Utility, not commodity?

In a sector where consumers pick their providers on price, brands are hard to build. But npower is doing better than most, says Nathalie Kilby

Much like the England cricket team, npower is doubtless feeling energised after the Ashes victory. Record audiences of over 7 million viewers tuned in to Channel 4 to watch England beat Australia, and npower’s sponsorship of the series can only have left it basking in the warm glow.

Npower, owned by German utility company RWE, is a relatively young brand. It was created in 2000 when National Power demerged to set up Innogy. Since then, consolidation in the utility sector has left it as one of six major UK suppliers of domestic home energy.

In 2000, Innogy had 2.2 million customers, but the acquisitions of Yorkshire Electricity and Northern Electric saw the company increase its customer base rapidly. Today, it has 6.3 million customers. Npower head of brands Kevin Peake says that one of the company’s strengths has been keeping its customers after buying rival energy companies. Npower has a customer churn rate of under 15 per cent, compared to an industry average of 18 per cent.

Peake argues that npower’s pricing policy is transparent and has tangible benefits, factors which attract consumers. He cites the company’s latest price package, Gas Guardian (MW last week), as a case in point: “It is a transparent offer, whereas [British Gas] freezing prices until 2010 is not.”

However, he adds that while price is a natural factor for consumers when choosing an energy supplier, making npower more visible, thanks in large part to the cricket sponsorship, has boosted awareness.

Peake says npower has always been a “slightly different” utility company. “It is not a fuddy-duddy utility company,” he states. “It was the first sponsor of ITV’s The Bill in 2000. The brand has also sponsored the FA Premiership (in 2001), as well as home improvement shows and, of course, the cricket. For &£3m, cricket has proven to be real value for money in terms of exposure.”

But not everyone is convinced npower’s association with cricket is a good one. Brandhouse WTS head of planning Warwick Cairns says: “The brand people immediately associate with cricket is [England team sponsor] Vodafone – npower is secondary.

“To most consumers, npower is just another big energy company in a very boring sector. Trying to make it more glamorous by sponsoring sport is not the way to attract consumers.”

Cairns says people want to know that utility companies are reliable and safe: “The main priority for consumers is price. Then it is safety – gas and electricity are dangerous, and people want to be reassured that the company which supplies them will do so safely and reliably.”

Others in the sector agree. One source says: “British Gas may be smarting from recent price rises, but this is hitting the sector as a whole. And while price is naturally an issue, British Gas has managed to portray itself as a caring, reliable brand. It has its ‘man in a van’ on the streets, getting itself seen in the community.”

Cairns says npower would do well to focus on domestic issues. “Home improvement television programmes were a much better association. These programmes make consumers think about their homes and are the natural environment for utilities. I think it would be much better for npower in terms of converting viewers into customers. I’m not so sure cricket turns awareness into custom.”

Peake says the cricket sponsorship has “worked tremendously well and is worth about &£50m in terms of brand awareness”. He says the &£4m sponsorship of home improvement shows on Channel 4 (MW February 28, 2002) was a good association, although he suggests it was “left-field”.

He also says that the “orb” advertising characters created by Isobel – which show gas as a swirling blue blob and electricity as a glowing yellow ball – have been a success with consumers and helped to raise awareness. Npower is even considering making toys of the two, following requests from consumers. “British Gas has even been impressed enough to reintroduce its flame character,” he says.

With the major UK energy companies having customer numbers between 5 million and 6 million – apart from British Gas, which has 13 million – it seems very difficult for utilities to engender loyalty by brand image alone. Peake says that for this reason, npower aims to make its sponsorships and advertising “summery and fun”, claiming that British Gas’s positioning is “cold and instills fear”.

But price and safety seemingly remain the major concerns for energy consumers. Interbrand executive director Andy Milligan says brand performance is key: “People care about a brand because it is a guarantee of reliability and they will pay a premium.

“For consumers, reliability and service are crucial. Price is important, but once they have switched provider, service is the factor that

Timeline

2000 National Power demerges, forming Innogy (npower’s parent company), and International Power as separate businesses

2001 Innogy buys Yorkshire Electricity, swapping YE’s energy distribution arm for the customer base of Northern Electric & Gas

2002 German utilities company RWE buys Innogy

2003 Innogy sells npower telecoms to focus on core electricity, gas and related products. Innogy becomes RWE Innogy as part of a global restructure

2004 RWE Innogy is renamed RWE npower. Npower sister companies National Wind Power and Innogy Hydro become npower renewables