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Is it time to drop the ‘challenger’ brand for energy retail companies?

Written by Tom Reynolds, Account Director, Energy

With ‘Big Oil’ venturing into the energy retail market and smaller suppliers at risk of losing the confidence of their customer base, the time is now for companies to reassess their current brand and positioning in order to achieve success.

Commenting on tough conditions in the UK’s energy retail market, Shell’s CEO, Ben van Beurden recently said that such things “are challenges for the Big Six, not challenges for the people who take on the Big Six”.

For years, the ‘Big Six’ energy suppliers – British Gas, EDF Energy, E.ON, Npower, SSE and Scottish Power – have weathered an immense storm as the issue of consumer energy prices has become more politicised.

This has broadly been to the benefit of ‘challenger’ energy suppliers, which have exploded in number over the last decade – from around 11 to around 60 – wrestling market share away from the ‘Big Six’. In September last year, it was reported that the ‘Big Six’ suffered a record loss of more than 160,000 customers in a single month – customers who moved to smaller energy suppliers.

Likewise, it’s also the case that new market entrants have not been hamstrung by the same legacy issues affecting the ‘Big Six’, including the need to deal with coal-fired power plants, big bureaucracies and IT systems “from the wrong century”, as it was recently put by another Shell executive.

The evidence points to Mr van Beurden being correct. However, his comments do not tell the whole story. In the past few weeks’ public scrutiny has turned its focus to the very companies taking on the ‘Big Six’, arguably more so then ever before.

The collapse of two smaller energy suppliers in January – Future Energy and Brighter World Energy –has raised serious questions as to whether new entrants can legitimately hold their positions within the UK energy retail market. The collapse of both companies was, in part, due to their inability to handle the heat when it came to rising and volatile wholesale energy prices, something which larger suppliers are in a much stronger position to deal with.

What does this mean for ‘challenger’ energy suppliers that remain in the market?

Clearly there is a risk that the failure of a few smaller firms will leave others ‘tarred with the same brush’ – a potential crisis of confidence may leave smaller suppliers’ existing and new customer-base feeling nervous that they too could find themselves left in the lurch by the threat of their current supplier collapsing.

From a communications perspective, ‘challenger’ companies will now need to work much harder to gain and maintain a social license to operate. These companies may even go so far as to drop the ‘challenger’ tag all together.

Smaller energy firms may do well to reassess whether their ‘challenger’ status really can instil the confidence that current and potential customers are looking for. To put it another way, ‘if you want to play with big boys, you need to start acting like one’.

Van Beurden was of course talking about Shell’s purchase of the UK’s largest independent energy supplier, First Utility. With the financial backing of a multi-national oil and gas major, there is scant danger of First Utility becoming the next Future Energy.

However, a corporate takeover represents a different challenge altogether. The challenge for First Utility is how it can achieve growth and success whilst still maintaining its brand values – taking on the ‘Big Six’ without becoming one of them.

How does First Utility avoid becoming a ‘Wolf in Sheep’s clothing’?

Looking beyond the energy retail market and taking lessons from other industries might be one way to go – internet broadband provides a remarkably good example. Following a major cyber-attack in 2015, TalkTalk set about returning to its roots as a ‘challenger’ to the likes of BT and Virgin, by refocussing on why customers were attracted to what they stood for in the first place.

For TalkTalk, moving away from celebrity-driven campaigns, ditching separate line rental charges on all packages and moving to a single combined monthly price, were all part of the drive to reposition as a ‘challenger’.

How does this translate to energy suppliers? 

Above all, stay true to the reasons why customers picked you in the first place and demonstrate this through the way you communicate – if innovative pricing, high quality customer service and cutting-edge technology are the reasons why customers choose you, then this is the story you should continue to tell. 

While van Beurden is correct in that the challenges facing smaller energy suppliers are not the same as those facing the ‘Big Six’, the reputational risks are just as present. With the energy market landscape quickly changing, companies must always be looking to assess their reputation and reposition. 

Madano is a fully integrated communications consultancy that specialises in advising clients in sectors where communications and positioning are critical to success. Our Energy Practice works for clients across the energy industry.