A better benchmark for customer service in the energy sector

The energy price cap rise has highlighted industry failings when it comes to customer service, says Oneserve chief executive, Chris Proctor, and suppliers must look outside the sector for best practice if they are to succeed.

The energy industry is a fickle thing. Last November, to the delight of customers, Ofgem announced its long-awaited energy price cap, promising a “fairer deal” and minimum savings of about £76 a year from 1 January. For consumer groups and political lobbyists it seemed that the sector, or at least the regulator, was at last understanding and responding to customer demands.

Yet in April, with the cap barely taking effect, the regulator announced an increase which saw the average household tariff increase by £117 to £1,254 per year – a 10 per cent increase on prices before the January implementation.

With energy prices heating up, the reception from customers is understandably frosty and poses a real reputational risk for the regulator. Indeed, British Gas owner Centrica recently announced a challenging financial first-half having lost 234,000 customer accounts, in part because of the price cap.

In the eyes of the consumer the cap increase is mocking their faith in the industry by disregarding their requests for fairer service. The gulf between words and action here is part of the issue. The watchdog talks about raising standards in “customer service and financial resilience”, but the lack of evidence for this so far is only exacerbating customers’ discontent.

The original cap had sought to protect customers from unfair price hikes and to increase competition for the players who dominate the market. The reverse has become true, frustration and distrust are becoming routine in the customer’s experience. Indeed, a recent survey from Oneserve revealed that out of 2,000 energy customers questioned, half reported receiving a poor customer experience from their provider. Two-fifths of them experienced bad service at least once every three months.

It is unsurprising that customer dissatisfaction is so high given recent events. The sector is at a turning point and if it truly intends to transform customer service, good intentions must give way to concrete action. Ofgem’s original price cap communications did conveniently say that fluctuations in wholesale gas and electricity costs may affect the cap in February, a caveat that has come to fruition.

As an industry watchdog that promotes customer-centricity, Ofgem has a duty to lead providers and ensure the best possible service for customers, and with this prior knowledge Ofgem might have managed expectations better.

Ultimately the desire to do better for customers must become integral to industry practice and it seems the regulator is redoubling efforts to change this. Recently Ofgem announced that it will be introducing more stringent entry tests for new energy suppliers from June. A key part of this test will require companies to provide a customer service plan that will improve customer experience.

While it is important to ensure new entrants do not bring bad customer experience practices into the sector, it remains prevalent in the industry now and must be eradicated at source. This will require a fundamental transformation in the way suppliers perceive and interact with customers.

The challenge is that the cap rise speaks of deeper problems underlying the industry. Eon led the big six pack by increasing prices accordingly for customers, with others following suit. Energy companies determine and justify their actions using the sector as the benchmark.

Now with customers more willing to abandon the big six after the cap, as British Gas has seen, it is imperative that suppliers take a more outward-looking approach. Providers must appreciate that their customers are consumers in a wide range of sectors from retail to financial services. Customers want value for money as well as great customer service from energy providers just as they expect it from high-street brands.

Energy companies should be looking at customer experience champions in different industries for inspiration on how to deliver great service for modern consumers.

Customers are facing greater pressure to meet rising costs and may be more prepared to switch in pursuit of more cost-effective providers. Indeed, the number of customers who switched providers in March 2019 was 12 per cent higher than the total number of switches at this point last year, according to Energy UK.

The risk for providers extends beyond customer churn. A continued inability to deliver on expectations could result in stronger regulations and repercussions as demonstrated by Economy Energy and Centrica.

Actions speak louder than words on customer service. With Eon, EDF and other major energy players pitching their prices as close to the cap as possible, there is even less differentiation between providers for customers. Suppliers should look to other industries as their touchstones for customer experience and start delivering superior service if they hope to restore faith for consumers and win their loyalty.

Providers that do so will stand out and take advantage in an increasingly crowded market that does not yet appear to be taking the customer seriously enough.