In the smart meter age, competitor price differences will be minimal and potentially level the playing field, increasing pressure on energy supplier price margins but also customer retention. This could spark competition between suppliers for prepayment meter customers, through price and tariff offers and mobile phone-type incentives. Suppliers will need to retain and win customers and offer added value to their deal, rather than becoming reliant on pricing alone.
A lesson learnt
One sector that has gone through a similar transition is the telecoms industry. Within this highly competitive market, providers are offering additional bonuses to incentivise their customers – for example Orange Wednesday cinema tickets (though that scheme will come to an end at the close of this month), O2 Rewards and Vodafone Freebees.
Although some energy players are deliberating on expansion beyond their utility operations, they need to embrace the idea of using non-commodity and value-added services to create highly differentiated propositions, or risk losing customers to competitors during the switch.
However, many of the legacy systems currently in operation in the energy sector lack the flexibility and efficiency to respond to smart meter-related market trends and customer expectations. The challenge is to find a balance between migrating from legacy systems to upgraded customer service and billing that will allow for change while keeping customer disruption in check. New entrants to the sector, however, are not weighed down with the same challenges. They are, in fact, set up to be more fleet of foot in bringing products to market.
Reaching the finish line
With so much imminent change in the industry, suppliers have got to keep their eye on the prize. They have to be smarter, slicker, and faster at dealing with all the challenges ahead, such as regulatory compliance, and the things that make them money.
Meanwhile they have to deliver on other changes to keep ahead of the competition. If they just deliver the business as usual, without going through the necessary due diligence and testing new systems, it will damage their business and future success. Now is the time to test everything, and then test it again – or turn to the experts who can test it for you. There won't be a second chance to get this right.
- Angus Panton is Director of Power and Communications at SQS
