With utility customers no longer motivated by price, energy suppliers are set to show their sensitive side....
New research from independent market analysts, Datamonitor (DTM.L) finds that low prices are no longer enough to convince residential customers to switch to a new gas or electricity supplier. Utilities must tap into customer emotion if they are to secure custom and brand loyalty. With consumers becoming increasingly cynical about companies ‘greenwashing’ their brands, utilities must now seek to form partnerships with trusted brands if they are to win their customers’ loyalty and prolonged business. Datamonitor finds that customers are increasingly willing to pay a premium for their energy if the brand openly supports a charity or environmental group. If this marketing initiative is successful, brand could become a more important factor than price by 2007. However, utilities cannot afford to be half-hearted about their branding -commitment to a good cause must permeate all areas of the company from advertising to the call centre. Utilities as an object of affection – the relationship will blossom The very idea of loving your utility 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 on in future. With price differences between suppliers becoming slimmer, trying to attract and retain customers on the promise of cheaper bills is no longer enough. Similarly, the shift towards promoting premium customer service has lost it’s attraction - today’s customers see good customer service as a given, rather than a luxury. With these two marketing methods nearing their sell by date, utilities will soon reach the point where utility supply is no longer profitable unless customers can be made more brand loyal. Whilst this is no easy task, it is by no means impossible. New research from Datamonitor highlights the need for utilities to tap into customers’ emotions and establish themselves as compassionate companies who sympathise with their customer’s interests and passionate causes. In much the same way as in the 80’s, The Bodyshop positioned itself as the cosmetics company with a conscience, Datamonitor believes that in the not to distant future we will see utilities companies falling over each other to show their sensitive side. Utilities must tap into customer emotion to gain consumer’s trust and business British Gas has been developing the idea that “there’s no place like a British Gas home” in an effort to tune in with customers’ aspirations of comfort, security, belonging and safety. This is a real departure from the “No.1 price” and “service to delight” advertisements that UK utilities have used in the past, perhaps in recognition of the fact that most utility customers now expect competitive prices and excellent customer service as part of the deal. BT successfully tapped into these very same emotions with their ‘It’s good to talk’ advertisements and it is clear that utilities are now set to follow this route. Alex Patient, Utilities analyst at Datamonitor comments: “As disposable incomes have risen to the point where the average family already has luxuries, people are relegating materialistic goals in their minds with a consequent rise in emotional needs. Customer interest in everything from battery farming to sweat-shop business practices and CFC gasses is already well entrenched. As the environment becomes an increasingly pressing question, we are likely to see customers questioning how their electricity was generated, and demand one type of generation over another from their supplier. These are truly emotional issues for some customers, and utilities must learn to play their part in customer involvement.” Wildlife, green energy, and the elderly to the rescue Utilities have traditionally been homogenously branded, their products dull, and their emotional appeal very limited. Now, however, the need to resist further downward price pressure has led to partnerships and re-branding to take advantage of brand emotion. By linking brands to passionate causes like wildlife, green energy, the elderly, and the family, utilities are beginning to show signs of developing the brand loyalty they have dreamt of since competition began. Thus far, Powergen is working with Age Concern, Scottish and Southern Energy with the Royal Society for the Protection of Birds, Npower with Greenpeace, and Nuon with Natuurmonumenten – the Netherlands’ largest conservation organisation. Customers taking up these special tariffs are paying money, sometimes at a premium, to support causes that they believe in, or to gain the social benefits of being involved in such good causes. Brand will be more important than price by 2007… Continual bombardment of ‘green’ advertising has rendered customers cynical of companies greenwashing their brands or suddenly supporting good causes. For that reason, utilities have looked to partner with trusted brands to overcome this scepticism, a crucial factor in the customer’s decision making process. At present, customers are switching utilities based largely on price and, possibly, in the hope of receiving better customer service. This, however, is predicted to change by 2007 as customers become more involved with utility brands that have emotional resonance. Although the majority of customers will remain largely apathetic towards their utility, utility consensus places between 10-40% of customers as developing a positive association with the social image of their supplier, or have a stronger and more passionate attachment to the causes that it supports. …but only if the utility “walks-the-talk” Nevertheless, utilities cannot hope to improve customer retention and acquisition if they fail to live up to their brand promise, or if their commitment to the passionate cause runs only skin deep. Current brand values of innovation and environmental responsibility lack credibility due to the 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-talk” in the call centre. Indeed, until utilities place as much emphasis upon internal communications as they do externally, customer scepticism of the brand will inhibit development. By truly “walking-the-talk”, however, affection for the utility may not seem so ridiculous and could help banish the “fat cat” persona forever. ‘The Future of Branding in Residential Utilities’ is available from Datamonitor priced at $3,595. For details please contact 0207 675 7824 Datamonitor plc is a premium business information company specializing in industry analysis. We help our clients, 5000 of the world's leading companies, to address complex strategic issues. Through our proprietary databases and wealth of expertise, we provide clients with unbiased expert analysis and in-depth forecasts for six industry sectors: Automotive, Consumer Markets, Energy, Financial Services, Healthcare, Technology. Datamonitor maintains its headquarters in London and has regional offices in New York, Frankfurt, and Hong Kong.
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