"We’ve all heard the saying: Trust is hard won and easily lost. It’s meant as a warning that you can spend years earning your customers confidence, day after day; but all it takes is one big mistake, or one huge controversy, and it can be wiped out for years, maybe even permanently. BP and Deepwater Horizon is one standout case study in our industry. Enron is another. BP survived, Enron didn’t.
But actually there’s another way it happens too, I think, which is slower, less immediately obvious, where no one identifiable thing happens overnight to rock the foundations. The banks, for example. Although the crash and the bailout happened relatively quickly, it actually took years for the full extent of the problems in that industry to work their way out into the public domain.
Like pulling teeth, it took seemingly endless Government committees, media exposés, dramatic resignations, and harsh regulatory sanctions before it became clear that what had actually been going on wasn’t just recklessness, or a lack of competence. It was the widespread, systematic exploitation of their customers.
So every new scandal, every new investigation, was another nail in the coffin, but actually it took years before banks could really start rebuilding trust.
All the evidence seems to point to the UK energy industry, specifically the utilities, suffering from a version of this second problem: a gradual, wearing away of customer trust over a period of years. Historically, this hasn’t always the case. Quite the opposite. Actually, this is an industry which was handed customers’ trust on a plate through its former Government-owned status.
Compare that with some relatively new industries – online marketplaces and other platforms are a great example, where companies have had to earn consumer trust in an unfamiliar product based on very new technology. Building from scratch the customer confidence needed to get millions of people to buy their laptop on Amazon, to give their credit card details and take a journey with an unknown driver working for Uber, to hand over the keys to their home to a stranger on AirBnB. Building and maintaining this sort of trust is really tough.
The liberalised, privatised energy industry were fortunate enough to inherit a huge surplus of trust. We had it, and over a period of days, weeks, months and years, we’ve lost it.
And just because nothing cataclysmic has suddenly happened, just because nothing is on fire, doesn’t mean what’s happening here isn’t as serious a threat to the industry as one of those big, one-off seismic events. This gradual chipping away of trust is just as serious, I think, and in some ways it’s harder to fix, because there’s no one thing to point to for an explanation or an apology.
Instead what we tend to see is a blame game between industry, politicians, regulators, the media and the general public. Right now we have the media doing the regulator’s job, politicians trying to do the market’s job, consumer groups feeling obliged to do the job of politicians, and energy companies challenged almost daily on their ability to do their job at all – whether that be serving customers or keeping the lights on.
When asked whose fault the financial crisis was, one senior director at a bank famously compared the industry to a lot of over-zealous waiters at a party, rushing around keeping everybody’s glass full and serving themselves at the same time. But who, asked this director, brought the booze and whose party was it in the first place?
It’s an entertaining analogy, and we’ve seen plenty of people try to use it in our industry – suggesting it’s the Government’s fault for imposing levies on bills, it’s the renewables industry’s fault for needing subsidy, it’s consumers’ fault because they don’t switch. It goes on and on.
Blame just undermines still further the credibility of those responsible for solving the problem. Customers hear one message from government, another from the media, another from the regulator and yet another from energy companies - it doesn’t solve anything.
Honesty does. Transparency does. Simplicity and good communication, consistency, reliability, collaboration and delivery of best value day-in day-out. These are things customers respond to. The truth is that we are all responsible for fixing the market and we all have a role to play in rebuilding trust in this critical industry.
I think maybe the banks held on to the old way of doing things for so long because they knew, once it all came out, it was the end of the whole business model. But no business model which relies on harming your customers is sustainable in the long term. Find one which means the better you do, the better things are for your customer. The more you benefit, the more benefit they see. That’s a business which will thrive, that’s an industry with a future.
I want to talk a bit about the company I work for now. I joined OVO from British Gas last year because I saw a chance, in a challenger brand, to make a bigger impact in redefining the relationship with customers than I felt I could do in a large, ex-monopoly, publicly owned utility.
For those of you not familiar with OVO’s history, we were, of course, founded by a former banker - hardly the ideal line on your CV if you want to launch a brand to transform trust in another industry. But perhaps it was the ideal background.
Stephen worked in the City for five years and he no longer liked what he saw. He promised his wife he’d get out by the time he was 30 and in 2008, they started off with a simple idea: if you were to design an energy company from scratch, around what was best for the customer, what would it look like?
The whole management team when OVO finally launched had a combined energy industry experience of three years. So when they answered the question based on their personal dealings as customers. They thought it should be it should treat people fairly, be competitively priced, transparent and simple to understand.
Most importantly, it should be designed and run around the customer, meaning:
Plenty of people in the management team who, unlike me clearly, don’t have energy industry backgrounds. Instead they come from great retail brands which excel at customer experience and engagement; investing in the best technology so that we are as rigorously cost efficient and user friendly as possible. Actually, I’d say we’re retail business first; a technology company second; and only as a distant third a utility. We don’t want to be a no frills energy provider, we want customers to enjoy their interaction with us;
Passing a share of those efficiency savings directly back to the customer, so when we save, they save. And being efficient about giving them back any money we owe them;
Being fair and not offering short term introductory deals which shoot up, nor offering deals to new customers that aren’t open to renewing customers;
And being honest and transparent about the price we ask customers to pay, making sure it’s based on the real cost of doing business and that when we can put prices down, we do.
