Small firms must play it smart

The advent of smart metering presents small, independent energy suppliers with a big opportunity to leverage the goodwill customers already feel towards them, says John Peters.

According to the Which? 2014 energy satisfaction survey in January, the UK’s smaller and lesser known energy suppliers are outperforming the UK’s big six in the customer satisfaction stakes. The consumer group polled 10,000 energy customers, and the satisfaction rating was based on customer service, value for money, accuracy and clarity of bills, complaints, and how suppliers helped their customers save energy.
Good Energy, a green and independent supplier, topped the league table and other smaller suppliers, including Ecotricity, Utility Warehouse, Ebico and Ovo Energy, were all ahead of British Gas, EDF, Eon, Npower, SSE and Scottish Power.
It is encouraging to see the number of suppliers included in the survey. The results indicate real competition and emphasise that Britain’s energy retail market offers real opportunity for small, independent suppliers.
From autumn 2015, the smart metering rollout will begin in earnest, and by 2020 more than 52 million British homes and businesses will have their dumb electricity and gas meters replaced by digital smart meters to more accurately measure and bill electricity and gas use. This presents all energy suppliers with a major opportunity to acquire new customers and engage existing ones.
To compete effectively, small independent suppliers will be aware of the need to get their smart metering business strategies right to ensure they can scale quickly while maintaining a quality service. They know that not only will they need to continue to offer compelling and attractive services to customers, they will also need the right systems capabilities, technologies and back office systems in place to meet the demand of smart. Doing all this, while continuing to grow, maintaining the favourable position they currently hold in their customers’ eyes, and ensuring they never let them down, could be a challenge.
Operating successfully in the energy retail market can be complex and with 18 months until rollout, now is a good time for small independent suppliers to take a step back and examine their business operations to ensure they are ready. It can be tempting for small suppliers to focus on the present – the urgent business requirements – and it can be difficult to find the time and resources to anticipate every change that will affect their business from a strategic perspective over the next five years.
However, with changing customer needs, fast-evolving technology and the advent of smart meters, small suppliers will need to do so to maintain their competitive position.
First, they will need to consider the many challenges ahead. One of the biggest will be consumer engagement. To support consumer engagement with smart meters, the Central Delivery Body has been established. The organisation is working with a wide range of stakeholders in the industry to build public awareness and confidence in smart meters and help people gain a better understanding of the energy and cost savings offered by smart meters.
Competition is set to increase in the market too. With a greater number of suppliers operating in an increasingly commoditised energy market, it is clear customers will not be swayed just by price. Suppliers need to do more to differentiate themselves and distinguish their brands.
Some small suppliers are already making strides in this area. Good Energy’s focus on renewable and green energy is appealing to many customers; Spark Energy is growing fast by offering a dedicated service to the property lettings market; and the Co-operative is offering a customer-centric energy proposition and building on its community-focused, ethical brand values. Differentiation is important in a crowded marketplace, but suppliers will also need to continue to deliver on their promises.
The quality of customer service will be a marker of success: consumers will need to be educated about smart meters, how to operate them, and the benefits they will deliver.
Suppliers are already rethinking their recruitment strategies and training to ensure they employ people who are not only highly competent and knowledgeable but who can provide advice to customers and handle all their technical and practical issues.
Another challenging area will be technology. All suppliers will have legacy technology systems in place that have not been built for the smart world. They will need to make an assessment about whether these systems should be replaced with new technology or simply re-engineered, and which option will suit the business in the long term.
Other considerations for small suppliers will be selecting the right technology partners to deliver their smart meters. The smart metering system is complex, with several components: the electricity meter, gas meter, in-home display, and a communications module, all of which need to be interoperable and which may be the responsibility of different providers. There are many new technology suppliers emerging alongside companies with a track record in the legacy world of metering, and suppliers will need to decide who to work with. Due diligence and testing will be of paramount importance in both cases.
There are a number of other challenges facing small suppliers, including staying on top of regulatory obligations, ensuring they are not leaking profits, that they have the most cost effective and efficient business processes in place, and that they are responding to their customers’ evolving needs.
It will not be easy, but with the start of the rollout still 18 months away, this is the time for small suppliers to examine their businesses to determine what changes need to be made, what support they need, and what strategy is required. This is a major opportunity to shine, by nurturing the positive light in which many of their customers view them, and ensuring they have a robust back office in place.