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The days are gone when change was slow, and a handful of suppliers could rely on a stable customer base to pay bills without question. Instead, suppliers have to be able to get new propositions to market fast – both to attract new customers and to retain existing ones.
What is more, customers are very different. Some are responding to energy prices by switching to a new supplier or changing their usage. Some are making new demands of their supplier, whether that is charging electric vehicles, generating their own power (such as with rooftop PV) or using smart appliances to move demand to cheaper times.
What are the challenges faced by domestic suppliers?
In 2021 more new battery electric vehicles were registered in the UK than over the last five years combined. The same year also saw the number of UK householders with PV surpass a million, with most installed over the last decade.
More recently, the conflict in Ukraine caused soaring energy prices and dramatically increased households’ energy-related expenses, making consumers even more price-conscious and looking for sustainable energy alternatives like solar panels.
Other customers’ needs are changing equally fast. For some, it is about a change in lifestyle and the change in demand profile that comes when working from home. They want to make more efficient use of energy, and they need help to be able to take advantage of innovative tariffs. When consumers make these decisions, they can create major change in the energy market – and do it very fast. Suppliers have to respond equally quickly and be able to offer a variety of new products to customers.
What does it mean for suppliers?
Customers like the ones above, who are more active energy users, will be looking at offers from other suppliers, and suppliers have to be able to quickly offer them a compelling offer to stay.
Other customers won’t change suppliers without question. But that may be because they have a poor credit history or little ability to take up the new products and services that allow suppliers and customers to work in partnership. Reducing the cost to serve for these customers is imperative and can result in continuing benefits for the supplier.
Meanwhile, third parties are changing suppliers’ customer base. Automatic switching services and ‘group buying’ schemes can see a supplier lose a swathe of customers overnight. But if suppliers are agile, they can react quickly to these initiatives. Even more if they fully understand the risk in making new offers, they can be the company that benefits, not the one that loses.
What is important, as the market changes, is that an energy retailer has the data at its fingertips; that it is able to assess models and margins within minutes; and that its risk is minimised by pinpoint accuracy and speed of understanding.
Why are domestic suppliers slow to respond?
Energy suppliers often rely on old technologies and limited tariff options to serve their customers. Legacy IT systems are slow, inflexible and isolate different teams that use different systems. That is not good enough to compete in the new industry.
Nowadays, as an energy supplier, you have to better manage your exposure to market prices. You have to be able to quickly absorb market information and generate costing information by the minute or hour. That information has to be converted immediately into pricing information and margin setting. With legacy systems, this is often a disjointed process, in which teams from different business areas, with different data structures, hand off to one another acting on different schedules.
What are those legacy systems? They may go back to simple spreadsheets and to systems designed for a specific process. Even for simple solutions the products, the IT systems and processes that go with them are under pressure. Because data is held in a variety of different systems, files and databases, oversight and reporting is complex. Data cleaning may have to be done manually and different formats managed. This adds time, cost – and potentially, new errors. But the staff needed to overhaul them are too busy keeping this labour-intensive process in daily operation rather than preparing it for the future.
The process is disconnected. Price generation is often not connected to billing, which is not connected to customer relationship management, which is not connected to sales channels.
What is the result?
The result as a supplier is that you take on more risk, because refreshing products and tariffs, or repricing them, takes a day or more, when it should take an hour at most.
You have very limited insight into margins and product performance. When tariffs become uncompetitive or unprofitable they remain in effect for longer – directly affecting your bottom line.
Billing systems designed for a few, homogeneous tariffs are wholly incompatible with a more dynamic market. It puts your company at a disadvantage.
And – fundamentally important in the new market – innovation is stifled. Product development using legacy systems is slow, costly or constrained. While you are developing your proposition, flexible new entrants or challenger brands gain market share.
Does this sound familiar?
In our Shell Energy Case Study, you’ll read all about the challenges Shell Energy was facing in the rapidly evolving customer-led innovative environment and how they readied themselves to take on these challenges using Gorilla to streamline their processes.
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