Another price war looks to be getting under way in the energy sector, which has taken a battering from the press and consumer lobbyists over the past couple of years.
As a consumer it is hard to reconcile average household energy bill rises of 69% since 2004 with the poor customer service, unreliable supply and aggressive sales tactics that have become indicative of the industry as a whole.
Complaints about water companies in England and Wales rose by 10% in 2006 according to the Consumer Council for Water, and gas and electricity fair no better. It may be "too little, too late for those in fuel poverty" as director of policy at uSwitch Ann Robinson remarks, but the industry is responding.
British Gas, which had the highest prices of the big six power companies, (losing 2.7 million accounts over the past three years or 2,471 a day) dropped its prices earlier this month and other suppliers have responded by announcing their own rate reductions. But even this has been criticised by Energywatch for not going far enough. The competitors merely bettered British Gas’ cuts of 17% for gas and 15% for electricity by as little as they could get away with. The price war is not living up to expectations.
Several companies in the sector are rethinking-thinking their communications. British Gas is reviewing its direct marketing; EDF Energy its sponsorship and advertising (it is sponsoring the next series of Soapstar Superstar on ITV). Npower is reviewing its public relations, while Scottish Power and Southern Electric are among those launching loyalty schemes, discounts or incentives. Over 4 million customers changed energy suppliers in 2006, and the heat is on to win new customers or retain existing ones.
But against this backdrop of poor performance, poor service and now price cuts, how big is the communications job to win back customer confidence? How negatively are energy companies actually perceived by UK consumers?
35 Communications constructed a scenario where some of the UK’s most recognised organisations were guests at a fictional dinner party. 35 used the scenario to ask a nationally representative sample of 1,400 people (aged 18 to 65) how they thought some of the best-known brands and organisations would behave if they shared an evening with them. As so many branding surveys are full of jargon, 35 felt that this scenario would enable it to probe key factors effecting customer relationships such as trust, reliability, responsiveness and appeal – the components that determine the reputation of an organisation – in a straightforward way.
The results serve as a wake-up call for marketers and brand managers, and are particularly alarming for those in the energy sector.
Trust is at the heart of any brand promise, and yet nearly one-third of UK consumers distrust large organisations. Energy providers record the lowest level of trust at an average of 42%. Thames Water records the lowest trust level of all.
Respondents feel that 70% of organisations provide a reliable service. Financial services is perceived as the most reliable industry. The energy sector is regarded as the most unreliable; Thames Water again plumbed further depths, being named as the worst-performing business across all sectors reviewed.
The survey also finds that just over a half of organisations are likely to treat consumers in a courteous manner. In almost a quarter of cases consumers feel they are shouted at. In the energy sector, 18% of communications are perceived as "inaudible mumbling", 29% of people feel shouted at and a staggering 10% feel as if they are metaphorically have the living daylights shaken out of them.
Only 59% of consumers say they are treated like adults, 41% say they are patronised or insulted by the organisations they deal with, and 26% say they are treated like idiots by energy providers.
Of the organisations surveyed, 17% are perceived to show no interest in consumer concerns. Insurance companies are better listeners than other sectors, with 47% of consumers believing they are genuinely interested in what they have to say. Contrast this with the perception that only 23% of energy providers care about customer concerns.
Energy companies really have work to do in this area. When asked how they performed, an alarming 53% of people say that energy companies are more interested in "smoothing over" problems than listening to customers’ feedback.
In terms of "brand phobia", it seems that there is plenty of work to do for the UK’s brand managers – with only just over a third of consumers welcoming an association with some of the most established companies in the UK. To highlight the extent of the challenge, this figure drops to 25% for the energy sector, making it the worst performing commercial sector.
Thom Newton, founding director of 35 Communications, contributed to this week’s Trends Insight