Switching the power base

With regular price hikes, looming supply problems and the prospect of foreign takeover bids, sparks are flying in the energy industry. In this hostile environment, suppliers are seeking to engage with consumers like never before in a bid to ma

Online switching services, like uSwitch, have become a major force in utilities, gaining power over consumers’ choice of gas and electricity company while the providers looked on helplessly. But the energy brands are fighting back, seeking to make the digital arena their own. By Nathalie Kilby

With regular price hikes, looming supply problems and the prospect of foreign takeover bids, sparks are flying in the energy industry. In this hostile environment, suppliers are seeking to engage with consumers like never before in a bid to maintain their power in the sector.

Both npower and British Gas are on the hunt for digital agencies to boost their online offer (MW last week), with the former introducing more interactive elements on its website in an effort to improve customer communications. Meanwhile, Eon-owned Powergen has also recently tweaked its website.

But there appears to be more fuelling the utility giants’ activity than simply consumer relations. Interest in power companies’ online operations was piqued by the acquisition of uSwitch, the biggest online “switching” service, for &£210m last month by US media company EW Scripps. USwitch, which allows consumers to search for the best deals, from gas or electricity supplier, to broadband provider, has been boosted by recent price increases for gas and electricity, such as the 25% hike from British Gas and the 15% rise by Scottish Power, as consumers visit the site to hunt for cheaper providers. USwitch is tipped to hand its advertising business to Miles Calcraft Briginshaw Duffy (MW February 2).

Catalyst for change

USwitch strategy director Tim Wolfenden says 3.5 million households changed gas or electricity supplier last year, and that about 75,000 households switch via the site each week. He adds rising prices are not the sole reason for consumer interest, saying the growth of UK broadband penetration has empowered people, and a spate of misselling scandals has made consumers mistrustful of utilities providers (MW July 11, 2002).

SimplySwitch chief executive Karen Darby agrees and adds that switching services offer consumers the chance to search for the cheapest option with no pressure of a door-to-door salesman. “We are reactive,” she says. “We offer ‘sticky’, loyal customers. They come to us, and are able to make an informed choice, using an impartial service.”

Darby says the power of the internet has been underplayed in the sector, with companies needing to up their game online. Although SimplySwitch started out with a call-centre focus it soon went online, an area that continues to grow. She adds: “Switching companies caught the giants sleeping. We forced providers to offer online-only tariffs, and better and more competitive rates. We’ve been a catalyst for growth.”

Npower brand marketing chief Kevin Peake is candid about the company’s shortcomings online, and says it is seeking to address the issue. This week it is launching orbworld.com, part of a wider marketing initiative piggybacking the orb characters in its recent television ads. Peake says: “It is one of our first major experiential initiatives and we hope consumers will react well.”

Make a connection

Nigel Sheldon, director of digital at Starcom Digital, says the Web is vital as “utilities need to provide a dialogue with and valuable services and information for consumers”. He adds: “In a world where consumers want to have more control, the internet plays a key role. They can readily find out what they need to know about a company or a service either by searching for themselves or by visiting comparison sites. The popularity and usage of the latter has increased as consumers become more confident in filtering information online.”

Peake agrees that switching services have driven the market and says uSwitch helped it gain 70,000 customers in one week alone earlier this year. But not all providers are happy, as Kanat Emiroglu, director of strategy and online at British Gas, explains: “Switch sites continue to confuse about savings based on non-average consumption rates – this is misleading and causes consumer confusion.”

Emiroglu is positive that British Gas has the right strategy online: “We are doing more than most in the energy market to create an online brand. We pioneered paperless bills through house.co.uk. Our cheapest energy proposition is online: Click Energy, a no-frills product on a low-cost-to-serve channel. House.co.uk traffic is twice that of the nearest rival.”

Meanwhile, Powergen online acquisitions manager Ben Latham says it has focused its attention in the digital environment on customer needs, providing access to services such as quotes, meter readings and account management. Informing customers via the website is essential, he says: “The internet is now where consumers look for information. Websites play an important role in enabling users to make informed decisions, and providing information on matters such as energy efficiency.”

Powergen allows consumers to conduct an online energy efficiency survey and e-mails the results back to participants. It is in areas such as efficiency, supply and conservation that observers say online will play a greater role.

But Matt Dyke, creative planning director at Tribal DDB, which previously worked on British Gas’s digital account, believes companies are still failing to grasp the nettle. They are obsessed with segmenting customer databases and tailoring direct marketing to consumers who don’t give “two hoots”. Dyke adds: “Their budget would be better spent generating brand experiences that attract consumers and offer some value exchange.

“The key mistake has been to think of online as a more cost-effective way to bombard consumers with price messaging. The real issue for most energy companies is not acquisition, but hanging on to the most valuable customers they do have. Creativity and a knowledge of digital marketing could make a massive difference.”

And Tribal DDB managing director Bill Brock points out: “Companies have yet to crack how the channel can contribute to the growth of their brand and success of their marketing efforts. Relevant, value-led interactive programmes, for example Orange Wednesdays, have not been a part of energy companies’ repertoires.” In an increasingly digital age, he believes, brands have both the ability and a requirement to find more progressive ways to generate interest in their marketing: to do more than scream at their audience by interacting with them.

Losing its spark

Commenting on reports that uSwitch has entered into discussions about commission levels with individual suppliers, Brock believes the service “seems to have lost its way”, eroding both consumer trust and empowerment.

Whatever the consensus on faith in switching sites, there can be no doubt they have forced utility suppliers to engage online. With uSwitch commanding a 27% share of visits to utility sites in one week, ahead of House.co.uk on 16% and Powergen on 6.5% (Hitwise UK), the lumbering giants must wake up to the digital age if they are to generate loyal consumers.

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