6th September, 2019
Author - MetroMail
Like many industries at the moment, the utility sector is experiencing a number of developments. While these changes can create challenges, equally, they can also open up opportunities.
One of the main challenges/opportunities is modernizing the way they work by utilising ‘cutting-edge tech, such as IoT and blockchain, which are gaining progressive adoption globally’ 1. Consumer adoption of energy technology is also changing customers’ relationships with their energy suppliers. Customers are moving from being passive payers of monthly bills to being more proactive and engaged in energy consumption and production 2. The main players within the market are being forced to catch up in order to ‘keep up with new digital-first competitors’ 3. ‘According to the latest report from Ofgem, the Big Six energy suppliers now account for just 77 per cent of the market’ 4. The smaller, more innovative players in the market are gaining market share by giving customers what they want; a personalised, good quality and reliable experience.
2019 is expected to be the year that utility companies embrace data analytics. Many companies have valuable data in their databases which could be used to create profiles that include data about customers’ energy technologies and a range of other pursuits 5. Using data correctly could help retain customers by improving customer service, experience and loyalty. However, a lack of skills and knowledge has caused the industry to be viewed as a slow adopter and fall behind the curve, while many other industries including retail and finance have already capitalised on this opportunity.
Merger and acquisition activity was strong in 2018, with the first quarter seeing the strongest activity in over a decade. However, the merger of SSE and Npower was cancelled in December 2018 as a result of ‘challenging conditions’. The Guardian reported that the government’s price cap and increasing competition were the reasons the two energy firms failed to reach a deal 6, with M&A activity slowing since.
With this increased competition, utility companies are finding that they are needing to refocus their marketing strategy so that they are able to retain customers, rather than acquiring large numbers who quickly move on after a year or so. British Gas are one of the companies adopting this strategy, with a drive towards personalised marketing. ‘The challenge in the utilities space is how do you differentiate from the other supplier as in recent years it’s become a race to the bottom on cost….I think over the next 18 months to two years you should expect the bulk of our [marketing] investment to go behind the message of smart homes and connected lifestyles’ 7, states Miriam Jordan Keane, Head of Marketing at British Gas. In addition, British Gas are launching a loyalty scheme for the foundations of their business, gas and electricity tariffs.
Consumer needs and attitudes towards renewable energy is changing. Consumers want to manage their own energy usage patterns (which can be done through apps that allow consumers to look at their energy spend). E.ON is keen to stick to its new brand promise to “create a better tomorrow” by developing new technologies such as electric vehicle charging or becoming part of the ‘connected home’ 8. In addition, many businesses want to control their energy efficiency, with many making pledges and creating targets to improve their environmental impact.
Regulatory change has also impacted the sector. On the 19th July 2018, the Parliament approved a law capping energy tariffs across the Great Britain (GB) energy market. The law will require Ofgem, the energy regulator, to provide a cap for standard variable and default tariffs offered by suppliers for household energy consumers across gas and electricity products. It will take effect in the winter of 2018 and is expected to last until 2020, impacting some 12 million people in Great Britain. Ofgem is currently undertaking analysis on the level of the cap and is expected to report its policy position on 23rd August 2018. It should help save customers up to £100 annually, but will hit the profit margins of the big six, hard 9.
So, how can direct marketing benefit your marketing strategy?
Well, based on the research above, it’s clear that utility companies are seeking a retention strategy that builds trust and loyalty, personalised communications that utilise data effectively, and a chance to stand out from competition in a positive way.
By aligning your online and offline strategy, it creates a consistent, credible message for your customers. Plus, did you know that direct mail is one of the most trusted channels of communication? 71% are more likely to trust the advertising mail they receive as opposed to other channels 10. In addition, ‘87% of consumer’s rate messages delivered by mail as believable, compared to 48% for email’ 11. Mail is also kept in the home for a substantial amount of time, therefore has more exposure than online methods of advertising. On average, mail is kept in a household for 17 days for advertising mail, 38 days for door drops and 45 days for bills and statements! 12. Finally, at MetroMail we have our very own Data Services department. Therefore, we can help you make the most of your data, improve your ROI and plug the potential skills gap you may currently be facing.
Contact us today to find out more, and to receive your free direct mail strategy.
1, 3 & 4 – Wilks, M 2019. 2019 predictions: utilities. https://www.capgemini.com/2019/01/2019-predictions-utilities/#. Accessed 05/09/19.
2 & 5 – Sumic, Z, Foust, N, Cohen, E, L & Harrison, K 2018. Top 10 Trends in 2018 Driving the Utility Industry Toward a Decarbonized, Distributed, Digital and Democratized Future. https://www.juniper.net/assets/us/en/local/pdf/whitepapers/2000721-en.pdf. Access 05/09/19.
6 – Vaughan, A 2018. SSE and npower scrap merger plan amid ‘challenging conditions’. https://www.theguardian.com/business/2018/dec/17/sse-and-npower-scrap-merger-plan-amid-challenging-conditions-energy. Accessed 05/09/19.
7 – Joseph, S 2017. British Gas shifts from acquisition to retention marketing to know the value of keeping the right customers. https://www.thedrum.com/news/2017/03/28/british-gas-shifts-acquisition-retention-marketing-know-the-value-keeping-the-right. Accessed 05/09/19.
8 – Roderick, L 2017. E.ON launches new marketing strategy in bid to become purpose-led brand. https://www.marketingweek.com/2017/05/26/eon-marketing-strategy-purpose/. Accessed 05/09/19.
9 – KPMG 2018. European Power & Utilities Report. https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2018/08/europoean-pu-q2-2018.pdf. Accessed 05/09/19.
10 – Royal Mail 2015. The Private Life of Mail. https://www.marketreach.co.uk/sites/default/files/The%20Private%20Life%20of%20Mail%20MR.pdf. Accessed 05/09/19.
11 & 12 – Royal Mail 2015. The Private Life of Mail. https://www.royalmail.com/sites/default/files/Royal-Mail-MarketReach-Private-Life-of-Mail.pdf. Viewed 05/09/19.