British Gas is planning to invest over £100m in a new customer loyalty scheme, which, it claims, will offer not just reduced bills but a raft of benefits including free Sky pay-TV packages.
The Centrica-owned company revealed the plans after reporting a 4% rise in operating profit for 2016 to £1.52bn, although operating profits in residential energy supply fell by 11% last year to £553m, compared to £623m in 2015. This was due to a customer exodus in the first half of the year, which saw 224,000 people switch to another supplier.
Under the loyalty scheme, dubbed British Gas Rewards, the company will offer a range of new tariffs, discounted energy and services, such as boiler servicing and insurance, as well as entertainment packages.
The move follows a call from regulator Ofgem for all energy suppliers to trial new ways to engage with existing customers on standard variable tariffs, who fail to switch to a better deal.
An investigation by the Competition & Markets Authority found that two-thirds of customers on standard tariffs are paying far more than they need to, meaning collectively energy customers are overpaying by £1.4bn a year.
Centrica chief executive Iain Conn told BBC Breakfast: “The British Gas Rewards programme will reward the loyalty of our customers and give them new offers that I think they are going to want and like. The longer customers are with us, they are going to get reductions on their bills, but we are also offering other services, like Sky packages, but also customers will be able to control their homes.”
Last month, Npower and EDF Energy bosses told a cross-party committee of MPs that they were considering a loyalty offering for existing customers.
Npower domestic markets chief Simon Stacey said: “We’ve done a trial to see whether it resonates with customers. We’d like to reward customers in ways they wouldn’t expect. The overall feedback was that they are happy to stay with us, they don’t feel ripped off and they like Npower as a brand. [But] they said they want us to reward their loyalty so we’re starting to look at that.”
EDF Energy retail boss Dan Hopcroft said the company was preparing to do the same. “We’re doing very similar things. We’re also look at the loyalty proposition,” he said.
Commenting on the British Gas plans, Barclays analysts said the loyalty programme could help retain customers which would lower Centrica’s costs over time, although doubted whether it would appease the authorities.
“(We) doubt the Government would distinguish between Big Six suppliers based on the introduction of a loyalty plan; especially when many materially cheaper fixed price tariffs remain available,” they said in a note.
British Gas will also be hoping to avoid a repetition of the 2015 CRM fiasco, when the business division was rocked by a 95% loss in operating profit during the first half of the year following a botched implementation. At the time, the utility giant blamed issues with the switch to SAP software for significant delays in issuing customer bills.
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