The story of how the British startup Ovo Energy was founded in 2009 makes for interesting reading. Though the startup’s founders had a combined energy industry experience of just three years, they were driven by the aspiration to become the U.K.’s most trusted energy company.
The company’s efforts to achieve this goal underscored all the attributes that trust stands for – treating customers fairly, being competitive in prices, and ensuring transparency and simplicity in billing. Nine years later, findings of the Utility Week research show that these aspects still form the bedrock of trust in the Energy & Utilities (E&U) industry.
Ovo Energy’s desire to be seen as a trusted utility is especially important in the E&U industry. Over the decades, the industry’s trust index has been consistently low across several customer surveys. A lot of blame for the erosion of customer trust is generally directed towards the pricing structures used by utilities.
The Complicated Equation Between Pricing and Trust
Pricing is undoubtedly crucial for fostering customer engagement, loyalty and trust. However, the correlation between trust and pricing is neither simple nor direct. What is clear, however, is that customer confidence in fair pricing is pivotal to nurture trust.
Utility customers have historically shown less readiness to pay more for quality services. However, attitudes are shifting – millennial customers tend to link trustworthiness with the value for money they get. This willingness offers an opportunity for utilities to demonstrate the value additional costs can bring in – for example, the benefits of smart meters.
More than a toss-up between low and fair pricing, price transparency is what really counts. Energy companies need to communicate better to explain their costs to customers. They should ensure accuracy of billing and make its elements easier to understand. It is also imperative for them to make pricing transparent enough to enable their customers to compare tariffs. For utilities, achieving these objectives is proving to be easier said than done.
Pricing Regulations: Trust Boosters or Deterrents?
There are numerous challenges that impede utilities’ efforts towards simplifying energy pricing. Regulations, especially the recent ones on price capping, have evoked mixed reactions on whether they enhance or inhibit customer trust in providers. Moreover, the deployment of standing charges and unit rates for energy tariffs often lead to several varying pricing permutations.
When combined with outdated supplier obligations, it creates an inconsistent playing field for retail pricing, resulting in an erosion of transparency and trust. Energy providers’ social and regulatory obligations (such as Warm Home Discounts) towards vulnerable customers further compound the challenges in gaining trust.
If customer trust has to be restored in the E&U sector, regulations and policies should not be looked at with apprehensions of creating mere cultures of compliance. They should empower utilities to enable problem solving, innovation, and long-term thinking in competitive market conditions.
Technology: An Enabler for Customer Trust
Smart technologies, including smart meters, can enable utilities to design innovative products and services, and build more credible customer relationships. The primary onus rests with the industry and its players to initiate such opportunities. They can do so by investing in technologies such as advanced analytics to transform data into actionable insights. These efforts should include:
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Leveraging big data for intelligent analysis and segmentation of diverse customer bases
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Blending industry knowledge and customer-centricity to design fair and simple pricing models
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Stepping up outreach capabilities to effectively communicate billing transparency to energy customers
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Acting as effective influencers with regulators and policy makers keeping customers at the core
The energy industry’s past record in pricing has been one of the major reasons for the growing mistrust. If the lost trust has to be regained, the course correction has to begin with pricing. But the conversation needs to change from low pricing to fair pricing underpinned by reliability, transparency, openness and collaboration.