What are the core issues that the utility industry must address to improve customer experience for good?
The energy industry is a fickle thing. Last November Ofgem announced its long-awaited energy price cap to the delight of customers, promising a ‘fairer deal’ and minimum savings of around à‚£76 annually to come into play from 1st 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 price cap barely taking effect, the regulator announced an increase which saw the average household tariff increase by à‚£117 to à‚£1254 per year, which is further 10 per cent increase on prices prior to the January implementation.
With energy prices heating up, the reception is understandably frosty from customers 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 owing to the new 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, while the watchdog talks around raising standards in “customer service and financial resilience”, 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 as well as increasing competition for the players who dominate the market and as the reverse has become true, frustration and distrust are becoming routine in the customer’s experience. Indeed, a recent survey from Oneserve found that out of 2000 energy customers, 50 per cent of these reported receiving a poor customer experience from their provider. Two fifths of whom having experienced bad service at least once every three months.
It is unsurprising that customer dissatisfaction is so high given the recent events, which indicate the customer’s best interests are not yet at the heart of industry regulation. The sector is at a turning point and if it intends to truly transform customer service, good intentions must give way to concrete action. Ofgem’s original price cap communications did conveniently state that fluctuations in wholesale gas and electricity costs may affect the cap in February, a caveat which has come to fruition.
As an industry watchdog who 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 which will elevate customer experience standards.
While it is important to ensure upcoming providers do not bring bad customer experience practices into the sector, it still remains prevalent within the industry now and must be eradicated at the source. This will require a fundamental transformation in the way suppliers perceive and interact with customers. So how can such a complex sector restructure its very DNA towards a better customer experience? To start with, the sector must acknowledge why change is not being maintained.
The challenge is that the cap rise speaks of deeper problems underlying the industry. E.ON led the Big Six pack by increasing prices accordingly for customers, with EDF following suit. A hasty move which confirms that most energy providers measure their standards by competitors alone. These energy companies are determining and justifying their actions using the sector as the benchmark, rather than considering the real experiences and expectations of customers. As a result, the sector is failing to make true customer-centricity a part of its approaches.
Now with customers more willing to abandon the Big Six following the cap, as British Gas has seen, it is imperative that suppliers take a more outward-looking approach. Providers must appreciate that their customers do not exist within a vacuum, they are equally consumers from across a wide range of sectors from retail to financial services which is constantly elevating their expectations for high-quality, reliable experiences. Customers simply want value-for-money as well as great customer service from energy providers just as they expect it from their high-street brands.
The customer does not see a difference between the level of service expected from Amazon or E.ON, and so energy companies should be looking at the customer experience champions in different industries for inspiration on how to deliver great service for modern consumers. The onus is on suppliers to be benchmarking correctly against other sectors, rather than against previous levels of competitors, to encourage innovation and actively improve customer service.
Customer experience reform means providers must consider the individual who is living the experience of the price inflations. Customers are facing greater pressure to meet rising costs and perhaps the hassle of switching 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 this time last year, according to Energy UK.
The risk for providers further 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 with customer service. With E.ON, 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 touchstone for customer experience and start delivering superior service if they hope to restore faith for consumers, and win their loyalty.
Providers who do so will stand out and take advantage in an increasingly crowded market which does not yet appear to be taking the customer seriously enough.
Chris Proctor is Chief Executive of Oneserve, a company that specializes in workforce management software for the utility sector.