UK utilities offer market solutions

As European utilities companies change from state sector monopolies into free market competitors, they will need to adopt a more customer-oriented mindset.

Developments in the Internet and telecoms industries continue to turn heads, with Vodafone’s takeover of Mannesmann the most recent example. Given the number of column inches devoted to such deals, one could be forgiven for thinking they were the only game in town.

The exploding world of dot-coms exerts a strong pull on the attentions of both the public and the marketing community. It is new, different and exciting.

While there are undoubtedly gains – and losses – to be made in such ventures, one should not be blinded by them, as interesting developments continue to occur across the spectrum, even in “mature” industries.

Take utilities, for example. True, recent market growth has been driven by “dot-com fever”, while “value” stocks such as gas and electricity appear to be dragging indices in the opposite direction. Yet these remain substantial businesses with large customer bases, which provide a myriad of challenges for the marketing and communications industries.

Just last week, the Italian government voted to liberalise the domestic gas market, thus obliging Eni, the incumbent monopoly, to begin rethinking its business from top to bottom. In Spain, a similar process is under way as Gas Natural prepares to face competition in the distribution of gas to industrial and domestic clients.

For the UK, of course, such developments are no longer a novelty. Thirteen years have passed since the famous “Tell Sid” campaign introduced the public to the idea of owning shares in British Gas. Since then, utility marketing has developed into one of the industry’s most hotly-contested areas.

As experience here has proven, for monopoly operators faced with building competitive advantage in newly-deregulated markets, the answer lies in a mix of defence, development and diversification. That is, defence of existing resources in the face of competitive onslaught and regulatory pressures; development of existing core products and services; and diversification into areas which exploit core skills previously unrecognised as marketing assets. Centrica’s development of the Goldfish credit card is a good example of this last case.

Each of these activities must be underpinned by a strong communications strategy, encompassing everything from lobbying and public relations to direct mail and mass communications. This places new demands on staff, as it requires a completely different, customer-oriented mindset.

In moving from state sector monopolies to free market competitors, Europe’s utilities will be faced with a new set of challenges. In addition to securing reserves of natural resources, a business they are already familiar with, they will have to build equally impressive reserves of brand equity – an endeavour which, for many, will be entirely novel.

John Shannon is President of Grey International

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