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Are the good times about to end for brands with principles?

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In price driven markets, there has always been a real or perceived cost to brands standing for something – having principles. Take the energy sector for example; an industry that has traditionally been split into two key audience types. Put bluntly - price hungry switchers and lethargic couch potatoes - buying purely on price or being totally unengaged. 

 

Then challenger brands such as Octopus, Bulb and OVO arrived with their heavily branded propositions of customer service and green, eco-friendly tariffs, highlighting that even for utility products, there are audience segments where having principles and values matter. Their principles have engaged with their customers and helped to sell product - a lot of product. These challenger brands have grabbed a truly significant 16% of market share in an extremely hard-to-break-into market (Bulb, 2020). 

 

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So, whilst price undeniably plays a critical role in switching product or service providers, there are active, engaged audiences who will align themselves with brands who share their principles, especially those seen to ‘do good’. And these audience segments are willing to pay a premium to not only shop with these brands, but to support them on their missions.

 

But is Covid-19 in danger of ruining the good times for principled brands? 


The UK population has been forced into two national lockdowns and is being subject to a steep downturn in the economy, job losses and a pretty scary economic outlook, even with the hope of a vaccine on the way. With people stuck at home and facing financial hardship, household costs are under review. The question is how do brands respond to this shift? Will the energy market shift again – painful for a market trying to move away from price and back into value. But can these purpose-driven energy brands afford not to compete on price given the current circumstances? 

 

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Statistics tell us that since March 2020, value (and we all know that really means price), has overtaken brand purpose as the key driver to purchases across all industries (McKinsey, 2020). So are energy providers who have built themselves on principled customer bases in danger of seeing their principled customers flee to such price deals as well? 


Undoubtedly, reducing prices can help companies compete at a time when consumers are looking to reduce costs, but will these short term gains lead to long-term damage in terms of public perception if brands abandon principles for price? Will this challenge the relationship brands have with their dedicated bases. Remember the Liberal Party’s U turn on their manifesto promise of free university education and what it did for their re-election results! 


The funny thing is that the price differential between sustainable brands such as Octopus, Bulb and OVO Energy and the traditionally cheaper Big Six is actually much smaller than people think, with the challenger brands often beating the Big Six on certain tariffs. So rather than worrying about customers fearing brands rejecting principles for prices, perhaps work needs to be done to educate audiences that it’s not always a straight shoot-out between price and principles. 

 

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Our recent work with energy brand ESB Energy is an excellent example of putting brand purpose at the forefront of a proposition, while remaining competitively priced. We helped the Irish brand launch in the GB market with heritage and sustainability-led messaging. We used audience insights around sustainability and green energy to identify segments most likely to make the switch to ESB Energy. While not always the cheapest provider, Positive have helped ESB Energy prove their commitment to a green and clean future time and time again, creating messaging we knew would resonate with the identified audience segments. ESB Energy’s tariffs are sometimes amongst the cheapest in some regions, so we've made sure to reflect their value offering in our messaging in these areas. 


We have developed four different types of messaging in our digital channel advertising – covering value, heritage, sustainability and service – targeting these to the regions within GB that would be most receptive to the message (e.g. ‘Value messaging’ in regions where ESB Energy’s tariffs were competitive, ‘Heritage messaging’ to areas with a large Irish population etc). This has allowed our messaging to land with absolutely the right people.  

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So Positive's view is that abandoning principles at times of hardship leaves one with very little for the future. At a time when consumers are looking to reduce costs, sustainable brands that balance value with their commitment to social and environmental causes are likely to come through strengthened when it comes to their reputation and retention amongst their key audiences. 

 
With consumer motivations shifting by the day, and industries in flux, it might seem like a confusing landscape. But with any changes to the status quo, there also comes opportunity. If you need some fresh eyes on your brand, or new thinking on how to match your traditional rivals in price while staying strong to your purpose, please do give us a call and we can guarantee we’ll give you a Positive outlook. 

 

Kiyon Samavat

Positive.