Six insights about increased competition in utilities

The utilities industry is becoming increasingly competitive as more retail providers enter the fold. But should traditional providers be alarmed?

Last month I took part in a Utility Week roundtable discussion around new challengers in the sector, and what firms can do to ensure they retain customers in the wake of greater competition.

Here are some of the key points covered during the session.

Removing the broker barrier is key

Many brokers in the energy market seem to get a disproportionate slice of value compared to the risk they’re taking, and often the customer is not getting good value.

That’s not to say that utilities firms should avoid brokers altogether – there are still some helpful ones out there. But as utilities firms begin to realise they can still achieve a significant market share without the help of a broker, they should become more confident in going direct to market.

Finding value in consumer data

One massive advantage that traditional utilities firms have is the sheer amount of consumer data they’ve been able to collect over the years.

But while this is a huge potential positive, data alone is not going to solve any problems. The real value lies in working out how that data can be used to create a better, more personalised service for customers and spot any future patterns in the market.

As one member of the roundtable put it: you can have reams and reams of data, but it comes down to figuring out the ‘so what’.

SMEs will decide who wins or loses

While big companies such as supermarket chains are extremely valuable to utilities firms, a large part of the customer base is made up of small businesses – fish and chip shops or pubs, for example. What are utilities providers going to offer those smaller customers in order to retain them?

If a new provider comes along and offers a better deal to one sector of the market (cafés, for instance), there would be little reason for them not to take that up. Existing providers mustn’t lose sight of this huge and extremely valuable part of the market.

Keeping hold of the middle to higher end SMEs in particular will be what decides whether utilities firms win or lose in the long run.

The industry needs disruption, but who will lead it?

A one-size-fits-all solution is no longer an option. When you look at other markets, the brands that have come out on top are the ones who emerged with a new way of doing things. Brands like Airbnb, Deliveroo and Uber are classics examples of this – disrupting industries that had remained unchanged for many years by providing a different, more user-friendly service.

The question is how utilities firms replicate this disruption. The number of customers is not going to increase significantly. So providing a better service to existing ones is key.

Branding (and rebranding) will play a big part

With deregulation coming in, the breaking up of bundled meters and existing providers forming alliances, from a branding point of view it’s going to be interesting to see how things play out in the coming years. Do you go with the comfort blanket of a big-name partner, or do you choose the dynamic route with a new and different brand?

Many at the rountable felt it is important for utilities firms to retain their heritage and hard-won reputation, but as we’ve seen with Uber you can’t rely on that alone. This is particularly true for those who have a strong local brand but want to break out into being a national provider.

Customers want value – make sure you’re providing it

While price will always be a key deciding factor in the utilities market, providing value to customers is also a major factor that firms need to bear in mind to fend off competition in future. If utilities companies can provide that additional value, the panel was confident that most customers will remain where they are rather than jumping to a new competitor.

All of this is positive news for the customer, of course. In the end, it is customers who will feel the benefit of any market changes as new and existing firms fight to win their business.

Enjoyed this post? Here are six things we learned at the Utility Week roundtable on asset management.

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Graeme Wright

Graeme Wright

CTO for the Manufacturing, Utilities, and Services, UK and Ireland at Fujitsu at Fujitsu
Graeme Wright

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