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12 | 9TH - 15TH DECEMBER 2016 | UTILITY WEEK Policy & Regulation Market view F or any players outside the big six energy suppliers, prime minister Theresa May's comments slamming the big six at this year's Conservative party confer- ence must have sounded very sweet indeed: "It's just not right that two-thirds of energy customers are stuck on the most expensive tariffs, where companies are exploiting the failures of the market." Her remarks strongly echo the sentiments of the Competition and Markets Authority (CMA) report on the energy supply market, which seemed to open up some positive opportunities for challenger utilities. The CMA stopped short of forcing the big six to push their disengaged customers to switch away from costly standard variable tariffs (SVTs), but it promised the opportu- nity for challenger brands to market directly to these people via an Ofgem-controlled database. It also beefed up the requirement for the big six to prompt their customers to consider switching. However, when one looks a little fur- ther into the detail, the picture turns a little darker for the challengers. First, Ofgem has only committed to rolling out this database nationally by spring 2018. Until then there will only be trials – so it is a case of jam tomorrow. The bigger cloud is the fact the real ben- eficiaries of the CMA's proposed remedies are likely to be price comparison websites (PCWs) rather than the challenger utility sup- pliers. PCWs are being encouraged to step up and develop their own exclusive tariff options, and are likely to be relieved of the obligation to list every option on the market. This sets up a scenario where the most prominent alternatives to the big six are no longer the so-called challenger brands, but PCWs – whether in their current guise or in the form of energy market-specific sub-brands. Already we can see the beginnings of this with Martin Lewis's Cheap Energy Club, which is in effect a go-to-market brand of MoneySupermarket.com for domestic energy supply. Its most recent Big Switch Event pro- motes an exclusive tariff, which happens to be from British Gas, although in truth it probably does not matter who the supplier is since the brand being chosen and trusted by the customer is Lewis himself. It is not difficult to envisage a time when all the big PCWs take a similar approach and take advantage of their high levels of brand awareness (and huge customer databases) to market exclu- sively negotiated tariffs directly to consumers. Given that the PCWs have historically spent far bigger sums marketing their brands than the chal- lenger utility brands, they would be entering the market with a big advantage. In this scenario, if the switching market became dominated by PCWs then the chal- lenger utility brands could be relegated to being interchangeable back-end suppliers for the consumer-facing PCW brand, rather than the purchase brands they are today. Think of the insurance market, where the customer buys from a household name while the actual cover is oen provided by some little-known underwriting firm. It appears the CMA has concluded that because most households remain on SVTs with the big six despite having been offered a choice of cheaper tariffs from alternative suppliers, a new competitive force is needed – and that this can be provided by PCWs. So what should challenger brands be doing to prepare for this coming storm? How can they avoid their brands being cast into perpetual shade by the big beasts from the world of price comparison? In two words, customer engagement. Right now, the challenger utility brands are seen as the good guys in the market. The accepted narrative is one of David and Goli- ath. The challenger brands operate within a benign environment as far as both media coverage and regulatory latitude are con- cerned. If ever there were a time to take advantage of this climate of positivity, it is now. Given that the PCWs are the dominant route to market for challenger brands, there is all the more urgency to step up and build a stronger relationship with both existing customers and non-customers who are active switchers. So, how can the challenger brands engage better with customers? The opportunity is to create useful and timely content people find valuable, using intelligent customer profiling to serve this content in the right channels and at the right moments. We have found that relevant content deliv- ered at the right time is valued by customers – for example, 82 per cent of Virgin Atlantic customers value the content they receive in the period between booking and flying. And more importantly, customers act upon timely content: for Vir- gin Atlantic, one in four customers who engaged with the brand's pre-flight content went on to buy an ancillary product (such as an extra legroom seat). What kind of content would energy customers engage with? The domestic energy market is undergoing more change right now than ever before: the smart meter rollout, the emergence of connected home automation systems, and the consequences of sterling's weakness on pricing. The potential for consumer confu- sion, not to mention mistrust, is consider- able. As the "good guys" in the market, the challenger brands are one of the few voices with enough credibility to be listened to by customers. May certainly talked tough in her confer- ence speech. But like the CMA report, her words may be seen more as bluster than substance by many in the industry. Yet big change is coming: an onslaught from price comparison websites. There is a limited win- dow of opportunity for the challenger utility brands to establish stronger customer rela- tionships before they feel the full force of the PCWs. The time to engage is now. Will Collin, founder and chief executive, Naked Communications Challenger brand showdown Theresa May parked her tanks on the big six's lawn, but it's the challenger brands that need to re-arm, says Will Collin, before the price comparison websites leverage their brand awareness. "Right now, the challenger utility brands are seen as the good guys in the market – now is the time to take advantage."