Milliband vs the Big 6

So its on! Mr Milliband has declared a challenge for the utilities pricing belt on behalf of the consumer (voter really) – Kid Customer (Mr Milliband) versus King Shareholder (The Big 6 Utilities) - the current, undisputed champion of the utility company boardrooms.

I am perhaps doing a bit of a Hollywood on this, but it is a timely reminder that virtually none of those big public companies have ever really been driven to deliver value to paying customers. Instead they are driven by shareholders who would probably be gleeful to see us all pay twice as much as we already do, so long as it returned them a better dividend.

If you read my blog regularly you’ll know that in my view the boardroom domination by shareholder value has left customers out in the cold and very definitely second class. To give you an example, I used using figures derived from the BBC to calculate that in 2012 the big 6 energy companies generated more than £150 profit for every household in the UK. A little down on 2011, but almost twice as much profit as the two years before. That’s a lot of profit especially in very difficult economic circumstances.

So, do you care a jot what the shareholders get now that you know how much profit they make from you? Or would you rather your utility bills were cheaper?

Thought so. 

What if I suggested that if the 'Big 6' delivered more value to customers, they would very possibly also be able to pay a bigger dividend to their customers?

Apple, the most valuable (regularly) company by market capitalization in the world is also one of the best customer service companies in the world. It focuses heavily on customer value and delivering the best possible customer experience it can. Guess what? It is such a good experience the consumer is often prepared to pay more because it’s a superior product. Its not just Apple either, Rackspace the cloud hosting provider is another similar company leading its market by focusing on delivering excellence to its customers. Again it is not the cheapest, but it is regarded by the market as probably the best there is.

So here is the real point of this little blog. Both Apple and Rackspace are more valuable because they deliver more to customers. As a result both customers and shareholders win.

It’s really obvious isn’t it when you think about it. Delight your customers and they help you attract more customers. This is essentially the old fashioned basis on which businesses grew – they did a good job for their customers, knowing that it would help them get new customers.

So here is a simple little idea for the folk at the ‘Big 6’ if you don’t want to face the challenge from ‘Kid Customer’ in 2015 why not start really thinking about the people that pay your bills, they are at least as important as your shareholders. What's more if you look after your customers you'll probably be able to pay your shareholders a bigger dividend.

Fastest, Cheapest, Brilliantest - or perhaps a little honesty might be better?

Being a bit of an obsessive marketing geek, I spend a lot of time looking at the way companies present themselves to the market and promote their products and services.

One of the things I’ve noticed in the last few years is the rise and rise of the super superlative in every field of marketing serving every marketplace. You know the kind I mean if you think about it:

•   Eat one of these pills and lose half your body weight.
•   Our Internet service is so fast it delivers content before you even knew you wanted it.
•   Our service is so wonderful a Celebrity endorsed it

You would honestly have to live in a cave with no access to any form of media not to have noticed this. But the big question is why do companies feel the need to promise things they can’t realistically deliver on.

Not sure what I mean, well think about these few examples:

• Mobile telecoms companies in the UK are absolutely adamant that they cover 99% of the population, yet spend five minutes looking at the comments about coverage on social media and you would think the reality is exactly the opposite?
• Utilities claiming that their deals will save you money if you just sign up to one of their 'simple' tariffs that trap consumers into complex and often very expansive contracts – not sure if I am right about that, well why is OFGEN spending so much time investigating it.
•  Lets not even go near the financial services sector with PPI, mortgage miss selling and many, many other examples of big promise, no delivery. 

A very brief and not terribly exact piece of research I carried out with about 30 random contacts showed that around two thirds of those I spoke to pretty much know that the increasingly outlandish promises being made by big businesses don’t amount to a hill of beans (whatever that means) but they still buy from these big players.

So here is a question for you. Does this world of super superlative but mostly empty corporate marketing promises present an opportunity for the rest of us?

Remember Roy Brooks the Honest Estate Agent from the 1960s who made it big by being almost ruthlessly honest about properties he was selling?  What about AG Barr the Scottish soft drinks manufacturer that never uses anything other than humour to market its drinks?

In both cases taking a different approach has paid dividends time and time again, while everyone else is still playing the same old game.

In neither case do they make outlandish claims (except humorously) or over promise on something they can’t deliver. As a result we trust them.

Anyone that has read the book or done any work with me knows that in a connected market feedback – good or bad – is often instantaneous and entirely public through social media, not to mention costly for some companies reputations. So isn’t it maybe a better idea to just set expectations properly and then deliver on them, rather than trying to promise the earth and then deliver a small egg cup of sand?

I’ll leave it to you to work that one out for yourself in the context of your own business but it would be great to hear other’s views on this.

Author – Tim Sandford