Iresa’s demise reminds the Energy Sector: Beware the Wrath of the Customer
The demise of Iresa last month came as little surprise to those familiar with its short history. I can imagine it’s been a tough two years for the company, founded on “a passion to build something special.”
Special is certainly one way to describe Iresa’s fortunes. The company was forbidden by Ofgem from taking on new customers in April 2017, again this March and in June 2018, that ban was extended indefinitely. Yet, after a formal investigation and repeated warnings, targets still hadn’t been met.
Ofgem’s patience had run out.
And just like that, its spark was extinguished. Iresa was an ex-Energy provider.
Iresa’s energy prices were among the cheapest. Pundits had warned that these were commercially unsustainable, especially considering market pressures from a year of rising wholesale energy prices. With this in mind, the business’s competitive pricing was perceived as an investment: a ploy to boost acquisition and support future trading. But this was a risky strategy, especially without minimal standards of customer experience. When push comes to shove, low prices and low service may be bedfellows, but customers have a limit.
If you’re at a loose end, peruse the outpouring of passion on TrustPilot or exchanges on Iresa’s Twitter feed and you’ll get the idea – we are not exactly dealing with 90,000 happy campers. Clearly desperate, one customer took matters into his own hands and set up an unofficial Facebook page to provide a home for collective venting: Iresa Unhappy Customers
When push comes to shove, low prices and low customer service may be bedfellows, but customers have a limit.
Clearly, customers were at the end of their tether – and their compulsion to share didn’t stop at Social Media and review sites. Iresa received the worst complaints score ever recorded by Citizens Advice at more than 9,000 per 100,000 customers (five times higher than Toto Energy, who received 1,800 complaints). And this year alone, the Energy Ombudsman accepted a total of 2,282 complaints about Iresa for investigation.
So, how could things have got this bad?
There were various contributory factors. Significantly higher Direct Debit payments were taken without warning, even when customers had diligently provided their monthly meter readings. [disclosure – my colleague was one of these unpleasantly surprised customers]. Equally, credit balances were not returned appropriately. And then, there was virtually no mechanism to complain, since average call times were huge – callers were commonly placed at “seventy in the queue”
Reading the breakdown of specific complaints, it appears that not only was the service shoddy, but resolution also failed: complaints were not addressed swiftly or satisfactorily. In the end, Iresa had fallen into the enticing trap of prioritising acquisition over retention. To paraphrase the words of many, Iresa’s customer experience was appalling.
In the end, Iresa had fallen into the enticing trap of prioritising acquisition over retention.
With this in mind, it seems logical that Ofgem has selected Octopus as the victorious bidder for The Supplier of Last Resort (SOLR), transferring over Iresa’s entire customer base. Octopus – another recent upstart, was founded with a very different focus: happy customers. This is not hyperbole; Octopus scores five stars on Trust Pilot and are a Which ‘Recommended Provider’.
“The decision to take on Iresa was the scariest since the decision to actually start the business. Our hope is that we can take a group of customers who’ve often had a poor experience and impress them with a good one, but the risk is that we fail to handle the “mess” of the collapsed business and that we end up with chaos, followed by big customer losses. Fingers crossed that ‘fortune favours the brave’, rather than ‘fools leap in’….
We’re working unbelievably hard to put ourselves in the customer’s shoes as we address the urgent issues of getting customers onto functioning energy accounts, and then help them smoothly and painlessly finalise their financial balances…”
I spoke with Greg Jackson, Founder and CEO, Octopus Energy – and he was refreshingly candid about the situation:
“The decision to take on Iresa was the scariest since the decision to actually start the business…We’re working unbelievably hard to put ourselves in the customer’s shoes”– Greg Jackson, CEO, Octopus
Inheriting close to 100,000 new customers and an administrational labyrinth, Octopus will be under pressure to deliver on its promise; as the old adage goes, you win a customer on price – but lose them on service. Trust, the cornerstone for relationships, is a precious currency – and Iresa’s customers will arrive with their arms figuratively folded.
Will something good come from Iresa’s passing?
Lessons are being learnt as perspectives change. Even the intermediaries, vilified by some brands for the subsequent ‘race to the bottom’, are themselves reconsidering the importance of long-term customer experience over short-term incentivisation, as seen in MoneySuperMarket’s new strategy. Who’d have predicted this, five years back?
On reflection, Ofgem’s previous demands on Iresa read more like a beginner’s guide to producing an Energy customer SLA:
- Extend its call centre hours
- Bring the average call-waiting time to below five minutes
- Respond to customers who request a call-back by the end of the next working day
- Respond to customer emails within five working days
- Clear the backlog of customer emails
- Record all expressions of dissatisfaction from customers
- Identify all vulnerable customers and offer to put them on a priority services register.
As the old adage goes, you win a customer on price – but lose them on service.
While simple in principle, these aspirations can be tricky at scale. Even the big, established players struggle to prioritise and effectively service vast volumes of customers. At best, failure impacts cross-sell – and, well, we’ve just seen what happens at worst.
Much of this is solved by culture and Board focus – the oft-stated desire to ‘put customers at the heart’ must be more than empty platitude. Focussing too hard on acquisition comes with risk; like many businesses, Iresa didn’t appear to think about life beyond the honeymoon, or view the customer journey from the customer’s perspective.
Furthermore, since customers have complex, individual needs and traverse an increasing multitude of channels and touchpoints, customer-focussed technology is also crucial. Ideally, this means a central hub to listen, understand journeys, act and ultimately, support long-term business growth.
The times, they are a-changin’
The Energy Sector is experiencing more change than ever before. EDF’s MD of Customer Business, Beatrice Bigois, recently described the situation: “more progress has been made in the last ten years than the previous hundred”.
On one hand, more suppliers mean more choice, at least according to Ofgem. They claim to have “successfully supported” consumer choice by boosting supplier numbers (from 27 in 2014, to around 70 today). But with the recent demise of GB Energy Supply, Brighter World Energy, Future Energy and National Gas and Power (in debt to the tune of £200k), Ofgem will be more sensitive than ever to the idea that with the delivery of great power comes great responsibility [Note to editor: apologies for a terrible pun].
Sure enough, measures are being put in place: Ofgem had already been considering making it harder for new challenger companies to enter the energy market, citing concerns over poor customer service and lack of financial resilience. But amidst the fluctuation, one thing remains consistent: putting customers first should be an Energy business’s number one priority
Matthew Vickers, chief executive and chief ombudsman designate, Ombudsman Services, echoes this view with clarity. Speaking recently in Utility Week*, he said:
“Put the consumers at the heart of everything…Price will always be a major factor in any purchasing decision, but if consumers are more savvy in the future – for example by looking at customer service as well as price – then the Iresa story will at least have one positive outcome.”
I couldn’t agree more.
And equally, Energy providers are clear that customers must not be treated as an afterthought.
*Utility Week, 2/8/18
Lloyd Buxton, Energy Sector Director, Thunderhead