Utilities are something many customers take for granted. They need them, therefore they assume they will always be taken care of. Utility companies are, however, just as likely to take their customers for granted.
In such an environment, customer service in the utilities sector has never been more important. Because if customers forget that they need to pay for their utilities, they will invariably fall into debt and end up resenting their suppliers. So begins an endless cycle of codependent resentment.
The rise of the digital economy has led to a major increase in choices across the utilities sector and this presents both a problem and an opportunity for suppliers. The problem is they risk losing custom if they do nothing, the opportunity is that by evolving alongside their customers, they have the chance at deepening customer engagement and customer loyalty and creating a revenue stream that lasts a lifetime.
How do utilities customers pay their bills?
Decades ago, most utility bills were all paid either on receipt every three months (and could be paid via cash, cheque or over the phone) or via a prepayment meter that could be topped up by a key or token. The advent of automated monthly direct debit payments, however, completely changed the game, to the extent that these payments now make up around 73% of all UK household bills.
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Unlike credit card debt, which is accrued actively, utility debt is a far more passive affair. Utility bills are often automatically assigned to direct debit and are effectively forgotten about by many account holders. These direct debits are based on an estimate of each customer’s usage, which means if that customer uses more of that utility in a month they can end up underpaying and build up credit; if they use less, they overpay and build up debt.
The idea is that these eventualities will balance each other out over the course of an average year (for example, customers using far less gas in summer than in winter) but that’s not always the case. It can be quite common, in fact, for customers to build up vast debts by underpaying on their utilities without even realising it.
If customers don’t have an automatic payment set up, meanwhile, it is common for them to forget to pay and end up with a large bill a few months down the line that they weren’t prepared for. The second customers begin neglecting their utilities account, it creates a downward spiral as debt continues to mount and they are eventually forced to default.
That’s why companies need to remain engaged with their customers - actively reminding them via several channels when payments are due or when they are in danger of falling into debt. Digital, tech-powered solutions are a perfect way of handling this and will hopefully lead to a future where there is a greater level of trust between customer and supplier.
Under or over?
Whilst underpaying is indeed an issue for suppliers, it’s overpaying that is the real blight facing the utilities industry currently and if companies wish to transform their brand images and become customer-first organisations, this is where their focus really should be.
In 2017, a uSwitch study found that over a quarter of electricity customers had been overpaying their bills due to supplier mistakes. Collectively, this represented around £102 million (around £80 per household). The study also found that consumers had faced lengthy waiting times to resolve billing errors, with 9% waiting up to two months to get their money back and 3% giving up entirely.
If the companies in question had a more reliable, AI-powered centralised strategy in place that was able to keep track of all customer usage, debts and overpayments, there would be far fewer mistakes and energy bills would be far simpler for customers to understand. Smart metres are, of course, a food start and according to Lawrence Slade, chief executive of Energy UK, which represents suppliers: “Smart meters will bring an end to estimated billing and help consumers understand what they are spending in near real-time.”
However, even today, with smart metre integration at over 15 million homes in the UK alone, British homes owe almost £400 million just to their power companies and around £18.9 billion to utility companies in general. In the case of the former, this is largely due to exorbitant price hikes, which took many British homes by surprise. These hikes also meant that whilst households are usually expected to be in credit by the winter, 2.93 million were in debt to their supplier, up from 2.62 million in October 2017.
These hikes represent just one example of utility companies coming out as the ‘bad guys’, which is perhaps unfair, given that energy prices across the board are rising and they are having to raise their prices accordingly. A perfect way to mitigate some of this ‘bad blood’ would be to improve their customer relations via a debt collections platform that is customer-centric and easy to use. This way, customers are far more likely to be able to keep track of their accounts and ensure they have the right amount of money in their accounts every month (or three months) to cover their utility costs.
It’s not such a far cry from retail banking, which is a more engaged and ‘active’ industry that has been forced to adapt to the digital upstarts, lest they get swept away by them. Indeed, the utilities sector is fending off its own upstarts. Alternative suppliers that focus largely on renewable energy are young and nimble enough to present more native digital solutions.
These relative newcomers are often ranked as the top energy companies in the country (Octopus Energy represents a perfect example) and whilst green energy is certainly a draw for many, it’s the customer service that really sets these newer suppliers apart. This is something legacy firms should be making a note of.
Getting the customer on side
In order to keep their customers engaged and loyal, utility firms need to be agile enough to move with the times, otherwise, they risk losing custom to alternative suppliers. The key is in seeing the customer not just as a “ratepayer” to be taken for granted but as an individual that needs to be won over and retained.
A solid, tech-powered debt collections strategy centred around mobile device apps and desktop software is certainly one avenue to consider, as it will allow utility companies to provide real-time, flexible services to their customers and communicate directly with them. Overall, however, this should be just one aspect of a more customer-focused strategy that is executed with agile tenacity via a digital lens and is based around the customer journey.
Ultimately, brand loyalty in the utility sector is strong, primarily because so many customers perceive the process of switching supplier as being difficult and convoluted. Indeed, people are reportedly losing over £4 billion every year by overpaying on their energy bills simply because they have remained loyal to their suppliers for at least 5 years.
Companies should not get complacent though, as customers are getting smarter and are always looking for better deals, particularly in such an unstable UK economy that doesn’t show signs of stabilising any time soon.
This is one piece in a larger series exploring utilities. Click here to read about the wider utilities landscape and click here to explore our debt collections strategies for utilities.