Chapter 4
 

What now for energy providers?

What happens when price and renewable options become a hygiene factor? How will energy suppliers differentiate their services?

 

We are finally starting to switch

Up until 2012, 98% of energy was provided by 'The Big 6'.  But switching is on the rise as these suppliers continue to rank in the bottom 10 for customer satisfaction after failing to shake their reputation for putting profit before customers.  

According to Ofgem about 57% of people with the largest suppliers - 13 million customers - are STILL on a standard variable tariff paying about £290 pounds per year more than the cheapest deal on the market.

Switching increased by 15% in 2017 - equivalent to 5.5 million customers. 1 in 5 of these people went independent. With providers like Octopus and Bulb proving you don’t need scale to compete on price, people are for switching for lower price, differentiated products including renewable energy deals and better digital first customer service. 

On average about 50% of us are happy with our current energy provider, but when we switch more than 90% of us are satisfied with the service.  And satisfied, engaged customers spend more.  In fact, each engaged household can add an incremental €15–€40 annually to an energy retailer’s bottom line.

Competition is increasing with more than 60 suppliers operating in the UK energy market.  Many people we spoke to also said they would be interested in buying energy from companies such as broadband providers like BT, supermarkets such as Tesco and TV subscription services like Sky. Almost one fifth of people (18%) said they would be interested in buying it from a music streaming service such as Spotify

Now competition is growing, price and renewables are no longer a differentiator and switching takes less than 10 minutes, the pressure is on the big energy suppliers to design new services that will deliver value to their customers or risk becoming irrelevant.

 

Principles for a new energy service

In a world where price and renewable options are hygiene factors. Where switching is easy and frequent, and customisable services with peer to peer options become the norm a new kind of service is required.

We've developed three key principles to guide what a new kind of energy service could look like in this context: 

1. Let me create my own service

Use digital to give me the tools I need to design my own service (hyper personalisation) 

Expectations have changed. Digital allows for customers to say what they want and when they want it and the tools to ability to create their own service that works for them. So suppliers will need a fluid product & service catalogue and an agile business to support customers in creating their own service from a suite of options. 

2. Let me engage with you on my own terms

Data driven interactions break assumptions about how I want to engage with a service

Customers don’t want suppliers to assume they know what's important to them, or how they like to be communicated to, especially based on tired demographic segmentation. They want to enter into an arrangement (sometimes set and forget) on their own terms. They want you to ask and take actions based on real data about their real motivations and actions. 

3. Help me solve my 99 actual problems

Solving the actual problems in my life is an easy way to get my attention and get to know me better

It's noisy out there.  And some people just don’t care. Customers want all round services that fit into and improve their current lifestyle eg. help them with their end-to-end utility management experience. 

In the next section you can see our two concepts Kitty and Kin which were developed to show how these three key principles can be used in the design of two new kinds of energy services. 

Kin is a great example of how to allow customers to start to design their own service and to get to know more about how they want to be engaged with. 

While Kitty is the perfect example of how energy suppliers can solve a problem related to house sharing as a way of meaningfully and usefully entering the lives of these customers. 

 

What might an new energy service designed in line with these principles look like?

Concepts: From indifference to action ➞