When we’re making decisions as a company, we imagine the customer’s in the room with us. If they wouldn’t like what we’re thinking about doing, we don’t do it. And since every single one of our customers is a switcher, or they wouldn’t be with us, we’ve always known if we didn’t work hard enough to keep them they’d vote with their feet.
I’m sure most of you are thinking, this is all easy for him to say, his company is small. Wait until it gets bigger. And you’re absolutely right. Today we have roughly 400,000 electricity and gas customers, that’s a 280% rise since the beginning of the year.
Our single biggest challenge going forward is to stay focused on all of this and not forfeit the trust we’ve earned.
So back to the industry more generally. Everyone in this room knows we’re dealing with a complex situation in energy. We have tightening capacity and an urgent need to invest in new generation, at the same time as reducing emissions and tackling serious social issues like fuel poverty.
This is big stuff, once in a generation stuff, and we have never needed to bring consumers along with us more than we do today, not least because they’re the ones who are footing the bill for a lot of this. But instead of public support, we have a crisis of trust. The consumers we need to bring along with us are, if not actively mistrustful, then certainly apathetic and disengaged.
In a recent Trust Barometer poll, the UK energy industry ranked joint bottom with the banks at 32%. Ten points lower than the media and 47% behind the highest scoring sector – technology. It was also a drop of 6% on last year. The highest ranking reasons by a country mile were rising bills and profit, with poor customer service coming some way behind.
So, rising bills and profit. Not easy topics by any means and I’m afraid I have no magic wand to wave and no silver bullet which will solve the trust issues around these two.
The reality of the problem with bills, unfortunately, is that whether they continue to go up is not entirely within the gift of either energy companies or the Government. Yes, the industry must do their part and work hard to be as efficient and innovative as possible. And yes Government policy must be designed to deliver objectives at lowest cost. But some factors, like global prices, may genuinely be outside of anyone’s control. The lack of a clear, consistent message about this is causing confusion and frustration for customers about what either Government or energy companies can do to fix it.
When bills do go up, there’s similarly no clear message for customers about why. Between politicians, the media and energy companies, consumers are hit by a whirlwind of blame and – as is almost always true - the simplest message wins out: that bills are going up to fuel energy company profits.
So singing from the same hymn sheet about the many reasons for rising bills and being honest about what we can, and can’t, control, is step one. Dealing with the public perception that bills are going up because of profit is step two.
Listening to what our customers say about this, I think the issue actually isn’t with profit per se. The problem is with the value they feel they’re getting in return. So we can spend a huge amount of time arguing about how much profit everyone makes, but it doesn’t get us anywhere.
Because the real issue isn’t that people don’t think energy companies should be allowed to make money. Which is good, because no company in its right mind invests in an industry where it has no prospect of decent returns. And this is an industry which needs investment.
It’s that they want a positive experience and a fair deal in return.
Unfortunately many energy customers don’t have a positive experience with customer service and, interestingly, I think the majority of the time this is more to do with competency than trust per se. Today’s tech savvy customers exist in a diverse, global marketplace and have much higher expectations of service and reliability than ever before. Thinking like a retailer, rather than a utility, should help guide behaviour in the right direction and Investing in customer service is an easy win in the trust stakes.
The more integral problem, I think, is that customers don’t believe they’re being treated fairly or getting real value, because they see varying prices out there in the market which seem inconsistent, or bear little relation to the real cost of doing business. Sometimes these are from a different company, sometimes they’re from the same company which is doubly confusing.
We still hear about situations where a customer only realises they could save hundreds of pounds when they threaten to switch. Earlier this year Ofgem said that customers who had never switched could be being over-charged by approximately £250, so it seems pretty clear that it’s the non-savvy consumers who are suffering the most here.
Yes, explaining bills is complex, and yes part of the rise has been from policy costs, but that doesn’t help me understand some of the deals we see out there – and I work in the industry.
So I think this price inconsistency is the biggest reason for lack of trust in the sector and also the lack of competition. And I honestly believe that rebuilding trust can’t happen unless suppliers turn a corner in making energy easier to understand, removing the complexities and being totally honest about what they are charging and why.
Just a few final thoughts before I finish up.
This is an industry which has a critical role to play in society, today and in the future. It’s an industry which, when we get it right, makes things work and which makes people’s lives better. And it’s getting more exciting all the time with new developments like more community energy, smart meters and other disruptive technologies.
The energy industry should be leading the charge through the twenty first century. But to get there, we need a social license to operate. And to get that, we all need to be a part of rebuilding trust.
I don’t think that’s going to happen overnight and, as I said, I’m not sure one big thing is going to do it. I suspect it’s not about brilliant ad campaigns, or big discounts, or even public inquiries like the CMA.
I think it’s going to be quite unglamorous work actually and it’s going to involve consistent delivery, day-in day-out of reliable service, good value and clear consistent communication.
Gradually moving from a shareholder driven business model to a sustainable, customer-driven one is a huge cultural and operational shift for the industry. But we all need to be in the business of trust. Building an industry fit for the future depends on it.