Can Independent Suppliers Sustain Growth In 2015?

Independent energy suppliers should plan for sustainable growth, says John Peters, Managing Director, Engage Consulting.
Published: Tue 03 Feb 2015

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According to figures from Energy UK, 3.3 million energy customers switched supplier last year, and 1.3 million moved from a large supplier to an independent one.

German newcomer, Extra Energy, attracted 36% of all customers who switched suppliers but according to a recent Which? survey, many other independents are ahead of their larger competitors in terms of delivering customer satisfaction.

In January 2014, and a year later in January 2015, the annual survey of 10,000 energy companies from Which? revealed that the top five energy companies for customer satisfaction were independent companies.

This year these independent companies will look to build on this success and this means achieving more growth in a highly complex and increasingly competitive market.

They will need to scale their businesses successfully, whilst looking after their loyal customers. To achieve this tricky balance, their businesses must be built on solid foundations, with robust and scalable systems and processes in place that will enable suppliers to compete effectively now and in the future.

Ofgem’s plans to introduce a 24-hour switching system in 2018 will most likely play to the strengths of independent suppliers. However, sustaining success will become more difficult as these companies grow.

Not only will they need a compelling and attractive customer proposition that differentiates their services from bigger players, they will need the right systems capabilities, technologies, people and back office processes in place too.

Getting ready for sustainable growth

For many suppliers, ensuring readiness for growth is a must for sustainability. This will involve them taking a step back and assessing all existing processes and systems, from the billing and IT systems through to their CRM system and sales processes and questioning if the systems have the scalability to manage rapid growth. If not, what new systems and processes are required? What changes are needed or which existing systems and processes can be upgraded or re-engineered?

During this process of analysis, some suppliers will invariably discover they need wide ranging business changes and new systems and processes in order to continue growing.

Others might need support with changing their systems, including requirements for gathering data, specifications development, design and build, testing and implementation. There might also be a requirement for investment in people, with greater training and development to improve technical knowledge and customer services support.

This process of readiness will be challenging and complex. Many will need to turn to external consultants to help them identify what they need for growth and how to address the challenges ahead from a strategic and operational perspective.

Creating robust systems for sustainable growth

Internal systems and processes – such as billing and CRM systems – also need to be robust enough to cope with new and existing customers.

Having a billing system in place that not only bills customers accurately and on time, but can cope with a rapid influx of new customers is vital. Sales systems and processes also need to be robust, as these are essential for the initial customer set up on a billing system.

Companies should also think about whether or not their system can address billing issues such as imbalance gaps between billing and industry settlement charges that exist in many businesses. In some cases, imbalances or leakage can amount to millions of pounds of lost revenue.

Companies need a way of managing their billing and settlement processes automatically so that commercial losses become a thing of the past.

Engage Consulting’s Revenue and Margin Assurance service minimizes the billing to settlement gap, producing a monthly saving in pounds. Our service also allows energy suppliers to calculate Gross Margin at a meter/customer level as well as extracting management information for Gross Margin reporting and analysis.

Meeting new regulatory challenges

With growth also comes greater regulation. Part of the reason why independent suppliers have been able to offer competitively priced deals is the Government’s removal of a number of obligations for independent suppliers. For example, suppliers with less than 250,000 domestic customer accounts are not required to take part in Government schemes such as the Energy Company Obligation (ECO), which is funded by large energy suppliers.

Once suppliers reach the 250,000 threshold this will change and they will pay green tax levies alongside their larger and better funded competitors. Suppliers will need to assess whether they need support in providing assurance that the necessary governance, regulatory compliance, reporting and data management processes are in place to support the delivery of sustained customer growth.

Success won’t just be down to pricing

Currently, there is great media attention being paid to energy suppliers cutting their costs. However, customers won’t just be swayed by price alone in the future, so excellent customer service, clear propositions and distinct brands are needed if independent suppliers are going to attract and retain customers for both the short and long term.

They also need to ensure they have the right business model in place to achieve manageable and sustainable growth and can capitalize on the current market opportunities.

The larger energy companies will almost certainly be preparing to up their game so 2015 is an important year for independents to establish their market share and to ensure business growth for years to come.