Price is fight for power houses

I read with interest Rod Peel’s prescription for a power industry consumer strategy in his piece The Mains Attraction (MW December 8). Apparently, “it will be about brand positioning, market segmentation, delivery of a promise, creation of tariffs and quality of customer service following (sic) through”. In other words, success will be based on marketing strategy. This is true, but not very helpful.

The average household consumes 300 to 350 of electricity a year. But margins are tight and average annual customer profitability is but a few pounds. A marketing strategy based on the forecasted price discounts of ten to 15 per cent is not sustainable in the long term unless:

High value consumers can be identified, acquired and retained.

Marketing investment, including the cost of discounting, can be calculated based on the lifetime value of consumers or market segments.

The average profitability of each customer can be enhanced through differential pricing based on metered consumption patterns, reduced overheads and the cross-selling of power products or other goods and services.

There will undoubtedly be increased price competition when the industry is deregulated in 1998; and the fiercest battles will be fought by new entrants without an established customer base.

It will be bloody but the marketing strategy is clear and the odds are heavily stacked in favour of the existing RECs. But do they have the heart for the fight?

A. Paul Hawkes

Abram Hawkes

Haywards Heath

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