Flipping the switch on the UK Energy Market.
It’s been 20 years since full competition was introduced into the UK energy market, and there’s been a lot of change. Competition means that there are now 69 utility suppliers in the UK, and growing Internet use coupled with the rise of comparison websites has led to a radical shift in the way we shop for electricity and gas. When we also consider that near-universal acceptance of climate change has brought the environment to the forefront of public consciousness, it’s clear that there’s a lot going on in the UK energy market.
But the Big 6 are still...Big.
But some things haven’t changed, and the Big Six are still in control of the UK energy market, (77% of the market to be precise), leaving the other 63 providers to fight over the scraps. However, despite this market dominance, or perhaps because of it, a growing number of consumers are unhappy. Poor ratings and reviews are commonplace, and negative press seems to dominate. Of the Big 6, only EDF manages to score higher than 1 star on Trustpilot.
Enter the challengers.
In a move against the ‘big, bad’ energy market firms, there’s been an emergence of smaller players. Some are for profit, some not, but all are promoting a sense of accountability and consumer relevance, because the new guys are different. They’re built with baked-in purpose, and they’re getting recognised for it. With mainstream press advocating challenger brands like Bulb and consumers leaving high ratings on sites like Trustpilot, it’s clear that people are starting to take notice.
Time to switch.
According to Ofgem, 40% of consumers say they plan to switch their energy tariff and/or supplier in the next 12 months or when their current deal expires. We all know that there’s a big discrepancy between what consumers say they’ll do and what they actually do, but last year a record 5.5m customers switched their electricity provider in the UK, and that’s having an impact on the Big 6. People are jumping ship. In fact, a quarter of total switches in March 2018 were from large suppliers (i.e. the Big 6) to other providers.
But in order for people to switch, they have to be engaged in the market, and when it comes to the energy market, the most engaged consumers tend to be middle-class homeowners (55% of households with a combined income of 50k+ switched providers in the last 2 years, and 48% of homeowners did the same compared to just 36% of renters).
But banking on switchers is dangerous.
With 76% of consumers citing saving money as their primary reason for switching energy suppliers, it’s safe to say that price is a key trigger. But in a fluctuating market, it’s not always possible to compete on price. That makes targeting switchers a dangerous strategy.
In 2018, eight small energy providers went bust, and a further four have exited through corporate transactions, feeding consumer concern and mistrust amongst energy companies. It’s predicted that as many as 10 more could follow suit over the coming months.
While price is a key trigger for consumers looking to switch energy suppliers, switching decisions are also determined by other factors like customer service and process simplicity. It’s not feasible to rely on a competitive price for long term, sustained growth which makes messaging around trust and simplicity even more important.
So what’s the key UK energy market takeaway?
There’s nothing wrong with having a niche because while everyone is a potential customer, not everyone is a realistic customer. Knowing where you’re competitive and who you’re competing against will help deliver sustainable growth, building a foundation for long term success, because you can’t be all things to all people. Understanding your competitive regions and your competitors helps define key growth segments. Once these segments are defined, it’s time to develop segment-specific messaging.
We can help you be the right things to the right people. This article is just the tip of the iceberg when it comes to our understanding of an increasingly complex market. If you need help finding your customer niche or want to relaunch with a new purpose, give us a call.
By David Craft