‘upstream’ space remains complicated due to uncertainty over supply, ageing infrastructure and the requirements imposed by the green agenda, in the ‘downstream’ space the energy companies are entering into a race to gain and retain customers (a concept alien to energy companies). They are facing competition from retail and telecommunications (e.g. Sainsbury’s Energy, Tesco Energy, Telecom Plus) who are savvy customer-service operators.
It is therefore encouraging to see energy companies trying to create customer experience teams, offering a range of flexible tariffs and energy efficiency advice, as well as extending service range to include additional home and energy services (such as central heating or kitchen installation). These are clear signs that energy companies recognise customer experience as their new area of specialism – but what more can they do to protect their territory in what has historically been their own market?
Firstly, the focus in managing the downstream activities needs to shift from asset to customer. An average British family moves houses approximately every 6-7 years. Before market liberalisation, customers changed energy suppliers only if they moved houses. Therefore the main interest of the energy supplier was to ensure that the ‘asset’ is maintained and the energy is sourced and delivered efficiently. Today, Market comparison services and websites provide customers the ability to choose energy suppliers as and when they want. Energy companies therefore face the threat of losing the customer even if they stay in the same property. Hence it has now become important to know your customer: is she a busy mom who would appreciate cheaper electricity for her washing overnight, or an owner of a local dry cleaning business for whom it is crucial that the supply remains stable at weekends?
Secondly, energy companies can learn from traditionally customer-centric industries like retail, telecommunications and digital media. These provide good examples of accumulating and using customer insight effectively to create customised service offerings. For example, applying the best practice from mobile telecommunications of monitoring individual usage trends of the customer and proactively suggesting the most suitable plan will help sustain and develop mutually beneficial relationships with customers. Service bundles could also be applied in utilities to offer gas, electricity and water from the same supplier or an ecosystem. Along with the best practice examples, traditionally customer-centric industries have also provided lessons on things to avoid, e.g. aggressive door-to-door sales campaigns in insurance, wasteful investment in loyalty schemes in retail or creating complicating and confusing range of tariffs and plans in telecommunications.
Thirdly, energy companies need to provide a unified customer experience, which is not easy given the fragmented value chain where energy retailers, network operators, field service and metering service are often represented by different companies. Disjointed customer experience undermines trust, one of the key determinants of brand perception in this industry. Therefore, even the B2B players providing services to the energy suppliers need to be aware of the end customer journeys.
Energy was once an upstream game. Those days offering a commoditised service was enough. Today, differentiation is a part of the winning strategy – and customer experience is the most powerful source of differentiation in this industry.