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Service in the energy sector: Why is it so bad and what can be done?

10th Jun 2016
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In its recent preliminary investigation into the energy market, the Competition Markets Authority (CMA) provided a damning assessment of the main energy companies. In particular, the “big six” suppliers - British Gas, EDF Energy, npower,  E.ON UK, Scottish Power and SSE – were accused of taking their customers for granted, not simply in pricing – with 70% on ‘default’ expensive standard variable tariffs – but also in the quality of customer service they deliver. 

Alex Heys, head of marketing and communications, at Flow, says: “The work of the CMA is a much-needed shakeup of established organisations, who have been allowed to become complacent and, in doing so, have tarnished some customers’ views of the entire energy market. The most recent example of this is Scottish Power, which has been fined £18m by Ofgem for treating their customers unfairly for a sustained period of time. In a scathing review of the company’s treatment of customers, Ofgem revealed that the energy firm received more than one million customer complaints between June 2013 and December 2015.” 

Reporting on the story at the time, the Financial Times suggested the £18m penalty “sends a strong message to all energy companies about the importance of treating consumers well at all times, including while new systems are put in place.” The newspaper also reported that “around £15m of the fine will be paid to vulnerable Scottish Power customers affected by the customer service issues, with the remainder going to charity”.

But is this enough to ensure that customers are treated with the respect and offered the high level of service they deserve? There is much evidence that customer service is lacking within the energy and utilities sector, and that such fines might not a make difference because customers seem reluctant change provider or, if they do, to look beyond the incumbent energy and utility companies.

We have seen the proliferation of price comparison websites (PCWs) in recent years, something that should facilitate switching. So why hasn’t this helped? In my opinion, PCWs aren’t always acting in the customers’ best interest. The search results shown to customers quite often prioritise the energy companies who pay the most commission or advertising to the PCWs, rather the suppliers who offer the best deals.

A recent statement from the Competition and Markets Authority said: “Although competition has benefited those customers who have switched to competitively priced fixed-term deals, around 70% of the domestic customers of the six largest energy firms are still on the more expensive ‘default’ standard variable tariff (SVT).”

This means the customers are missing out on potential savings. Citing the CMA’s recent energy market report, personal energy shopping start-up, Flipper Community, claims that most energy consumers aren’t switching. The hassle of switching is one reason why many aren’t bothering. Traditionally, there were four tariffs per provider and with 43 energy providers in the market, this equated to 160 tariffs. But the CMA’s plans to rightly encourage more competition will raise this to over 800 energy tariffs. 

Customers also complain about the following:

  • Customers don’t feel they have the time or inclination to constantly change energy provider, and so the incumbent companies within the energy sector can remain largely complacent. 
  • The increasing complexity and number of tariffs available make it harder to know whether a customer is really getting the best deal.
  • Bills that are hard to understand, causing confusion. The lack of response from energy companies to questions or whenever an issue is raised with them by the customer.

Heys says: “A recent survey which Flow ran amongst people in the UK revealed that the energy market has become so over complicated and rife with jargon that over a third of us don’t even read our energy bill each month and over half believe it’s the most confusing of all household bills. But it’s not just arcane terminology that’s the problem. Difficult-to-compare tariffs, price comparison sites that don’t always show the best deals – all this combines to mean that customers often don’t know whether they’re getting the best deal or not. And when customers are fundamentally confused about just what it is that they’re receiving from a business, it’s hard for them to judge value and certainly hard for them to judge an overall experience that includes customer service as a key component.”    

“The research indicates that greater transparency and clarity is needed in the energy market. Customers need to understand the ins and outs of energy and, of course, they need to understand every element of their bill, how much energy they’re using, how much they’re paying, how that compares and how they might reduce their costs.  It’s only really when customers have this level of understanding that customer service in the energy industry will ever be in a position to compete with the best-in-class.”

But things may be set to change. With the CMA conducting an investigation into the big six, and keen to encourage greater competition in the energy sector, the market is ripe for smaller, agile businesses to capitalise on the customer dissatisfaction.

So how can start-ups improve customer service where the incumbent market players aren’t acting in the customers’ best interest? Flipper Community’s co-founder, Hilal Kanafani offers some best practice tips, which even the existing market players should consider if they wish to put their customers first:

  1. Research the customer pain points, and not just those that are communicated to contact centre agents. All customer-facing channels offer an opportunity to understand customer pain points and by doing so you will widen the definition of customer service.
  2. Examine new and innovative business models that engage with the customer. 
  3. Consider how transparency can enable customers to trust you more than any other provider by demonstrating that you really offer the best deal, but also enable them to switch easily without any hassle.
  4. Think about using self-service and automated services to resolve the pain points, and to motivate customers to take action today. Self-service and service automation can eliminate many customer service enquiries to the supplier altogether.
  5. Turn every bill into a marketing and customer experience opportunity by making them simple and easy to read and  more understandable to resolve many of the standard billing questions that customers normally have before an enquiry to the supplier even needs to be made.
  6. Ensure you build a platform that customers really want and need. Remember that the biggest mistake that start-ups make is to build something that nobody really wants.
  7. Remember that customer service can be a key way for start-ups to differentiate themselves from their competitors.
  8. Don’t be like the price comparison websites. They don’t always offer customers the best deals and they lack transparency.

Kanafani concludes: “Identifying the actual customer pain points and better customer service can only be achieved by talking to customers to understand what they are going through and what they want.” This then requires you to find and execute a solution that’s both economical for you and your customer. It is also crucial to offer what he calls “a big step up in terms of the experience on offer compared to what the customer is used to” in order to gain a competitive advantage. This is how any company – including a start-up – can improve customer service to stay ahead of the game.”


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By PaulineAshenden
17th Jun 2016 07:09

Given that utilities are selling a product that cannot be seen, price and customer experience are the only factors they can use to differentiate themselves. Yet Eptica research found that many are failing to answer basic questions online – one utility responded to a tweet in 2 minutes, and another took 4 days to answer the same query. More in this Eptica blog

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