AGENDA: Utility tie-ins signal market battle - The imminent opening up of the market is prompting new utility companies to forge deals to win custom from the old monopolies. Robert Gray reports

Marketers in electricity companies will be undergoing a rude awakening over the next few months. In an industry in which until a couple of years ago marketing was seen as an unnecessary expense, the major players are suddenly turning to brand building to hold on to customers as they face a newly opened-up market.

Marketers in electricity companies will be undergoing a rude

awakening over the next few months. In an industry in which until a

couple of years ago marketing was seen as an unnecessary expense, the

major players are suddenly turning to brand building to hold on to

customers as they face a newly opened-up market.



Last week, in one of the more unusual promotions to emerge, London

Electricity revealed its offer of free gas and electricity for three

years to anyone who signs up to a special mortgage offered through

Alliance & Leicester (Marketing, September 24).



The reason for this explosion of activity is the 750,000 customers in

various parts of the catchment areas for Eastern Electricity, Manweb,

Scottish Power and Yorkshire Electricity who, two weeks ago, were given

the freedom of choice to buy electricity from a source other than the

monopoly utilities.



In the coming months, competition will be extended into other areas

until all 26 million customers that make up the pounds 7bn domestic

electricity market will be able to choose their own supplier.



As the market opens up in stages, competition among the 15 Public

Electricity Supply (PES) companies will intensify. Marketing will become

key as companies vie to retain customers from their traditional

’footprints’ while attracting those from outside their old geographical

areas.



The entry of British Gas into the market has unbalanced the status

quo.



Having lost upwards of three million customers (many to PES companies)

through the introduction of competition in the gas market, British Gas

is determined to win back millions of electricity customers.



PES companies are aware that they have a fight on their hands. Many have

developed innovative marketing programmes, including the London

Electricity/Alliance & Leicester deal. The ’no bills’ mortgage will save

an average household pounds 1600 over three years.



’House-moving is the classic time to consider changing supplier,’ says

Simon Carter, London Electricity’s head of residential marketing.



The bank and the PES have agreed a deal based on average usage. If

consumers use more power than average, London Electricity will lose out;

if less is used, Alliance & Leicester will have the worst of the

bargain.



London Electricity has started a poster campaign, which will be stepped

up into a ’heavyweight’ campaign in December when the first part of its

market area (about 10%) is open to competition.



’We were a boring utility, like all the others,’ says Carter. ’We didn’t

even have a marketing department until a couple of years ago. Now we

need to change customer perceptions.’



Eastern Group, the largest PES with three million customers, is expected

to be one of the most aggressive in pursuit of new business. It has

forged a deal with Barclaycard whereby consumers are given discounts on

bills when paying by credit card.



Eastern is not alone in developing affinity relationships. Southern

Electric has joined the Argos Premier Points loyalty scheme,

Hydro-Electric has a tie-in with Air Miles, gas supplier Amerada has a

link with retailer Currys, Yorkshire Electricity with rival retailer

Tandy’s, and Norweb has a partnership with Tesco, which offers loyalty

card bonus points to customers.



Scottish Power, which brought out its own Visa card on which points

collected can be redeemed as discounts on electricity bills, is the

first PES to offer what is called ’dual fuel’ billing: putting gas and

electricity charges on a single bill. This launches next month, when the

90,000 customers who have taken up the offer receive their first unified

bills.



Willie MacDiarmid, Scottish Power’s sales and marketing director of

energy supply, says quality of service and simplifying things for the

consumer are the way forward.



One danger is that margins will be cut to the bone as competitors slug

it out on price. British Gas is currently putting the cat among the

pigeons by running TV ads promising to offer cheap electricity until at

least 2001.



’The companies that will survive are those that give great customer

service and good products,’ says Jon Kinsey, British Gas Trading’s

director of marketing and strategy.



There is a consensus that consolidation in the industry is inevitable,

with smaller players forced to merge or be crushed by the giants.

Research from MarketLine International found that 4.2 million domestic

electricity customers intended to switch electricity supplier by the

year 2000.



Murray MacFarlane, head of the energy customer management practice at

PricewaterhouseCoopers, is author of several studies on the sector. He

has found that up to 55% of consumers are receptive to switching

electricity supplier. He says that PES companies will be under ’severe

pressure when competition begins next year’.



In the long term MacFarlane sees a greatly changed market in which

consumers might buy electricity from retailers, insurance companies,

clubs or even their employers. But however the future pans out, it will

be a million miles from the monopolies of old.



Discussion

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Brand Republic Jobs

subscribe now

Latest

John Lewis walks consumers through its history to celebrate 150 years of business
Waitrose boosts content strategy with 'Weekend Kitchen with Waitrose' C4 tie-up
Hottest virals: Cute puppies star in Pedigree ad, plus Idris Elba and Fruyo
Amnesty International burns candles to illuminate new hope
Toyota achieves the impossible by calming angry Roman drivers
Tom of Finland's 'homoerotic' drawings made into stamps
YouTube reveals user habits to appeal to 'older' marketers
Ex-M&S marketing chief Steven Sharp consulting at WPP
Wolff Olins reveals new CEO after Apple poaches Karl Heiselman
Glasgow offers £30,000 prize to best digital idea for 2014 Commonwealth Games
Google's revenues surge but shares drop as it grapples with transition to mobile
Facebook beats Twitter to most 'marketing friendly' social media site crown, says DMA
Fableists believe children like Finn should be outdoors enjoying life
Homebase, Baileys and Camelot join the line-up at Media360
MasterCard renews Rugby World Cup sponsorship to push cashless message
Lynx unleashes £9m 'Peace invasion' campaign
Social Brands 100 Youth: Pizza Hut most social youth brand in UK
Cheryl Cole is wild and arresting in new L'Oreal work
Morrisons told not to show alcohol ads during YouTube nursery rhymes
O2 head of brand Shadi Halliwell departs after 23 years at company in restructure
Tesco hit by further sales decline as it turns to digital Clubcard and social network
Branding guru Wally Olins dies aged 83
Duracell short film captures epic Transatlantic voyage
Ash runs Tinder experiment to show smokers are less desirable to opposite sex
British Airways teams up with Gerry Cottle Jnr for summer of rooftop film screenings
Arklu says 'girls can be superheroes too' with doll design competition
Coke enters squash market with Oasis Mighty Drops
Virgin Galactic signs up Land Rover as space flight sponsor
Motorola marketer Andrew Morley departs as Google gears up for sale to Lenovo
US Airways apologises after tweeting obscene image at a customer