Challenger brands are finally rewriting the rules in this high profile industry
Over the last decade, similar to consumer finance, we have witnessed a major shift in mindset towards the way in which household energy is seen and used today.
Gas and electricity have traditionally been seen as passive consumption (you pay and forget about it). But with the advancement of technology (such as smart meter apps, electric cars, Disney’s room-filling wireless charging) and the explosion of the Internet of Things (IoT) – gas and electric will no longer be tied only to what you use at home. It’s instead becoming something you can track and control anytime, anywhere.
Today the use of energy utilities is more integral to our everyday life, and as such, the changes in consumer behaviour will bring challenges and opportunities to businesses and consumers alike.
To assess the state of the industry, we’ve taken a look at the current user experiences on offer from industry leaders in gas & electric and compared them to those provided by a few of the new innovative challenger brands now operating in the same space. From the industry leaders, we selected British Gas and npower, which combined provide gas & electricity to around 42% (26.5 million) people in the UK. On the other end of the spectrum, we look at challenger brands Economy energy and OVO Energy.
A few key findings stood out following our review:
A new kind of value: comfort and control trumps offers and discounts
British Gas leads their homepage with “Smarter Homes for All”. Having a dedicated ‘Smart Home’ area on the website conveys the message that British Gas are progressive, forward thinking and in our opinion, more aligned with the change in customer’s mindset around how they feel and understand energy consumption. On the contrary, npower’s homepage mostly focuses around pricing, promoting fixed tariffs and customer offers. It is possible that npower is targeting specific audiences with a strong preference for pricing. But according to Ofgem, customers are showing a greater desire to have control over how their energy is generated and distributed and are beginning to see electric and gas companies as service providers rather than as a commodity.
Ofgem also mentions that customers are willing to pay a premium for control, comfort and service, which challenges the traditional view of the energy consumer where cheaper pricing is almost the only thing that mattered. To triangulate this, we also looked at reports from research consultancies such as Populus. And overall, their analysis of supplier performance against customers’ likelihood to switch also reveals that customer service emerges as the strongest loyalty driver far ahead of price.
When looking at challenger brands such as OVO Energy and Economy energy, they have taken the principle of transparency, comfort and control to the next level. On OVO Energy’s website for example, we can see that their brand proposition is focused around pricing transparency, control and their award winning service. Digging deeper, their shift in mindset compared to the market leaders was evident, in the sense that rather than focusing purely on pricing and offers, they focus on selling their service and the features of their product (app) that allow you to feel comfortable and in control.
Challengers are moving up the ranks
Industry leaders British Gas and npower hold 42% of the UK market but challenger brands are quickly catching up.
According to the latest UK customer satisfaction (Jan 2016), the utility sector ranks second to last for overall satisfaction including retail, tourism, banking, beating only the telecom and media sector. When comparing this research with findings from Ofgem and Populus, we found that the challenger brands such as Economy energy and OVO Energy are beating the industry leaders in almost every metric within customer satisfaction. As mentioned earlier, industry leaders British Gas and npower currently hold around 42% of the UK market, however their satisfaction rating on Trustpilot is extremely low when compared to the challenger brands.
To stay ahead, industry leaders must see themselves as a service rather than as a pure utility function. By focusing on being a service, they are aligning closer to the customer’s mindset around control and comfort. Creating experiences that are satisfying and engaging therefore quickly becomes the spearhead within the battle between the David and Goliaths of the industry.
Ultimately, switching isn’t easy
Whilst carrying out research for this report we found that it’s hard to get people to switch. In fact, it takes at least £290 of potential savings for the average customer to be motivated enough to switch. (Populus)
Populus also mentions that 50% of customers believe they can get a better energy deal if they looked, but even so, 53% still say they are unlikely to switch deals within the next 12 months, therefore, solidifying the point that cheaper prices are not as impactful today. That leaves brands with the challenge of differentiating themselves in other ways, e.g. charitable work or price transparency.
Of course, a final difficulty that can’t be ignored is the fact that the majority of customers simply use comparison sites to stay informed on alternative energy providers. In order to get cut through and have more of an impact on customer behaviour, suppliers must therefore start making more of an effort around marketing, and connect with their audiences on channels other than their website, promoting non-price related points of difference.
For this experience review, we focused on analysing the usability of the website across devices. Further, we took a look beyond to understand engagement and persuasion as well as the disruptiveness and innovation around their overall value proposition to the customer.
At first glance
Looking at reviews from Trustpilot, the industry leaders have received scores of 4.7 (British Gas) and 0.7 (npower) out of 10 respectively. The challenger brands, however, are scoring a much higher 8.8 (OVO Energy) and 8.2 (Economy energy) in comparison.
We decided to dig deeper into the user experience, to understand how the challenger brands are punching above their weight and how industry leaders can do more to stay ahead.
The techniques brands used years ago to increase customer loyalty are no longer relevant. In a world full of increasing choice it’s more important than ever to pay attention to changing customer needs.