Utility Week

28 | 1ST - 7TH DECEMBER 2017 | UTILITY WEEK Customers Market view T here has been a seismic shi in con- sumer behaviour in recent years. No longer satisfied with a company that just offers an efficient service and competi- tive price point, a growing number of con- sumers also expect – even demand – that businesses follow a strong code of ethics. From addressing environmental concerns to providing a transparent billing system or giving back to the local community, it is becoming more important that organisations do good as they go, as well as providing value for money and good service. Indeed, estimates suggest that 66 per cent of consumers are now more likely to spend with ethical businesses over others. By con- trast, companies that are seen to have dubi- ous ethical conduct are increasingly at risk of losing out as "activist" consumers – those who shun companies with poor business practices – grow in numbers. What is more, according to Echo research, which looks at how to retain customers in a world of choice, 16 per cent would look to move away from a business they thought did not hold the same values as them, or was caught up in a negative headline. Companies that ignore this fact are leav- ing themselves open to bear the brunt of serious reputational and commercial harm. The recent Sports Direct scandal is a good example of this: a disastrous failure of eth- ics which has damaged what was a major UK business – perhaps irrecoverably. The retailer was stung by a litany of allegations surrounding poor working conditions and unethical employee pay in 2016, with thou- sands of staff allegedly paid less than mini- mum wage. Profits plummeted by 60 per cent in the months that followed, and the brand name has been le in tatters. Managing reputation In the energy sector, a number of high pro- file cases surrounding the sector have caused similar reputational damage. Headlines have repeatedly called out companies causing environmental damage, being fined for poor customer service and even operating unfair and unsustainable customer repayment plans. These issues have understandably led to a lack of trust in the sector. According to a report by Ofgem, only 44 per cent of con- sumers trust energy suppliers to be fair in their dealings with consumers – a worryingly low figure. Yet suppliers have made little progress in tackling this image. The rapid expansion of social and digital media means that consum- ers are now acutely aware of ethical failings and are becoming more discerning when it comes to choosing a supplier. Historically there was very little that "activist" consumers could do given the monopoly that the big players held over the market. However, the past few years have seen an unprecedented boom in independ- ent start-ups, which aim to provide competi- tion to the bigger players. There has been a 26 per cent year-on-year increase in the num- ber of domestic energy suppliers in the UK, many of which have a primary focus on ethi- cal authenticity and seek to actively distance themselves from the industry status quo. Retain or gain Take Engie, which offers 100 per cent renew- able electricity at no additional cost, or Bris- tol Energy, a "force for social good", which openly passes on savings to its customers and reinvests profits back into the local com- munity. These principles clearly stand out in an increasingly competitive market when compared with more traditional messaging revolving largely around saving money – at whatever cost. Should the sector be doing more? Put simply, yes. Price comparison sites have made switch- ing a relatively straightforward process, and it is now easier than ever for disgruntled consumers to take their business elsewhere if they feel that their current supplier is not providing a transparent service. Indeed, switching or reviewing household utility or service providers is now viewed as an annual event by a third of consumers (33 per cent). While it is no secret that price will always remain the most motivating factor for many households who may be feeling the finan- cial squeeze, suppliers need to think hard about how they will retain or gain custom- ers beyond just offering cheaper tariffs or deals. Authenticity needs to be at the heart of this thinking if issues around reputation and trust are to be fully addressed. There are substantial gains to be made if organisations can proactively convince customers they have their best interests at heart before they choose to switch. As reputation and trust become more intrinsically linked to brand value, the implementation of a robust corporate social responsibilty policy must never just be a box- ticking exercise, but a concrete commercial consideration. Businesses need to consider that if their customers are now putting more emphasis on ethics, it is something they should take seriously, too. Chris Cullen, head of sales and marketing, Echo Managed Services Do the right thing As more consumers become willing to vote with their feet and desert companies that behave badly, corporate social responsibility becomes an ever more acute business issue, says Chris Cullen. Key points Price and service are key drivers behind consumers awarded a business their custom, but ethical considerations are growing. Research suggests 66 per cent of consumers are more likely to choose an ethical business over an unethical one. Being in the press for the wrong reasons can do significant reputational harm, as Sports Direct found to its cost. For utilities, they can be hit with accusations of environmental bad behaviour as well as bad service. Utilities occupy a particularly precarious place in relation to customer trust. The spread of small energy suppliers now gives consumers somewhere else to go. Authenticity must be at the heart of a utility's reputation.

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