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Residential Electricity Provider Brand Strategies

With most consumer goods and services, quality varies significantly between suppliers. Electricity, however, is a unique product.  The quality and reliability of the electricity flowing through the meter does not depend on the provider.  Providers only differ on their rates, pricing plan structures, customer service, and value added services.  Some of the larger electricity providers often conduct business under multiple brands.

The three main categories of multi-brand strategies used by electricity suppliers are legacy, cause and concern, and agility and niche. The following is a brief overview of how some of the largest electricity providers use these strategies in the residential electricity market.

Legacy Brands

Direct Energy is a good example of a company using legacy brands as part of its overall marketing strategy. When the Texas electricity market opened to competition in 2002, Direct Energy purchased the retail operations of the electric utilities serving south and west Texas.  Electricity customers in areas ranging from Corpus Christi and Laredo to Abilene and San Angelo were very familiar with the CPL and WTU brands.  Those brands had built considerable loyalty over generations of dependable service and community involvement.

In a deregulated market, however, the crews showing up to repair fallen power lines no longer had the CPL and WTU logos on their trucks. Many consumers still felt comfortable selecting these brands as their electricity supplier based on past association.  Time has diminished this brand equity.  While Direct Energy still markets to consumers using the CPL Retail Energy and WTU Retail Energy names, their marketing focus has shifted to the Direct Energy brand.  Eventually, there will be fewer consumers familiar with the legacy brands and it is likely these brands will quietly disappear from the market.

Direct Energy also purchased First Choice Power which is the retail energy affiliate of the Texas-New Mexico Power (TNMP) utility. TNMP’s parent company launched this brand when the electricity market deregulated.  Therefore, it did not have the same brand equity as the CPL and WTU names.  While it is technically a legacy brand, it appears that Direct Energy uses it simply as an additional brand in its marketing portfolio.

Cause and Concern Brands

An effective marketing technique employed by some electricity providers is dialing into the interests and values of consumers. Renewable energy, for example, appeals to a growing number of home electricity shoppers.  Some consumers favor electricity providers who support charities or other worthwhile causes.

4Change Energy is an excellent example of a cause and concern brand. Part of electricity giant TXU Energy, 4Change Energy contributes 4% of its profits to one of four established charities.  The customer selects which charity they desire to support.  Linking a worthwhile cause to choosing an electricity provider is a successful strategy for acquiring and retaining customers.  Instead of simply making a choice on a relatively uninteresting service, home electricity consumers have the opportunity to make a difference in their communities.

Green Mountain Energy Company is another well-known example of a cause brand. Green Mountain Energy exclusively markets 100% renewable energy products.  This approach appeals to a growing segment of the consumer market concerned with climate change and reducing greenhouse gas emissions. NRG acquired Green Mountain Energy and chose to keep the company as a separate brand within its portfolio of companies.  Many electricity companies include a renewable energy product with their flagship brand offerings.  By retaining the Green Mountain Energy brand, NRG is able to focus its renewable energy marketing efforts on a brand established and recognized within the environmental community.

Agility and Niche Brands

Some electricity providers like NRG, Direct Energy, and Constellation also maintain small niche brands. Electricity companies usually gain these niche brands through acquisition.  However, rather than merging these niche companies into the flagship brand they keep them separate.

This decision is often due to the niche brand having a unique marketing strategy or service offering that would be lost if it were absorbed into the mothership. For example, Bounce Energy has remained a separate brand long after its acquisition by Direct Energy.  Compared to its parent company, Bounce Energy had catchy marketing, superior online interface, and a stronger social media presence.  Another example of a niche brand is Pennywise Power.  Now part of NRG, Pennywise is a very low touch, bare bones discount electricity provider.  It is similar in many ways to a discount airline – low price with no frills.

An advantage to having niche brands is the ability to test the market. Finding and retaining customers in the residential electricity market is a challenge.  Marketers must continually try out new campaigns and offers in order to appeal to consumers and grow market share.  Smaller brands provide an agile test lab to experiment with new marketing concepts without hurting the flagship brand.  Marketers can test value-added services, new approaches to customer service, and consumer credit policies to find what works best.

About: Charlie Hewitt

Charlie Hewitt has more than 25 years of in-depth energy experience having served in executive and managerial roles at some of the largest retail energy providers in North America.His expertise covers a wide range of retail energy disciplines including pricing, contracting, risk management, and credit. He holds an MBA from UT Arlington, MA and BS degrees in geology from UT Austin, and was a TXU environmental research fellow.

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