Power through persuasion

As prices in the utilities sector converge, companies are having to find new ways to differentiate themselves – often by taking up fashionable causes

The very idea of “loving your utility company” may seem as far-fetched as waiting expectantly for the utility bill to drop through your letterbox, but this is what utility brand managers will be working towards in future. With price differences between suppliers now negligible, trying to attract and retain customers with promises of cheaper bills is no longer enough. Similarly, the shift towards promoting premium customer service has lost its attraction, because today’s customers see good customer service as a given, rather than a luxury.

Research from Datamonitor says that we will soon reach the point where utility supply is no longer profitable unless customers can be made more brand-loyal.

The research highlights the need for utilities to tap into customers’ emotions and establish themselves as “compassionate companies”, which sympathise with their customers’ interests. In much the same way as Body Shop positioned itself in the Eighties – as a company with a conscience – Datamonitor believes that in the near future we will see utilities companies falling over each other to show their sensitive side.

British Gas has been developing the idea that “there’s no place like a British Gas home” in an effort to be in tune with customers’ aspirations for comfort, security, belonging and safety. This is a real departure from the “number one price” and “service to delight” lines that UK utilities have used in the past, perhaps in recognition of the fact that customers now expect competitive prices and excellent customer service as part of the deal. BT successfully tapped into these very same emotions with the “It’s good to talk” ads and it is clear that utilities are now set to follow this route.

It is a common complaint that there are too few hours in the day to get everything done. People worry about balancing work and family time. Nevertheless, as disposable incomes have increased to the point where the average family has luxuries such as freezers, mobile phones and dishwashers, people are relegating materialistic goals and turning to emotional needs. Already there exists a customer interest in issues such as multinationals’ employment practices, the environmental impact of products, farm-animal welfare and organic produce. As the environment becomes an increasingly pressing question, we may begin to see customers questioning how their electricity is generated, while at the same time demanding that their supplier favour particular methods of power generation. These are emotive issues for some consumers, and utilities will have to learn to play their part in customer involvement.

Utilities have traditionally been homogeneously branded – their products were dull, and their emotional appeal very limited. But the need to resist further downward price pressure has led to partnerships and rebranding to inject some brand emotion. By linking brands to “passionate causes” such as conservation, green energy, the elderly and the family, utilities are beginning to show signs of developing the brand loyalty that they have dreamt of since competition began.

For instance, Powergen is working with Age Concern, Scottish and Southern Energy with the Royal Society for the Protection of Birds and npower with Greenpeace. Customers taking up special tariffs – sometimes at a premium – know that by doing so they are supporting causes that they believe in, or gaining the social benefits of being involved in such good causes.

People are continually bombarded with advertising, proclaiming the benefits of 1,001 products. It is therefore unsurprising that customers are becoming increasingly cynical of companies “greenwashing” their brands, or suddenly deciding to support good causes. To overcome this scepticism, utilities have looked to partners with trusted brands. Datamonitor believes that as prices converge in the energy market following deregulation, brands and brand associations will become ever more important in the customer’s decision making.

Until now, the motivation behind a customers’ decisions to switch utilities have usually been price or, possibly, the

hope of receiving better customer service. However, Datamonitor predicts that these motivations will change dramatically in the next five years, as customers become more involved with utility brands that have emotional resonance. Although the majority of customers will remain apathetic towards their utility, the industry consensus is that between ten and 40 per cent of customers will develop a positive association with the social image of their supplier, or a stronger and more passionate attachment to the causes that it supports.

Nevertheless, utilities cannot hope to improve customer retention and acquisition if they fail to live up to their brand promises, or if their commitment to a particular cause is only skin-deep. Brand values of innovation and environmental responsibility often lack credibility, because of a failure to demonstrate them through day-to-day contact with customers. Ensuring visual conformity with brand values is only one small step, and utilities continue to fall down when it comes to “walking the walk” in their call centres or direct sales practices. Until utilities place as much emphasis upon internal communications as they do externally, customer scepticism will inhibit both development and growth.

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