Can British Gas fulfil its burning ambition?

British Gas’s ambition to provide a one-stop shop for all household needs shows no sign of wavering, despite a slow uptake by consumers and moves by other utility companies to scale down similar operations to focus on power.

Last week the power company reshuffled its marketing team, putting head of marketing operations Andrew Mann in charge of its online home management service House.co.uk. The online division was launched in 2001 and offers every British Gas service, from gas and electricity supply, through insurance to telecoms (MW last week).

It was Mann who oversaw British Gas’s latest advertising campaign, which attempts to inform consumers that it is more than just a gas and electricity supplier. Featuring Ricky Tomlinson and carrying the tagline “Doing the right thing”, the ads were created by Clemmow Hornby Inge (CHI).

But Centrica-owned British Gas still has a long way to go to make the transition to a general household services supplier, says Jon Kinsey, former British Gas and London Electricity marketing boss and managing director at George Wimpey. “Centrica has got a significant job before it can say British Gas is a multi-service provider. It is a well-established energy supplier but has not made much of an impact elsewhere,” he says.

Kinsey says its boiler repair service is the only one that has proved a success so far. Expansion into areas such as financial services is limited, particularly following the sale of Centrica’s Goldfish business.

Although the company’s dominance of the gas market has been eroded since deregulation, British Gas still supplies 63 per cent of the UK domestic gas market, and its move into electricity has yielded 23 per cent of the market, according to Ofgem figures for the first half of 2003.

Other utilities companies have in the past also offered services outside gas and electricity. In the late Nineties, for instance, Powergen offered telecoms and internet services, but has since scaled them back.

Powergen marketing director Paul Parmenter says: “We’ve decided not to move outside our core areas, but rather to bring added value to our customers.”

Another utilities company, Npower, specifically set out to become a home service brand, but eventually shifted its focus back to gas and electricity at the expense of other services, such as telecoms (MW January 23, 2003).

EDF Energy chief executive of customers branch Derek Lickorish says: “British Gas is fortunate in having a massive customer base. Other energy providers now focus on differentiating themselves within the energy market.”

One former utility marketing boss says that British Gas’s position is ironic in that it is the only utility brand with the ability to diversify, yet is the least suited to do so. “Npower was specifically created with a multi-product strategy in mind but lacked the resources. By contrast, British Gas has the clout but not the right brand. British Gas has spontaneous awareness for gas, not phones, plumbing or DIY.”

British Gas director of marketing and strategy Nick Smith rejects suggestions that his company’s brand cannot be associated with multi-product provision. “The brand has a frightening amount of loyalty and trust in the gas market, and this can be projected elsewhere.”

He explains that to do this it is important to apply that trust to all its home services, and points to its current advertising tagline.

But one senior advertising executive says British Gas has a problem in that the term “home services” is an abstract one that consumers don’t understand, least of all associate with a company that traditionally supplies gas. He adds that CHI’s advertising campaign has done little to educate potential customers.

“People don’t think of homes as needing a package of complete services and British Gas isn’t doing much to persuade them otherwise. The ads merely focus on single services, such as boiler repair.”

Mark Rapley, director of Creative Partnership Marketing and a former account director at BMP DDB, which lost the British Gas account to CHI last year, agrees the company needs to do more in its advertising to explain its position. “The ads are very good, but it is difficult to see how they help British Gas to become a multi-product home services company.”

Even British Gas’s Smith admits consumers “still don’t know what the home services market looks like”. He explains that the strategy is to focus on one product at a time, which, he says, will eventually lead to a greater understanding of the company’s service.

According to British Gas, each customer has an average of 1.6 services provided by the company. Smith admits that its massive database has helped it cross-promote products. As the number of customers cross-holding products increases (those having two or more services supplied by the same company), so too will British Gas’s grip on them, as these households are less likely to move to another provider.

But negative press coverage over recent gas price increases has not helped British Gas. Last week, consumer watchdog uSwitch added its voice to those attacking the company for raising its prices for a third time in two years. USwitch estimates that up to 15,000 customers have been lost to rival operators since the hike was introduced last week.

Smith, however, says that it is too early to see the results of the home services strategy, in which it has invested &£400m. This is only the second year in what is a five-year plan.

“We are changing the organisation, and that takes time,” he says. “Brands need to evolve or they will die. If we stay as a gas-only brand we will not survive.”